Office Depot CEO Smith: Compucom Unit Is 'Well Positioned' To Capture Additional IT Services Business

Office Depot's billion dollar bet on CompuCom is paying off and has placed the office product retailer on a profitable path as more of its customers put their IT plans into action, said Office Depot CEO Gerry Smith.

"Several customers are initiating large IT projects as they're investing back in their businesses. CompuCom is very well positioned to continue benefiting from this additional spend," Smith said in a conference call with analysts after the IT services provider/office products retailer reported net income from continuing operations of $33 million compared with a loss of $48 million in the preceding quarter.. "We expect additional benefits this year from the continued roll out of tech services into the retail stores and are very pleased to report that we are on track to deliver the cost synergies when we announced the transaction."

Office Depot bought Charlotte, N.C.-based solution provider CompuCom last November for $940 million. Including the Compucom division,Office Depot's services' sales soared to $407 million in the quarter, up 88 percent from $216 million in the year ago quarter. Services sales now account for 14 percent of total sales for Office Depot.

Business to-business focused divisions, meanwhile, now account for almost 60 percent of total sales for the Boca Raton, Fla. headquartered company..

Smith said CompuCom has given Office Depot a leg up as more companies transition to a smart office. He said the organization recently moved into a smart office of its own design in South Carolina.

"CompuCom really saw this as a pilot, demonstrating where the technology and the capability could go," he said. "They were able to build a building faster and cheaper than most historical builds. For example, its all done from an Internet of Things sensor device perspective. You have no light switches, etc. everything is done from a tech perspective. We think that's an indication of where people can go in the future."

The CompuCom division reported sales of $257 million in the first quarter of 2018, flat versus sales of $259 million in the prior year historical period.

Smith said Office Depot wants to add more channel partners in small and medium-sized businesses, and teamed with cloud distributor/master agent MicroCorp last month to make that happen..

"We have also recently introduced a new channel partnership with MicroCorp to provide additional feet on the street to engage with an even larger number of small and medium sized businesses than we could do on our own," he said.

In their partnership, MicroCorp uses its People Powered Network, to offer Office Depot’s managed services to all markets with a focus on delivering enterprise-class technology solutions designed specifically for SMB customers.

For the first quarter ended March 31, Office Deport reported a six percent increase in sales to $2.83 billion compared with $2.67 billion in the year ago quarter. Office Depot has not seen that kind of sales growth since its merger with OfficeMax in 2013.

The company reported net income from continuing operations of $33 million or six cents per share compared with $74 million or 14 cents per share in the year ago quarter. Office Depots shares were trading down 19 cents per share to $2.18 in late afternoon trading even though the company raised its full year sales guidance to $10.8 billion from $10.6 billion.

"We think, we’re not just an office supply company any more," he said. "We're a true service product company that can sell services and products to new categories."