MSP, Sales and marketing, Midmarket

ODP’s CompuCom: Slow MSP Revenue Growth Amid Potential Sale

CompuCom, the MSP owned by Office Depot parent ODP, generated slow business growth in its most recent quarter. The financial results surface as parent ODP seeks to sell CompuCom as part of a larger business breakup plan.

Office Depot CEO Gerry Smith
Office Depot CEO Gerry Smith

In a conference call with Wall Street analysts on August 4, 2021, ODP CEO Gerry Smith said: "Our process of exploring a value maximizing sale of our CompuCom Division continues to move forward."

Still, Smith did not provide a target timeframe for the potential MSP business sale, nor did he indicate whether ODP has received bids for CompuCom.

In the meantime, CompuCom's sales were $222 million in the second quarter of 2021, up 4% compared to Q2 of 2020. Also, CompuCom's operating income was $3 million in Q2 of 2021, down from $4 million in Q2 of 2020, ODP disclosed on August 4, 2021.

CompuCom's business performance lags the overall managed IT services market, which is growing roughly 8 percent annually overall, according to MarketsAndMarkets research, and generating double-digit growth rates in such segments as managed security services, according to MSSP Alert.

CompuCom Struggles Under Office Depot Ownership

The back story: Office Depot acquired CompuCom for $1 billion — a lofty 10 times earnings at the time— in October 2017. The IT services business unit has generated mixed performance under ODP’s ownership.

CompuCom President Mick Slattery described key business progress to ChannelE2E in June 2020. However, the business struggled on some fronts during the pandemic. Also, a malware attack against CompuCom triggered further revenue and profit challenges for the MSP.

Amid those and other challenges, ODP apparently soured on the MSP business and has been trying to sell off CompuCom  since late 2020.

ODP Company Breakup Plan

Meanwhile, ODP is moving forward with plans to separate ODP into two, highly-focused, pure-play companies, CEO Gerry Smith said in ODP's earnings statement today. "The improving market dynamics continue to reflect the growth opportunities for both businesses, and we remain excited about their future prospects. We have modified our plan for the separation, and we remain on-track with our initiatives to complete this transformation in the first half of 2022,” he said.

Rival Staples has made multiple attempts to acquire various Office Depot assets in recent years, though it's unclear if Staples wants CompuCom as part of those M&A overtures.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.

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