Keywords: year, review, US, annual, 2011, office, products, technology

Year in review

Mergers, acquisitions, appointments and new structures; the past year in office products has thrown up some interesting developments.

November 2010

US industry icon Howard Brown and his son Michael, who had returned to the office products scene in May with the creation of HiTouch Business Services, propelled themselves to the top of the independent dealer charts after swooping for $130 million Tennessee reseller MyOfficeProducts (MYOP).

One big change to the MYOP business is a transition from its stockless model to a stocking model that the Browns favoured during their time at Allied, a move requiring major infrastructure investments.

Staples’ third quarter results showed that it was gaining share from its big-box rivals, its delivery business posting swings of 6% and 5% on those of Depot and ‘Max respectively. CEO Ron Sargent said that things were “heating up” in the government contract business ahead of the US Communities contract switch to Independent Stationers in January.

On the M&A front, MWV announced that it had agreed to sell its EPG envelope manufacturing business – producing around 25 billion envelopes a year – to Quality Park owner Cenveo. Katun acquired the toner cartridge business of struggling aftermarket manufacturer Media Sciences International (MSI) and agreed to be the exclusive distributor of its solid ink sticks – a move which eventually led to MSI being wound down.

December 2010

The government contracts issue was still grabbing the headlines as the holiday season approached. San Diego County sensationally cancelled its bid for the new National IPA cooperative contract, only for National IPA to reveal days later that it had agreed to piggyback onto Office Depot’s Florida state contract.

That agreement was not without controversy, however. A new off-contract product pricing amendment to the Florida contract appeared to give Office Depot a free hand to set pricing on non-core items. Staples – which had jointly been awarded the Florida contract – revealed that it had refused to sign a similar pricing amendment and told OPI that it found the situation “distressing”. NOPA President Chris Bates called the amendment “a major step backward”.

In California, the City of San Francisco and Office Depot reached an agreement in their long-running dispute over alleged overcharging by the supplier. Depot agreed to a $4.25 million cash and credit settlement in what it described as “a reasonable compromise”.

On the vendor front, Fellowes announced it had filed a patent infringement lawsuit against ACCO over shredder technology. ACCO said it would “vigorously defend” the allegations.

Meanwhile, ACCO promoted Boris Elisman to COO with full responsibility for the sales, marketing and operations of all the company’s businesses and products worldwide.

January 2011

As Independent Stationers began the year as the holder of the US Communities contract, the dealer group received another boost for its national accounts programme after agreeing a three-year deal in the healthcare vertical with the CHAMPS purchasing organisation.

Rumours resurfaced about a possible merger between Office Depot and OfficeMax after the South Florida Business Journal speculated that Depot could be hearing “wedding bells”.

A Los Angeles jury unanimously sided with Accentra, maker of the PaperPro stapler, in its patent infringement case against Staples.

Accentra’s suit alleged that Staples’ OneTouch line of staplers infringed on three patents Accentra held for its PaperPro staplers. The jury agreed that Staples had “wilfully” infringed on Accentra’s patents, but the office supplier said it would appeal.

United Stationers said it was cutting 150 jobs in a move to save the company between $4-5 million a year. In what was described as a “focused workforce realignment”, United said the reduction would come from a voluntary early retirement programme.

There was sad news for the industry after well-known independent dealer figure Bob Rosa was tragically killed in a car accident. Rosa had run the family dealership in Indiana for many years before retiring in 2006, but was still active in a number of civic and charitable organisations.

February 2011

All eyes were on this month’s quarterly results, especially for an indication of what US Communities customers were doing. Office Depot stated that it had retained about 85% of its former US Communities business, a figure that it was to maintain throughout the year.

School Specialty, Depot’s rival supplier on its US Communities school supplies contract, said it was terminating its agreement with US Communities in order to focus on an alternative cooperative contract.

In a SEC filing, Depot revealed that the US Department of Justice had opened an investigation into pricing practices on its former US Communities office supplies contract. The investigation is still ongoing.

Overall, quarterly results from OP companies came in ahead of analysts’ expectations following an improvement in trading conditions at the end of 2010, and there was some optimism that this trend would continue throughout 2011, especially in the B2B sector.

At an eagerly-awaited presentation in San Francisco, HP revealed its TouchPad tablet device. Heralded as a challenger to the dominance of Apple’s iPad, HP said the tablet would go on sale in the summer.

Manufacturers’ rep group Highlands expanded in the west of the country with the acquisition of California-based group Office Products Suppliers.

March 2011

Depot was still in the news in March, this time after it had to restate full-year earnings following a tax-related ruling from the Internal Revenue Service that saw $80 million wiped off its 2010 net result and a $63 million cash hole for 2011. 

The company also announced that its SVP Contract Sales Dave Grove had been dismissed for “personal misconduct” reasons.

Staples said that it had gained over 1,000 former US Communities public agency customers by the end of January. During its results conference call, Staples said that these US Communities customer gains represented a 2011 run-rate of around $50 million and said that there was “more to come”.

There was quite a bit of acquisitions activity this month. WB Mason acquired two more local businesses in its march towards the $1 billion annual sales figure; California dealer AAA bought a $5 million furniture dealer based to the north of San Francisco taking its annual run-rate to around $25 million; ECi increased its managed print capabilities by acquiring FMAudit; Clover expanded its consumer electronics recycling operations after making a move for The Wireless Source; and vendor Acme announced the $3.4 million acquisition of first-aid products maker Pac-Kit.

April 2011

It was the end of the line for Office Depot’s last remaining stores in Canada as it announced it was pulling out of the retail channel in a market dominated by Staples.

OfficeMax turned to experience in its retail division, naming 60-year-old Michael Lewis as President of Retail. Meanwhile, CEO Ravi Saligram announced a number of new initiatives after saying he was “disappointed” with the company’s first quarter results.

Wholesalers United and SP Richards both reported Q1 sales increases with the independent dealer channel helping to drive growth as sales to big boxes declined.

Staples strengthened its ties with the cooperative purchasing organisation National Joint Powers Alliance after being awarded a new janitorial supplies contract, an indication of the reseller’s growing capabilities in the facilities management segment.

Still on the national accounts scene, independent dealer network AOPD revealed that it had been awarded a new national contract with the group purchasing unit of Premier Healthcare, an alliance of more than 2,500 US hospitals and over 73,000 other healthcare sites.

Consumer electronics retailer Best Buy said it would focus on growing its mobile standalone store format to between 600-800 outlets in the US by 2015, and that it aimed to double its online sales to $4 billion over the next three to five years.

May 2011

News broke that TriMega was leaving the BPGI purchasing consortium from January 2012. The announcement was not a major surprise after TriMega’s purchasing alignment with wholesaler SP Richards had put a strain on its relationship with BPGI.

As expected, Cody Phipps succeeded Dick Gochnauer as CEO of United Stationers. One of Phipps’ first tasks was to oversee United’s Vision conference in Orlando. The wholesaler used the event to launch its coffee initiative and urged independent dealers to improve brand awareness
in order to keep up with the growing e-commerce retail channel.

One appointment that did come as a major surprise was Neil Austrian taking on the Office Depot CEO role on a full-time basis after seven months as Interim CEO. Depot had been on the verge of offering the position to an external candidate, but the board decided at the last minute that Austrian was the best person for the job.

Technology provider Red Cheetah acquired the Blue Planet Group, naming former Corporate Express VP Greg Shewmaker as COO in the process and appointing another ex-power channel exec John Ormson as VP E-Commerce.

Independent dealer Kenny Sayes was named as the 2011 Louisiana Small Business Person of the Year by the US Small Business Administration.

June 2011

Independent Stationers revealed that it had acquired more than 100 new members in the preceding 12 months thanks, in part, to its federal government and US Communities contract wins.

The Depot-‘Max merger was on the agenda again this month. Speaking at a Sanford Bernstein conference, Staples CEO Ron Sargent said that a tie-up between his two rivals would be a “natural pairing”. Neil Austrian added fuel to the flames when he told a Florida newspaper that Depot would be open to a deal, sparking a jump in each company’s share price, but then said that an attempted merger would probably be blocked by regulators. 

Depot agreed to pay a total of almost $190,000 to more than 100 governmental agencies in Colorado after a year-long investigation into pricing-plan switching between 2006 and 2009.

OfficeMax’s under-pressure EVP Jim Durkin resigned after over 20 years with the company following disappointing results from ‘Max’s contract division.

The month ended with a bang as the second North American Office Products Awards were held during a special presentation dinner at the SP Richards ABC event in Las Vegas (see ‘NAOPA 2011').

July 2011

MYOP acquired the volume it needed in Florida to open a regional distribution centre in the state by snapping up $6.5 million Tallahassee-based dealer Service Office Supply.

Dave Guernsey’s Pinnacle group added two new members, taking aggregate sales above $800 million and moving another step closer to being able to provide nationwide coverage.

Trade association NOPA urged President Obama to restore full competitive access to the federal market for office products for all small business GSA Schedule 75 contract holders. NOPA claimed that hundreds of office suppliers had been shut out of the federal government arena following the Federal Strategic Sourcing Initiative (FSSI) award of 15 office supplies blanket purchase agreements.

It was a busy month for quarterly results. Avery’s Office and Consumer Products division continued to see sales decline in the face of stiff competition and weak end-user demand, while rival 3M reported sales increases.

Neil Austrian made his first major management changes since his full-time appointment as CEO, naming Kevin Peters as President North America in a restructure that saw BSD President Steve Schmidt take on a business development role.

Depot reported a net loss for the second quarter of $29 million, but there was some cheer as its earnings still came in ahead of Wall Street expectations. 

Meanwhile, both United Stationers and SP Richards reported growth in their respective quarters. 

There was bad news for US bookstore chain Borders after it failed to emerge from Chapter 11 bankruptcy protection, resulting in the closure of almost 400 stores.

August 2011

Renewed fears of a double-dip recession took their toll on the share prices of companies in the OP sector, with many firms seeing double-digit declines.

Staples proved to be more resilient than its peers, especially after posting a solid set of Q2 results which included positive same-store comparisons in its US retail network.

Depot was again hit by fresh overcharging claims following a public sector audit. This time it was Dallas County, which claimed almost $1.8 million relating to transactions between 2005 and 2010 under the US Communities contract.

The main talking point in the back half of the month was the future of HP after CEO Leo Apotheker’s dramatic 19 August announcement, which included the news that HP was ditching its TouchPad and smartphones, looking at selling off its computer division, and planning to pay around $10 billion for UK data firm Autonomy. It marked the beginning of the end for Apotheker who was ousted shortly after with former eBay CEO Meg Whitman taking over in September.

Meanwhile, the leading smartphone and tablet manufacturer Apple made a dramatic announcement of its own. The company’s CEO and co-founder Steve Jobs stated that ongoing health problems were forcing him to step down. Technology icon Jobs passed away a few weeks later in October.

September 2011

Point Nationwide, the national accounts programme of dealer group TriMega, received a boost when it announced that it had piggybacked onto a contract that allowed its members to participate in the federal government’s FSSI contract.

The announcement took place during TriMega’s annual conference in San Diego, CA. The event was also the setting for the next phase in the development of Office Products Women in Leadership, the international community for high achieving professional women in the OP industry, which announced the formation of its first-ever board.

Detroit Public Schools (DPS) became the latest public agency to claim that it had been overcharged by Office Depot. In its annual report, DPS determined that the office supplies company had overcharged it by $5.2 million. 

Depot was in the news again later in the month when it announced the dismissal of President International Charlie Brown for improper conduct.

The US OP industry came together for the annual City of Hope’s Spirit of Life gala in Chicago. More than 700 industry executives attended the event, which saw Jay Mutschler of Staples collect the 2011 Spirit of Life award. Mutschler had been leading the office products industry’s fundraising efforts for City of Hope with this year’s Committed To Hope campaign, raising a record $9.3 million.

October 2011

The industry was shocked to learn that Office Depot whistle-blower David Sherwin had been diagnosed with terminal cancer. An unrelenting critic of Office Depot since his dismissal from the company in 2008, Sherwin has spent the last three and a half years running a campaign to expose alleged price switching and overcharging in Office Depot’s US government contracts business. News of his ill health prompted glowing tributes and messages of support from many prominent members of the independent dealer community.

To the relief of many, HP stated that it was not selling or spinning off its PSG computer division after all. The company said that a strategic review had revealed the depth of the integration across key operations such as supply chain, IT and procurement, meaning the cost to recreate a standalone company outweighed any benefits of separation.

It was quarterly results time again in October with operating efficiencies and cost savings recurrent themes, as companies struggled with soft sales in many markets.

Newell Rubbermaid announced restructuring plans alongside its results. The company said it would consolidate its operating groups in order to reduce structural costs. Current President of its Office Products division Penny McIntyre was chosen to head a new division to be known as Newell Consumer, effective 1 January 2012.