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CompUSA Sold to Mexican Retailer

Grupo Sanborns will buy struggling PC store chain.

By Margret Johnston, PCWorld   

"CompUSA is a premier retail brand for computer equipment, consumer technology and related services in the U.S., and represents a tremendous opportunity to leverage the management experience of Sanborns in the retail and e-commerce sectors," said Carlos Slim Domit, Chairman of Grupo Sanborns, in a prepared statement.

Grupo Sanborns said that it expects to ally itself with strategic business partners to enhance the value of its investment in CompUSA, including Telefonos de Mexico, Telmex, Microsoft, SBC Communications and Prodigy Communications. Telmex, Microsoft and SBC are expected to be minority investors in the company, the company said.

"We believe that this offer represents a good value for our shareholders and an exciting new future for our customers, employees and business partners," said James Halpin, President and Chief Executive Officer of CompUSA, in a prepared statemnt. The company said the agreement was unanimously approved by its board of directors.

CompUSA employs about 20,000 and operates 217 stores in 84 metropolitan markets across the U.S. It has been struggling financially, losing $12.9 million on sales of $1.35 billion in the quarter ended Sept. 25. Three weeks ago its stock price was less than half of what Grupo Sanborns offered.

Grupo Sanborns owns and operates 305 stores in major Mexican cities, and also manufactures food and household items, the company said.

Focus on Services

Investment from the technology and telecommunications companies could remake CompUSA into a store much more focused on services, particularly those related to broadband Internet access, and away from the inventory-laden requirements of the traditional retail store, analysts said.

"Margins in retail are extremely low in this industry now. And [CompUSA] is necessarily in the inventory game, which is a bad business to be in when the value of inventory declines by a percentage a week," said Roger Kay, an analyst for International Data Corp..

CompUSA, rumored as a takeover target for months, last year moved to increase its Web presence with the creation of the wholly owned online subsidiary Cozone.com. The new subsidiary, launched in October, borrowed the Web-based direct-sale model used by Dell, but Cozone.com also competed directly with CompUSA.

Kay said, however, the subsidiary seemed to "sink beneath the waves" after making a big splash when it was launched.

Broadband Goes Retail

Roger Lanctot, director of research at PC Data, said expected investments from Microsoft and SBC Communications signaled that the retailing of broadband was on the horizon.

"I would see this as a broadband play," Lanctot said. "There is a big marketing and sales opportunity that is up for grabs. [CompUSA] will need all the leverage the partners to that acquisition bring to the party."

Retail stores are likely to play a big role in the distribution of broadband hardware and services to consumers through store kiosks where people could get information about DSL (digital subscriber line) and cable modems, Lanctot said.

"Broadband is taking things to another level," Lanctot said. "It will be more than just taking a product, marking it up and selling it. It's still not clear the full extent what role the retailer is going to play."