CompUSA to Spin Off Direct Division

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Computer retailer CompUSA Inc., Dallas, said it will spin off its direct-sales division, which includes Internet and mail-order catalog operations that had sales of about $83 million in the most recent quarter.

A spokeswoman said CompUSA will unveil more details about the spin-off within the next 30 to 60 days.

Industry observers had expected the company to act on its direct division, which generates most of its revenue from catalogs mailed primarily to business customers.

"It became pretty clear that they were interested in the Internet when they started to sell software over the Internet," said Alan Mak of Argus Research, New York.

Although CompUSA derives less revenue from the Internet than it does from its monthly mail-order catalogs, the retailer said online sales were "one of its fastest-growing businesses." The company declined to reveal what percentage of its $83 million in direct sales in the most recent quarter took place online, but it did say those sales increased by more than 100 percent over online sales in the comparable quarter of a year ago. It was the first time the company reported separately the sales volume for its CompUSA Direct division.

The direct business is still a relatively small piece of CompUSA's overall volume. The company had $1.78 billion in total sales for the second quarter, which ended Dec. 26, and $3.17 billion in the half-year period. It reported a drop in profits for the quarter, however. Profits fell to $15.57 million in the most recent quarter, down from $34.07 million in the year-ago period, which the company attributed to a drop in the average price per computer and costs associated with the integration of the Computer City chain.

Mak said he expects investors to benefit from the spin off of the CompUSA Direct division.

"The stock price is not reflecting the value they have in that direct business," he said. "They need to return stockholder value, and people will give it a higher valuation if it is no longer a part of CompUSA."

He declined to speculate what the direct business might be worth as a separate, publicly traded company.

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