Questions Linger Over Office Depot's (NYSE:ODP) Strategic Direction

FBR Capital said a number of questions have arisen concerning the strategic direction of Office Depot (NYSE:ODP), especially after the the 8-K issued on December 21.

FBR addressed the issues saying, "There have been reports and questions regarding the potential strategic direction of Office Depot. Many of these questions were accelerated on the heels of the 8-K issued by Office Depot on December 21. We have received requests for our sum-of-the-parts math surrounding Office Depot's international segment (29% of sales), as well as for its JV in Mexico (miscellaneous income on the face of the P&L). Both of these segments are considered monetizable, if needed, as we have stated in the past. Mexico in fact received a $430M pretax bid in July 2008 ($325M after-tax) for Office Depot's portion. Our Outperform rating on ODP is based on the risk/reward investment merit of a turnaround, the prospects of a new CEO, and a more dynamic, more involved board of directors. Three of the 13-member board are from private equity investment firm BC Partners, with a 20% stake in the company (via a convertible bond). We have also said in the past that this provides a safety net, of sorts, for Office Depot to attract a good outside CEO. This provides a decent hybrid investment case for the stock: fundamental and strategic."

FBR Capital maintains an "Outperform" rating on Office Depot, which closed Tuesday at $5.81, down $0.02, or 0.34 percent. FBR has a price target of $7 on them.