The company is running third in a three-horse race with Office Max and Staples. Office Depot also has to compete with small business centers in Sam's Club and Costco. The firm operates on razor-thin margins, while managing 1,150 locations -- which are very costly due to employee and real estate expenses. Office Depot is a strong candidate to be taken over by one of its rivals or a broader retail chain like Target.
The market is too competitive for Office Depot to stand on its own. A consolidation in the sector would allow a merged operation to cut thousands of people and close hundreds of locations. Operating margins, then, would not be so modest.
(AP Photo/Paul Sakuma)