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Home Depot to sell Supply Services Division to
make Wall Street "Happy"

News Story posted below with responding commentary by Alessandro Machi.

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Posted on Tue, Feb. 13, 2007

Home Depot to consider sale of division

HOME DEPOT SUPPLY SERVES CONTRACTORS, OTHERS; NEW CEO REVIEWING OPTIONS FOR CHAIN

By Harry R. Weber
Associated Press

ATLANTA - Home Depot, the world's largest home-improvement store chain, distanced itself further from the strategies advanced by former Chief Executive Bob Nardelli as it said Monday it will consider shedding its division serving contractors, home builders and other business customers.

The company's shares rose on the news.

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Home Depot's stock market "value" has risen because Wall Street has approved of a strategy that minimizes the value of American Citizens who do blue collar jobs such as carpentry, plumbing, landscaping and general home improvement for a living.
-A.M.
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Some analysts said the decision to possibly sell Home Depot Supply could benefit the company by allowing it to focus on generating value for shareholders, while others suggested it could put the onus back on the company's retail side, where it faces tough competition from Lowe's.

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How does one "generate value" for Wall Street stockholders? It appears that the Wall Street investment community sees the disenfranchising of Blue Collar American Workers who work in America for other American Citizens as having inferior "value" when compared to businesses such as WalMart that sell retail products imported from other countries.
-A.M.
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The announcement followed a decision earlier this month by the Atlanta company to give a seat on its board to an investment group that wants Home Depot to consider, among other things, a leveraged buyout of the entire company as a way to generate shareholder value.

The group, Relational Investors, had threatened a proxy fight over the home-improvement company's strategic direction, part of an undercurrent that led to Nardelli's resignation in early January after six years at the helm of the company.

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According to Wall Street "experts" it was unnacceptable for Home Depot to have a "supply division" that enabled skilled American Citizens who work with their hands to have a place to go to buy the products they need to do work for other Americans. Because Home Depot Supply Division could not create the kind of immediate profit that importing from other countries can create, Wall Street thinks the division should be sold off.
-A.M.
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Frank Blake, who replaced Nardelli as CEO, said Monday's announcement regarding Home Depot Supply was part of a strategic review the company conducted in November.

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What Mr. Blake calls a "strategic review" I call a sucide bomb placed directly into the heart and soul of the American Blue Collar worker. Wall Street supports the premise that it is not preferrable to sell supplies to American skilled labor because that will generate a smaller profit margin than selling product that is imported from other countries.
-A.M.
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Nardelli had said repeatedly that he believed the company's strategy under his watch did not need changing.

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Mr. Nardelli appears to be a controversial figure. While I wholeheartedly agree with his position that Home Depot should not shed it's Supply Division, Mr. Nardelli just received a huge, really huge severance package for his tenure at Home Depot. It appears that Mr. Nardelli understands that without a strong local economy which the Supply Division of Home Depot helps nurture; local community economies would stagnate. It just seems a shame Mr. Nardelli was paid so much darn money for that basic understanding. Home Depot Supply is the seed that bears fruit for local communities throughout the United States yet Wall Street seems to focus solely on quarterly profit margin reports and is unwilling to acknowledge that long term stability matters just as much.
-A.M.
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Blake said the company wants to concentrate more on its retail business.

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Retail business means the importing of product from other countries at the loss of local blue collar jobs, that's what is Good for Wall Street, but is that what is good for your local community?
-A.M.
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The company said it would ''evaluate strategic alternatives'' that also could include an initial public offering of the supply business. Home Depot did not say how much it could fetch for HD Supply, but some analysts valued it at $5 billion to $7.5 billion.

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Strategic alternatives is a code word for outsourcing, for buying as much product from other countries as possible at the expense of the local communities ability to create skilled labor jobs.
-A.M.
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Analysts had mixed reactions.

''While we had long been advocates of the Home Depot Supply business, the market never seemed to warm up to the strategy, viewing it more as a lower-margin, lower-return distraction from retail,'' David Strasser, an analyst with Banc of America Securities, said in a research note.

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Lower profit margin does not mean the Home Depot Supply division was losing money, it just means that it was making less money than Home Depot could allegedly make if it were to simply focus on importing products from other countries.

Do you see a dangerous pattern emerging here? No new United States business can be created that uses United States Labor and United States resources and still score as high a rating with Wall Street as a U.S. business that imports products and/or services from other countries.

At some point, do we dare ask if Wall Street's institutional practices and objectives are violating the constitution of the United States by aggressively advocating the outsourcing of all goods and services to other countries over the blue collar citizens of the United States?
-A.M.
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Strasser said Home Depot's stock should react positively to the news.

''This tells us new CEO Frank Blake is focused on value, and taking a fresh look at every aspect of the business,'' Strasser wrote.

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Increased value for whom? Perhaps increased value for those who are already worth millions and salivate for millions more from their Wall Street Stock holdings. How is this "fresh look" achieved, by focusing on the import retail business while downgrading the importance of the local blue collar worker.
-A.M.
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But Mark Rowen, an analyst with Prudential Equity Group, said in a research note of his own that without HD Supply as a growth vehicle, investors soon could start to focus more intensely on Home Depot's core retail segment, which he believes is close to reaching store saturation in the United States.

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Mark Rowen is a smart person. What Mr. Rowen is saying is the diversity of products and services Home Depot provides all over the United States fuels a huge amount of local economies by serving both the consumer with goods they can immediately use, and the blue collar worker with core products they require to do skilled labor, to have a job!

Home Depot is a company that has become an essential economic cog and valued member of local communities throughout the United States, whereas the same cannot be said of Walmart, which actually assisted in the rise and fall of a small town rubbermaid plant located in Wooster, Ohio several years ago. The rubbermaid plant was disassembled and the assembly line manufacturing components were sold to China, over a thousand workers in Wooster Ohio lost their jobs.

What Wall Street is saying to Home Depot is, "Be like Walmart and offer retail only products made from other countries or we will downgrade your Wall Street Value". What Mr. Rowen has intelligently pointed out is that companies that help the local community create and maintain jobs have an intrinsic value that cannot be easily measured by Wall Street. Ironically, it's smaller profit divisions within a company like Home Depot Supply that actually help stabilize a local communities economy and as a result help other Wall Street Stocks meet their bottom line because the local economy sustains more jobs, which results in more overall spendable income.
-A.M.
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''We believe that Home Depot will continue to struggle with the effects of a difficult housing market in the near term, as well as intense competition from archrival Lowe's longer term,'' Rowen wrote.

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Another excellent point by Mr. Rowen. Home Depot has a competitive edge because it offers a diversity of goods and services. Once Home Depot "cuts and runs", they may gain an instant increase in stockholder value for the investors who want to make a quick buck by selling their Home Depot stock. Afterwards Home Depot will simply blend in with their competition and most likely no longer hold any advantage. Meanwhile the blue collar workers who lose their jobs because of less supply availability won't be able to buy any product from Home Depot at all.
-A.M.
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Overall, Home Depot currently operates 2,159 stores in the United States, Canada, Mexico and China.

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Let us not forget, Home Depot not only sells products to consumers, but Home Depot Supply currently sells product to creators, innovators and blue collar people who use Home Depot Supply product in their own line of work. These jobs fuel the local economy so people have money to spend in their own community. Wall Street is insidiously proposing that it's always better to import product and services from other countries rather than creating the product in the United States. Wall Street is advocating an outsourcing paradigm because it will always create a larger profit margin than can be created with United States skilled labor. Wall Street is advocating this outsourcing motiff at the loss of blue collar jobs in the United States.

In a related scenario, since Wall Street has decided to completely embrace the importation industry over blue collar American Made Jobs, the War in Iraq takes on added significance. Having access to the worlds oil supply is imperative for any country intent on creating an import economy because it takes petroleum to fuel the huge number of ships that bring product from all over the world to our own ports. Yes, Wall Street, whether they realize it or not, appears to be a war mongering institution as well.

-Alessandro Machi