Systemax To Lay Off 500 As It Shuts North American Technology Business

Systemax plans to spend $48 million to $55 million cutting 500 jobs, leases and inventory after selling its North American business-to-business assets to PCM, according to a filing with the federal Securities and Exchange Commission.

The Port Washington, N.Y.-based company, No. 17 on the CRN 2015 Solution Provider 500, expects to incur the one-time charge between now and the end of 2017 as it shutters its $1.69 billion North American Technology Products Group, it said in the document filed with the SEC on Monday.

Systemax plans to eventually eliminate 500 North American technology jobs as it winds down consumer technology operations on the continent, according to a Systemax spokesman, setting aside between $4 and $5 million for severance expenses.

[Related: Blockbuster Deal: PCM Buys North America Systemax B2B Business, TigerDirect Brand]

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The remaining roughly 500 employees -- including 400 of Systemax's B2B sales reps across the U.S. and Canada -- will be hired by PCM, the spokesman said, with El Segundo, Calif.-based PCM assuming paid-time-off liability for certain Systemax employees.

This comes eight months after the company unveiled plans to close a distribution center and 31 of the company's 34 retail stores, with those reductions affecting 1,500 of the company's then-4,000 North American employees.

Last week, Systemax said it would close its other North American Technology distribution center as well as three remaining TigerDirect retail stores and management operations. Exiting these leases will cost Systemax $17 million to $19 million, Systemax projects, with the company also expecting to take a $20 million to $23 million hit related to inventory sales.

Systemax also expects to incur $3 million to $4 million of transaction fees, as well as $4 million of other charges. The company said the $14 million of proceeds from PCM's purchase and incoming money from inventory sales and accounts receivables should more than offset the cost associated with closing what remains of its $891 million North American retail technology business.

Systemax said it has engaged with outside firms to help with inventory clearance sales and the lease exit process. PCM's acquisition of Systemax's $800 million North American B2B operations and coveted TigerDirect brand is expected to close Dec. 1, with Systemax transferring its B2B website assets and related domain names to PCM no later than Feb. 15.

Systemax also said it will allow PCM to purchase its consumer customer lists and related information for $500,000. Already included in the deal are PCM's rights to Systemax's B2B customer lists and vendor contracts, trademarks and other intellectual property rights.

The company's stock was unchanged in after-hours trading; the SEC document was filed after the market closed.

The North American Technology Group has for several quarters been a drag on Systemax's operating income, which, unlike net income, accounts only for expenses associated with keeping a business running.

Systemax's North American Technology Group has recorded a $68 million operating loss in the first nine months of 2015. Conversely, Systemax's other business units -- which include corporate, global industrial products and technology products in Europe, the Middle East and Africa -- delivered a $12 million operating profit in the first three quarters of 2015.