CDI to sell Todays Staffing unit for $40 million

CDI Corp. will sell its Todays Staffing division, jettisoning the office-temporary business to focus on higher-margin divisions that place highly skilled technicians, engineers and managers.

The sale, to Spherion Corp., is for $40 million in cash and is expected to close by the end of the month, CDI announced today.

CDI's corporate headquarters are in Philadelphia, Todays Staffing is based in Dallas, and Spherion is in Fort Lauderdale, Fla.

Selling Todays Staffing has been "something they focused on for a while," said William Sutherland, an analyst for Boenning & Scattergood Inc., a Conshohocken investment firm.

"It didn't really fit well strategically with where the company has moved: more technical, longer cycles."

While Todays Staffing does help companies find lawyers, accountants and financial analysts for temporary assignments, it mostly provides short-term clerical workers.

Most of CDI's revenue comes from its engineering and information-technology divisions. CDI assembles technical teams to work on projects for aerospace and life-sciences clients.

Sutherland said that, while all staffing businesses were especially sensitive to changes in the economy, the temporary-staffing business was among the most mercurial.

A decade ago, the routine use of temporary staffers was not as prevalent, he said. Now it is common for companies to consider temporary staff as a strategy in dealing with economic cycles.

That helps explain why all temporary-staffing companies "have slowed down in the last year or two," he said. The gross domestic product "has slowed a bit, and hiring on the margin is not growing. If there's a true downturn, it'll be worse."

It may already be happening. Revenue from temporary-office-staffing companies is projected to decline 3.5 percent this year, making them the weakest component in the staffing industry, said Jon Osborne, director of research for Staffing Industry Analysts Inc., a California-based research firm covering the contingent workforce.

"It's a slowing part of the economy," he said.

Spherion expects to report earnings from the acquisition next year.

In the first half of this year, Todays Staffing had $80.5 million in revenue and an operating profit of $1.8 million. Revenue was up year over year, recently driven by an increase in billing rates, which offset a decrease in the volume of hours.

Spherion president Roy Krause said in a statement that Todays Staffing's strong brand and its focus on small and mid-size accounts would help Spherion expand its business. Spherion plans to keep the Todays Staffing name.

But keeping the focus on small and mid-size accounts won't be as easy. That priority has been a struggle for Todays Staffing over the years, according to CDI's annual reports. Todays Staffing performs best when it can handle business for small, high-margin local businesses.

When it has to negotiate major national assignments, it faces "strong, competitive pricing pressures" that result in lower profit margins.

Todays Staffing was CDI's least-profitable unit in 2006, representing 12 percent of CDI's revenue but only 7 percent of its operating profit.

Still, Sutherland said, Todays Staffing's profit margins are stronger than those of many of its competitors. "Spherion is thrilled to get them," he said.

Maybe Spherion was, but Wall Street was not as sure.

Shares of CDI fell 83 cents, or 2.8 percent, to close today at $28.50, while Spherion dropped $1.37, or 14.4 percent, to $8.12.

Todays Staffing was founded in 1982 and acquired by CDI in 1991. It has about 60 offices in the United States and Canada.