UPDATE: Office Depot Interim CEO Austrian Named Permanent CEO

Office Depot Inc. (ODP) board late Monday turned to its interim chairman and chief executive, Neil Austrian, to take those roles on a permanent basis after a nearly seven-month search.

Austrian, who had been lead Office Depot director when he stepped in as interim CEO and chairman in October to replace departing CEO Steven Odland, is a former chief of the National Football League. He has served on Office Depot's board since 1998, or for roughly half of the second-largest office supplier behind behemoth Staples Inc. (SPLS).

The company's executive search committee leader, Marty Evans, said in a statement that the panel conducted a "very thorough" search and "kept coming back to Neil."

"Over his seven months at the helm, Neil has had a profound effect on the company, its culture, and its relationships with key stakeholders," Evans said. "He has already increased the talent level of the management team and taken the steps necessary to grow sales, leverage assets and build brands."

A source familiar with Office Depot's executive search said the company had also identified an external candidate, but whose experience was strictly below the CEO level. That candidate eventually took a back seat to Austrian after Austrian expressed his desire to assume the roles permanently.

"We had conversations with many fine candidates who saw Office Depot as an excellent opportunity," Office Depot spokesman Brian Levine said in an emailed response to a question about the search. "We hired the best candidate to lead Office Depot forward at this point in time."

Austrian, who in the press release declared himself "flattered and humbled by the strong confidence," said he is confident the company has begun the process of returning to the profitability of prior years. Office Depot has struggled in and since the recession. In its latest quarterly results, it swung to a surprise loss on weaker sales and a bigger tax bite.

Odland stepped down in October after a controversial five-year reign at the office-supplies company. The departure, a decision reached mutually by the departing executive and Office Depot's board, followed federal investigations into the violation of fair-disclosure rules for allegedly instructing his employees a few years ago to guide analysts' then-high estimates lower. Though the company and Odland both agreed to pay civil fines related to the investigations, Odland and Office Depot neither admitted nor denied wrongdoing in the cases.

More recently, the Department of Justice, as well as several states and cities, have investigated Office Depot's pricing practices at its contract office-supply business. Office Depot has settled some of these cases, including a $4.25 million settlement with the city of San Francisco.

Further, the company had to restate results when the Internal Revenue Service denied Office Depot's attempt to use $80 million in credits from past losses to offset its 2010 taxes, and said it couldn't use $63 million more in credits it planned for this year. Office Depot and its tax advisers mistakenly filed for the credit without considering a rule the IRS said superseded the one it was trying to use.

The office supply sector, with its glut of stores and razor-thin margins, has come under increasing pressure of late, amid constrained business spending, high unemployment, a lackluster economy and fierce competition on many fronts. Staples, the strongest player which many investors thought was immune to the major woes of Office Depot and No. 3 player OfficeMax Inc. (OMX), took a tumble last week when it reported disappointing quarterly results and cut its guidance.

"Looks like the economy's still stuck in neutral," Staples Chairman and CEO Ron Sargent said at the time.

Office Depot shares closed down 1.5% and are down nearly 26% since the beginning of the year; the stock was slightly higher on one small trade in afterhours action following the announcement. Staples stock is off nearly 27% and OfficeMax stock has more than halved this year, following its own terrible results.

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

--Joann S. Lublin contributed to this article.

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