Home Depot Girding for an Overhaul

With its business underperforming and stock price lagging, Home Depot has been under pressure by shareholders like Relational Investors to make a drastic change. Relational, which last week gained a board seat at the company, had been calling for Home Depot to restructure or put the wholesale business up for sale.

Strasser believes the idea to sell or spin off the supply business was the result of Relational's David Batchelder being added to the board.

"He and his firm have actively opposed this business," Strasser wrote. "The question is: are they abandoning their strategy too fast, and does one person, with just 1.3% ownership, have too much influence? What a difference six weeks make."

Scott Rothbort, founder of LakeView Asset Management and a contributor to Street Insight, says the supply division hasn't been the stronger part of Home Depot's business, but he also points out that Home Depot may be off in its timing of getting rid of the segment.

"It seems the new CEO is making the necessary moves as he begins to put his arms around the mess left behind by Bob Nardelli," he says. "The supply business waxes and wanes with the construction business. Home Depot bought it at the top of the market and now that market's come off a fair amount. You have to ask yourself, are they selling low after buying high?"