Celestica will stop making products for BlackBerry smartphone maker Research In
Motion.
The BlackBerry maker is looking at cutting costs by
shrinking its global supply base. Recently, Nokia also announced its plans to
shut manufacturing facilities in a bid to reduce costs.
Celestica has mainly built BlackBerry Bold and Curve models
in Mexico for the North American market. RIM’s sales in the United States have
been hit particularly hard as it struggles to compete with Apple Inc’s iPhone
and devices using Google Inc’s Android software, according to media reports.
RIM’s decision to trim the number of companies that build
its smartphones is happening at a time when it looks to cut $1 billion from its
operating costs this year.
Celestica will likely take a near-term hit due to RIM’s move
but it is expected to bounce back as it diversifies into higher-value and
higher-margin markets.
RIM’s three main remaining suppliers are Flextronics
International, Jabil Circuit, and Quanta Computer Inc, which makes RIM’s
poor-selling PlayBook tablet.
RIM accounted for 19 percent of Celestica’s first-quarter
revenue, but that was down from a year earlier due to weak demand and program
transitions at the smartphone company.
Recently, the struggling RIM hired bankers from J.P. Morgan
and RBC Capital to help evaluate its strategic options.
Celestica, which produces servers and other products for
branded manufacturers such as IBM and Cisco Systems, said it expects
restructuring charges of up to $35 million.
The company said it continues to expect an adjusted
second-quarter profit of 20 cents to 26 cents a share on revenue of $1.65
billion to $1.75 billion.
