Celestica Inc. (CLS), an electronics supplier based in Toronto, plans to record a $35 million expense as it ceases production of BlackBerrys for Research In Motion Ltd. (RIM), its largest customer.
The company will wind down RIM manufacturing over the next three to six months, according to a statement today. Celestica had said in a conference call in April that RIM was seeking to cut costs in its supply chain and a loss of the business would result in a maximum charge of $35 million.
RIM, which is sitting on a $1 billion pile of inventory, said on May 30 that it expected to have an operating loss in the first quarter and has hired banks to explore strategic alternatives. RIM’s BlackBerry smartphone has failed to keep up with the rising popularity of Apple Inc.’s iPhone and devices running Google Inc.’s Android software.
The manufacturing changes are part of a bid to save money, Nick Manning, a RIM spokesman, said today in an e-mail.
“We are making changes to our supply chain as part of wider efforts to improve the efficiency and cost effectiveness of RIM’s operations to help meet our strategic objectives and to deliver long-term value to our stakeholders,” Manning said.
RIM represented 19 percent of Celestica’s revenue in the most recently reported quarter, according to supply-chain data compiled by Bloomberg. At Jabil Circuit Inc. (JBL:US), another contract manufacturer, RIM accounted for 15 percent. The BlackBerry maker represented 11 percent for Flextronics International Ltd. (FLEX:US)
Celestica didn’t immediately respond to a request for comment.
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