The EMS provider Celestica Inc. (NYSE, Toronto: CLS) has announced it is winding down its manufacturing relationship with BlackBerry (Nasdaq: RIMM; Toronto: RIM), the struggling maker of the BlackBerry. Celestica said that the restructuring charges will not exceed $35 million, and that disengaging with RIM will take three to six months.
Celestica gave no indication which party initiated the breakup. In April, it told analysts during a regular earnings conference call that it had been working with RIM as it reassessed its supply chain strategy.
Ending a manufacturing partnership is time-consuming and can be costly for both the EMS and the OEM. (See: Apple & Foxconn: Breaking Up Is Hard to Do.) According to the Globe and Mail of Toronto, Celestica gets as much as one-fifth of its overall revenue from RIM.
The EMS consulting firm Charlie Barnhart & Associates told us in an email that it can take as long as three fiscal quarters to dismantle an outsourcing pact.
"Obviously, there is a range on this data point as well, but that number is extremely hard to pin-down as it's much more complicated to determine when the 'initial internal discussion' (re: the disengagement) actually took place," Barnhart said. "Plus many of the failed cases we study drag on for several years due to material liability issues, legal proceedings, warranty related claims, etc."
Celestica is expected to offer more details during its second-quarter earnings release and conference call, which are scheduled for Friday, July 27.