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.
It will be interesting to find out who initiated the split. I imagine RIM needs lower cost solution and considering RIM was such a large portion of Celestica's revenue I doubt Celestica forced the split.
@p_d: yes, this is, potentially, a way for savings, but - imo - is not the key for ensuring market recovery, they need to enroll someone with the target for innovation doing more on that area; it should be a good time, hence other competitors are still facing issues on the market...
@flyingscot: I think Celestica may also have started having doubts about the future of RIM. May be they didn't want to be in a situation where they face the bad name if something happens to RIM. This could be one reason why they may have chosen to break the partnership.
"RIM is going to Mexico for lower cost. I am more concerened about RIM product quality. Celestica may get more business from Microsoft."
@_hm: Do you think companies in Mexico can compete with Chinese manufacturers in terms of technical strength and capabilities? Yes, they may be able to catch up with the labor costs but that's not the only component. There's so much more to it.
The real solution for RIM problem may not be breakup with celestica. Rather blackberry should look at reducing selling price of their phones to compete in current smart phone market.
AT first I thought Celestica initiated the breakup because RIM is so unstable. But reading that RIM accounts for one-fifth of Celestica's revenue puts some doubt in my mind. Celestica will have a hard time replacing that, particularly if it is going after mobile equipment. I believe the EMS also mentioned some repositioning, so maybe they will go after a different market.
Barbara, actually what happens for the mobile industries. If we are analysis the market we can see that Nokia is on the way of shutting down and now RIM also follows it. Intel gave up their mobile chip plans and today I had read that semiconductor firm Renesas Electronics Corp. could sell its mobile chip subsidiary, Renesas Mobile Corp. According to industrial analysis, most of the developments are going to happens in communication sector, which includes Tablet and smartphones. But in day to day life we are hearing only about negative news.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This