Celestica Diversifies With Brooks

In a move that emphasizes its commitment to diversifying its business, {complink 987|Celestica Inc.} will acquire Brooks Automation's semiconductor equipment manufacturing business for about $80 million. Brooks, which has operations in the US and China, is Celestica's third acquisition since the beginning of 2010.

Although Celestica's Q1 results beat analysts' estimates, the company's growth has been lackluster, especially when compared with industry behemoth Foxconn. Celestica reports revenue for its most recent quarter increased 19 percent to $1.80 billion, compared to $1.52 billion in the first quarter of 2010. Even with a recent deceleration in its growth rate, Foxconn — a highly diversified EMS — reported a 34 percent sales growth in its first quarter ended March 31.

“The acquisition of Brooks’ operations in Oregon and China will significantly strengthen Celestica’s industrial market offering, providing our customers with additional capability in complex mechanical and systems integration services,” said Paul Nicoletti, Celestica's executive vice president, Diversified Markets, and chief financial officer, in a press release issued by the company.

“The design, engineering, and technical depth of these operations, coupled with their capital equipment supplier management expertise, are an excellent addition to Celestica’s existing global capabilities,” he said.

Semiconductor manufacturing equipment is not part of Celestica's main business. The Toronto-based company currently generates only about 10 percent of its revenue from the industrial market, and 28 percent is from the highly competitive consumer market.

Celestica will benefit from Brooks's capabilities, which include the production of front-end modules for wafer handling and transportation, vacuum transfer modules, and sub-systems for semiconductor capital equipment OEMs. Brooks, which employs about 450 people, generated revenue of approximately $135 million for the six months ended March 31, 2011.

In 2010, Celestica acquired AlliedPanels, a medical engineering and manufacturing service provider, to broaden its presence in the diagnostic and complex medical device market. It also bought Invec Solutions, a provider of warranty management, repair, and parts management services to companies in the IT and consumer electronics markets.

Before 2010, Celestica's last purchase was in 2005, when it acquired Displaytronix, which provides flat-panel display repair services; Ramnish Electronics, an EMS provider located in Hyderabad, India; and CoreSim, a leader in advanced design analysis and redesign services.

Celestica has been busy lately, but analysts agree that although the EMS industry is ripe for mergers and acquisitions, companies have generally been slow to act. EBN contributor Thomas Dinges makes this point, but acknowledges that “a few original equipment manufacturer (OEM) divestments in the consumer and computing segments have taken place, and several of the larger EMS providers already have acquired smaller competitors to gain scale or enhance specific end markets.” (See: Embattled EMS Providers Resist Market Consolidation.)

Part of the challenge for Celestica and other EMS businesses will be improving profit margins after semiconductor manufacturing equipment was hit hard by the recession.

“Celestica delivered 19% year-over-year revenue growth in the first quarter as we began to realize the impact of new programs launched late last year,” said Craig Muhlhauser, Celestica's President and Chief Executive Officer.

“We expect to achieve continued revenue growth and operating margin improvement throughout 2011 as these and other new programs ramp to full production volumes and achieve higher levels of productivity and efficiency.”

3 comments on “Celestica Diversifies With Brooks

  1. Nemos
    April 22, 2011

    I checked it out Celestica's site ( , and they have a nice picture that it says “Solid partnerships, that make an impact” (one picture is 1000 words.)

    It seems an active and promising company.

  2. elctrnx_lyf
    April 26, 2011

    Celestica is not really doing good comared to the competeitors like foxconn and sanmina. But their idea of diversifying into many businesses could actually provide with less risk in the future.

  3. maou_villaflores
    April 27, 2011

    They should diversified their business or else they totally out of business.

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