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Celestica Restructures as Revenue from BlackBerry Wanes
Celestica Inc. (CLS), a provider of electronic manufacturing services to original equipment manufacturers and service providers across various industries, is in the process of restructuring its business operations, subsequent to the winding down of manufacturing services for former smartphone giant BlackBerry (BBRY). At the conclusion of the third-quarter, BBRY contributed less than 10% to Celestica’s top-line, which hurt year-over-year revenue comparisons. That being said, excluding sales from the Canadian cellphone maker, revenues were roughly 3% higher during the quarter, led by the company’s Diversified and Server segments. Looking forward, the contribution from BBRY ought to be nearly non-existent in 2013, placing an importance on bolstering business through the already existing customer base, as well as expanding revenue streams through acquisitions.
Moreover, restructuring charges related to the ending relationship ought to subside over the next several quarters. The company is striving to improve margins by lowering its cost structure within their global network, thus increasing operational efficiency. To date, Celestica has recorded approximately $28 million in charges, with the majority attributed to one-time costs associated with the fade out of services for BlackBerry. Total costs linked to the restructuring program are estimated to be in the range of $40 million to $50 million, and will likely come to fruition by the mid-way point of 2013. Once restructuring costs stabilize and decline, we anticipate a pickup in top-line production, along with solid bottom-line growth.
Additionally, Celestica is well-positioned to take advantage of a growing domestic healthcare market, where the use, development, effectiveness, and timing of products from original equipment manufacturers is vital. Celestica HealthTech, the company’s expanding healthcare segment, provides design, automated manufacturing, electronics manufacturing, and fulfillment and after-market services to medical equipment companies. At present, its involvement in the segment is fairly minimal; however efforts to ramp up exposure are on the front burner.
Meanwhile, on November 29, 2012, the company announced the formation of an advisory council to oversee and guide company actions and decision making within the industry. The main function of the group is to provide valuable insight and generate strategic initiatives for Celestica, as the company develops new and innovative medical device technologies and supply chain solutions, designed specifically for the healthcare industry.
Headlining the council is Dr. David Goodman, MD, who currently serves on the board of directors of NEUROMetrix (NURO), a neurotechnology company focused on the early detection of diabetic peripheral neuropathy (DPN) and treatment of painful diabetic neuropathy (PDN).
Working with Dr. Goodman is Dr. Eric Maurincomme , the current chief executive officer of INSA Lyon, France, one of the top international engineering universities in Europe and Chairman of the Board at Insavalor, its research and technology transfer subsidiary.
Lastly, joining the council is Christopher Van Ingen, who is chairman of the board of Bruker Energy & Superconducting Technologies Inc.; director of the Bruker Corporation; chairman of the board at Accelrys, Inc; director of Senova Systems, Inc.; and director of Promega Corporation.
By leveraging years of experience from top-quality industry professionals, the company ought to isolate and indentify niche opportunities within the market, alongside improving operational efficiency amongst its already established business practices. Indeed, the formation of an advisory group is undoubtedly a step in the right direction and a solid addition to the management umbrella. From a long-term perspective, Celestica’s top- and bottom-line should ultimately benefit from seasoned executive guidance, especially in such an ever-important growth industry. That, coupled with re-focusing and restructuring their manufacturing operations subsequent to the BlackBerry phase-out, makes a compelling argument for the company’s prospects further down the road.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.