As I mentioned in one of my earlier posts, if you think things can’t get any worse for RIM, you need to remember the golden rule - it can get worse before it gets better. Lately, there’s been no shortage of bad news for the Waterloo giant – dipping stock value, delayed product releases, job cuts and what not – clearly, things are way worse than anyone had anticipated.
Several analysts say the writing is on the wall and the end is near for RIM. And there was more bad news for the Waterloo giant yesterday as Contract electronics maker Celestica Inc. announced that it plans to wind down its manufacturing services for Research in Motion over the next three to six months.
To put things in perspective, the Toronto-based Celestica has been widely considered as one of RIM’s closest ally over the last decade. The manufacturer used to produce BlackBerry Bold and Curve models in Mexico for the North American market. The announcement effectively means that Celestica will not be making RIM’s BlackBerry 10 devices, thereby alleviating concerns of further delays before these new devices are launched. The manufacturer expects restructuring charges to the tune of $35 million due to RIM’s move but it remains confident of making inroads into higher-margin markets.
Celestica’s other major customers include IBM Corp and Cisco Systems Inc. Though RIM accounted for 19 percent of Celestica’s Q1 revenue, it represented a 16 percent YoY decline amid declining sales of RIM’s BlackBerry devices.
RIM’s other suppliers include Flextronics International Ltd, Jabil Circuit Inc, and Quanta Computer Inc. Last week, RIM killed the 16 GB PlayBook so its relationship with Quanta Computer Inc. is already under strain. It’s unclear whether RIM would further trim down its supply line as it looks to cut $1 billion from its operating costs this year.
“As we outlined in our Q4 earnings call, 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,” a RIM spokesman said.
Celestica says it will continue to work with RIM through the company’s restructuring by assessing its supply chain strategy. The two companies declined to comment whether the decision was RIM’s, Celestica’s or a mutual.