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Celestica cuts ties with hapless RIM

Canadian contract electronics manufacturer Celestica on Monday announced plans to part ways with Research in Motion (RIM), its largest customer.

Celestica said it would "wind down" manufacturing services for RIM over the next three to six months as RIM shrinks its supply base. Toronto-based Celestica said it would provide more details when it releases its second quarter results next month.

Celestica has been working with RIM as the as the troubled BlackBerry maker reassesses its supply chain strategy. RIM accounted for 19 per cent of Celestica's revenue during the first quarter, down 16 per cent from a year earlier, largely due to weak demand for BlackBerry products, Reuters reported. Celestica has been involved with the production of RIM products such as the Bold 9900 and Curve 8520.

"We do not normally comment on specific supplier relationships," a RIM spokesman told PCMag. "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."

Celestica, which also makes products for IBM and Cisco, said it expects restructuring changes of up to $35 million (£22 million) prior to recoveries. The company affirmed its second quarter guidance, which calls for revenue of $1.65 billion (£1.05 billion) to $1.75 billion (£1.12 billion).

RIM, meanwhile, recently hired bankers from JP Morgan and RBC Capital to help evaluate its strategic options. The company has faced several disappointing financial quarters in a row as it struggles to deal with the popularity of Apple's iPhone and smartphones based on Google's Android.

The announcement from Celestica comes just weeks after RIM confirmed that it will no longer produce the 16GB version of its troubled BlackBerry PlayBook tablet. RIM late last year said it would take a $485 million (£310 million) hit related to lackluster sales of the PlayBook.