|Celestica Hit As Top 2 Customer Sun Micro Issues Warning |
Updated: Wednesday, May 30, 2001 01:22 PM ET
By Paul Haavardsrud
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--Celestica Inc. (CLS, news, msgs) is among the hardest hit of the contract manufacturers, after Sun Microsystems Inc. (SUNW, news, msgs) announced a profit warning late Tuesday.
Celestica's two largest customers at the end of its first quarter were Sun and International Business Machines Corp. (IBM, news, msgs), each accounting for just under 20% of revenues, according to National Bank Financial analyst Benoit Chotard.
After market close Tuesday, Sun said it expects revenues in its fourth quarter ending June 30 to be between $3.8 billion and $4.0 billion, about 24% lower than the $5.02 billion recorded a year earlier and below the guidance given at the end of its third quarter.
Sun attributed part of the shortfall to weaker than expected sales for its mid-range computer servers.
"Clearly when you have that kind of percentage you do everything for that client, servers and the like, so I suspect it will have an impact on the top line of Celestica," Chotard said, noting that he is making a downward revision to his forecasts for Celestica. "33% of Celestica's business last quarter came from servers, so obviously a big portion of that was from Sun," he said.
In New York Wednesday, Celestica is down $4.91, or 9%, to $48.90 on about 4.6 million shares.
Company Web Site: celestica.com
Part of the revenue shortfall expected for Celestica Inc. (CLS, news, msgs) after Sun Microsystems Inc.'s (SUNW, news, msgs) earnings warning could be offset by increased business with International Business Machines Corp. (IBM, news, msgs), said National Bank Financial analyst Benoit Chotard.
"That's the whole game plan," Chotard said. "They have a multitude of clients that hopefully offset one another."
While noting that worsening economic conditions in Europe, as well as the tough North American environment, makes it difficult for both Sun and IBM, Chotard said he expects IBM's business is holding up better than Sun's.
"IBM is selling to more Fortune 500 companies, which are continuing to spend," Chotard said.
In contrast, Sun's customer list has more exposure to the telecommunications industry, in particular competitive local exchange carriers, which is pulling back on spending, he said.
-Paul Haavardsrud, Dow Jones Newswires; 416-306-2032