Profit growth returns as Celestica shrugs off BlackBerry loss

Fri Jul 26, 2013 12:31pm EDT
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By Bhaswati Mukhopadhyay

(Reuters) - Contract electronics manufacturer Celestica Inc (CLS.TO: Quote) posted its first rise in profit in five quarters, sending its stock up the most in two years and allying concerns about its growth after it ended a contract with BlackBerry Ltd (BB.TO: Quote).

The 19 percent rise in profit in the second quarter was partly due to stronger-than-expected demand at the Canadian company's fastest growing and largest unit, communications, which makes networking equipment for telecom companies.

Chief Executive Craig Muhlhauser said the company was shifting its focus to communications and diversified businesses, away from the consumer business.

Sales from Blackberry, part of the company's consumer business, accounted for about 12 percent of revenue last year. Analysts have questioned the company's growth prospects ever since the company lost the contract.

The Toronto-based company's current-quarter revenue forecast indicated a fall of 9 percent at the most, much less than the 14-19 percent fall in the past four quarters.

The diversified business accounted for a fourth of second-quarter revenue, while communications accounted for 42 percent and consumer was the smallest of the five units with a 7 percent contribution to total revenue.

"We are not pursuing consumer opportunities," Muhlhauser said in an interview to Reuters.

Celestica also makes servers for manufacturers such as IBM (IBM.N: Quote), Cisco (CSCO.O: Quote) and Juniper Networks Inc (JNPR.N: Quote).   Continued...