April 21, 2011 / 2:06 PM / in 6 years

UPDATE 3-Celestica seeks new markets, adds jobs

* Adding 400 jobs at HQ, to buy chip-making equipment

* Expects more high-value business in defense, medical

* Q1 adjusted EPS $0.25 vs estimate $0.23

* Q1 revenue up 18 percent at $1.80 billion (Recasts, adds executive and analyst comment, updates share rise; in U.S. dollars unless noted)

By Alastair Sharp

TORONTO, April 21 (Reuters) - Celestica Inc (CLS.TO) aims to expand the range of electronics it builds for military, medical and green technology companies to offset sometimes patchy demand for servers and smartphones.

The contract electronics maker reported earnings just above analyst expectations on Thursday, even though Oracle ORCL.O asked it to build fewer servers than it had initially ordered.

It now hopes to boost complex tasks like building solar panels account to 30 percent of its business within three years, from just over 10 percent at present.

“We want to be the company that takes on the toughest challenges in the most difficult environments where quality and technology matter,” chief executive Craig Muhlhauser told reporters after an investor meeting on Thursday. “We don’t want to be the guy that’s fighting to build the cheap product.”

To that end, Celestica plans to add 400 jobs, a 40 percent increase, at its Toronto headquarters to grow the expertise that filters out to its factories in Asia and elsewhere.

It employs some 35,000 people worldwide.

It will buy the chip-equipment making operations of Brooks Automation (BRKS.O) for some $80 million, adding semiconductor equipment maker Applied Materials (AMAT.O) to a customer list that already features BlackBerry maker Research In Motion RIM.TO, network equipment maker Cisco (CSCO.O) and software maker Oracle.

Oregon and China-based Brooks facilities had revenue of $135 million for the six months ended March 31.

Celestica said its quarterly profit rose to $30 million, or 14 cents a share, from $28.5 million, or 12 cents a share, a year ago. Revenue rose to $1.8 billion, from $1.52 billion.

Adjusted to exclude stock-based compensation, amortization of intangible assets, restructuring and other charges, profit was $54.7 million, or 25 cents a share, beating the average expectation of analysts of 23 cents a share, according to Thomson Reuters I/B/E/S.

The smaller than expected orders for Oracle, whose purchase of Sun Microsystems last year brought new server business Celestica’s way, was a blip on the otherwise solid numbers.

“Where we struggle is if you’re my customer and you say ‘I‘m going to sell ten’ and you sell six and you don’t tell me until the third month of the quarter, I have a problem offsetting that,” Muhlhauser said.

“Despite that we achieved the mid-point of our guidance, so the message is we can take those body blows.”

Investors shrugged it off. The stock had jumped 4 percent by mid-afternoon.

NOT ALONE

Celestica’s larger competitors Jabil Circuit (JBL.N) and Flextronics (FLEX.O) -- which also produce BlackBerrys for RIM -- have also identified similar growth opportunities.

“They’re all going after the same business,” said Collins Stewart analyst Louis Miscioscia. “Some of them like Flex and Jabil have been more aggressive and gotten there first but I’d say we’re still in the early stages.”

Celestica was spun off from IBM Corp (IBM.N) in 1996 and is majority-owned by Onex Corp OCX.TO. It forecast sales between $1.75 billion and $1.9 billion this quarter and maintained its outlook for 10 to 15 percent sales growth in 2011. (Additional reporting by Gowri Jayakumar in Bangalore; editing by Janet Guttsman)

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