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Celestica continues its winning diversification strategy

Celestica continues its winning diversification strategy 

At that time, a prototype of a high-tech band aid was just one of the projects the company was undertaking as it strived to redefine itself from a tech component manufacturer for IBM in the 1990s into a design, engineering, and manufacturing services firm now established in fields such as healthcare, smart energy, the environment, avionics and defence, industrial manufacturing, and enterprise communications.

At its recent shareholder’s meeting, Celestica executives reported that its diversification strategy has worked well for the company and that the public could expect more of it in the near future.

In its recent Q1, 2017 report the company earned US$25.6 million on gross revenues of $1.47 billion. This represents a nine per cent increase over the same period last year. Celestica now has 20 factories in 14 countries around the world and has a workforce of 27,000.

 A market analyst for Toronto-based financial services firm Canaccord Genuity estimates Celestica is on track to generate $305 million in revenue on $6.25 billion in 2017.

Not bad for a Canadian tech darling that famously stumbled during the dot-com crash that t had to lay off 3,000 people. Other well-known companies have since disappeared, or continue to struggle, but Celestica managed to stabilize its operations by around 2008.

If there’s any lesson to be learned here it’s about adaptation and diversification.

“There’s been under a lot of technology transformation pressure, and our customers have been challenged with going from hardware to software, and software to services,” Rob Mionis, Celestica’s CEO, told journalists recently. “But we’ve been adapting with our customers, and are there to support their transformation.”

Celestica has evolved into a “supply chain solutions company,” says Mionis, who became the company’s CEO in 2015. “We understand the trends in the marketplace and where it’s going, and align our product roadmaps and customer targeting solutions to support those customers.”

Today, Celestica’s footprints can be found in the healthcare sector, enterprise communications space, industrial manufacturing, semiconductors, as well as the environment and smart energy spaces. It works with the likes of Cisco, Honeywell, Juniper, and of course IBM.

Celestica’s Refined Manufacturing Acceleration Process (ReMAP), a government and industry-funded non-profit alliance which focuses on electronics manufacturing in Canada founded in 2014, is a good example of this matchmaking strategy.

Headed by Irene Sterian, Celestica’s director of technology and innovation development, the alliance is now behind several projects in healthcare, aerospace and renewable energy. Earlier this year ReMAP announced that its 7D Surgical Machine-vision Image Guidance System recently received FDA approval for spinal surgery. The ReMAP O7 team is a collaboration between 7D SurgicalCelesticaRyerson University and Sunnybrook Research Institute, formed to advance optical technologies for their image-guided surgery solution.

Robert Young, of Genuity who is “cautiously optimistic” about Celestica’s near term future, said that the two markets that are expected to drive growth for the company are communications and the strong demand for semiconductors.

“We could see growth and margin expansion accelerated by a more aggressive stance on M&A targeted on higher-margin diversified opportunities,” he said in an interview with CantechLetter.

Although it has launched 24 new products, basically, the company is not into inventing new products, he said. Instead, Celestica works with customers to determine their needs, and together they develop the solutions for it, says Darren Myers, chief financial officer of the Celestica.

“We help them design it and we help them scale it,” he said.

Celestica is also always on the lookout for markets with growth potential.

For example, some years ago, Celestica went into building solar panels. Margins are tough in that market with competition from Asia. However, the company’s work on solar panels opened up the opportunity to go into smart energy and wind energy – which has grown globally.

Celestica is known for its high-engineering and the ability of its professionals to deal with complexities reliably, said Myers.

“We look at other markets and say ‘okay, what are companies in-sourcing today that they will outsource in the future?’” he said. “Where do they really care about quality?”

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