Celestica
Encyclopedia
Celestica Inc. is a multinational
electronics manufacturing services
(EMS) company headquartered in Toronto
, Canada
. Celestica’s global manufacturing network comprises more than 40 locations in 11 countries in the Americas, Europe and Asia, supplying a wide variety of leading OEMs (original equipment manufacturers). In addition to manufacturing, the company's global services include design and engineering, systems assembly, fulfillment and after-market services.
's Toronto sales and support offices, which also supported a small a manufacturing unit which built metal boxes for their mainframe
computers and associated support systems. Eugene Polistuk, a graduate of the University of Toronto
in 1969, joined IBM and rose through the ranks before taking over the Toronto manufacturing division in 1986.
As the world turned from mainframes to microcomputer
s, Polistuk's operations were forced to reduce headcount in 1986 and 1988. In response, Polistuk started to diversify the plant's product lines, building circuit boards, memory products and power supplies that could be used in a wide variety of IBM products. The $300 million investment was successful, and by 1993 most IBM divisions were buying some of the systems produced in Toronto. The factory site expanded several times.
.
Polistuk immediately invoked changes in order to break out of what he saw as a moribund management structure left over from the IBM days. An early move was to intitute a 5% pay cut in exchange for a profit sharing
program that could reap up to 30% of base pay. Another move was to make the same share offerings to everyone in the company, breaking with conventional options plans that offer the best prices to executives.
By the end of Celestica's first year of operations, they had signed up 40 new customers. Non-IBM customers had originally accounted for only 10% of their output, but was now standing at 30% and growing. This process was helped as major players in the computer industry started the process of outsourcing their own production systems. However, Polistuk felt that the only way to truly reach their potential was to have someone buy the company off of IBM.
This triggered rapid expansion at Celestica. In 1997 they bought UK-based Design to Distribution, the manufacturing division of International Computers Limited which itself was owned by Fujitsu
at that time. Later that year they purchased major portions of Hewlett-Packard
's manufacturing lines, including their PC board plant in Fort Collins, CO, their system assembly plant in New Hampshire
, and their system design shop in Chelmsford, MA. In October they bought Ascent Power Technology, who had power supply manufacturing in Canada, the US and UK.
By the end of the year, only 25% of its business came from IBM.
By 1998 the global EMS market was estimated to be around $60 billion, with projections that it would be over $150 billion 2003. Polistuk considered this to be conservative, noting "By 2001, to be among the largest contract manufacturers in this business, you'll need $10 billion in annual revenues. Just five years ago, nobody would have thought there would be a $10 billion EMS, but soon that is going to be the minimum to be a Tier 1 company."
Several additional stock offerings were made from the original Onex pool; $251 million in March 1999 and $225 million in May. A Second Public Offering in November added $488 million. The money was used to fund more purchases, adding five factories in the Czech Republic
, two in Italy and another each in Ireland, the US, Brazil and Malaysia. By the end of the year they had a turnover of $5.3 billion, making them the third largest EMS in the world. On 6 June 2001, Polistuk was appointed Chairman of the Board.
in 2001 led to a worldwide drying-up of EMS work. In April 2001 the company announced it was laying of 3,000 people, about 10% of its workforce. The company later announced that Polistuk would be taking a 1/3 pay cut as part of a wider series of compensation rollbacks.
Several rounds of lowered guidance followed, in spite of new supplier contracts and continued acquisitions. Losses mounted, and on 29 January 2004, the company announced that Polistuk would be retiring. In April, Stephen Delaney took over the CEO position. A second round of layoffs followed in 2005, along with the sale of several divisions. Operations stabilized, along with the rest of the market, through 2008.
console repairs for defective units produced in Canada.
was filed in New York against Celestica and members of the company’s executive team. The complaint alleges that the company made materially false and misleading statements about the business and failed to disclose adverse facts, namely:
This class action suit was dismissed in 2010.
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...
electronics manufacturing services
Electronics manufacturing services
Electronic manufacturing services is a term used for companies that design, test, manufacture, distribute, and provide return/repair services for electronic components and assemblies for original equipment manufacturers...
(EMS) company headquartered in Toronto
Toronto
Toronto is the provincial capital of Ontario and the largest city in Canada. It is located in Southern Ontario on the northwestern shore of Lake Ontario. A relatively modern city, Toronto's history dates back to the late-18th century, when its land was first purchased by the British monarchy from...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
. Celestica’s global manufacturing network comprises more than 40 locations in 11 countries in the Americas, Europe and Asia, supplying a wide variety of leading OEMs (original equipment manufacturers). In addition to manufacturing, the company's global services include design and engineering, systems assembly, fulfillment and after-market services.
Origins
Celestica's Toronto headquarters were originally the location of IBMIBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
's Toronto sales and support offices, which also supported a small a manufacturing unit which built metal boxes for their mainframe
Mainframe computer
Mainframes are powerful computers used primarily by corporate and governmental organizations for critical applications, bulk data processing such as census, industry and consumer statistics, enterprise resource planning, and financial transaction processing.The term originally referred to the...
computers and associated support systems. Eugene Polistuk, a graduate of the University of Toronto
University of Toronto
The University of Toronto is a public research university in Toronto, Ontario, Canada, situated on the grounds that surround Queen's Park. It was founded by royal charter in 1827 as King's College, the first institution of higher learning in Upper Canada...
in 1969, joined IBM and rose through the ranks before taking over the Toronto manufacturing division in 1986.
As the world turned from mainframes to microcomputer
Microcomputer
A microcomputer is a computer with a microprocessor as its central processing unit. They are physically small compared to mainframe and minicomputers...
s, Polistuk's operations were forced to reduce headcount in 1986 and 1988. In response, Polistuk started to diversify the plant's product lines, building circuit boards, memory products and power supplies that could be used in a wide variety of IBM products. The $300 million investment was successful, and by 1993 most IBM divisions were buying some of the systems produced in Toronto. The factory site expanded several times.
Spin-off
As IBM transitioned from a hardware company to a software and services company, the future of the manufacturing unit was in doubt despite its financial successes. In 1992 Polistuk suggested that the entire division be spun off into a separate company that would offer their services to anyone. His arguments slowly won over IBM's management, and in January 1994, Celestica was formed as a wholly owned subsidiary of IBM Canada. IBM's other divisions at the location moved to new buildings to the northeast, on the border of MarkhamMarkham
-Biology:* Markham's storm-petrel , a seabird species found in Chile and Colombia* Markham's grass mouse , a rodent subspecies found on Wellington Island and the nearby Southern Patagonian Ice Field in southern Chile* Ulmus americana 'Markham', an American elm cultivar-Companies:* Markham & Co., an...
.
Polistuk immediately invoked changes in order to break out of what he saw as a moribund management structure left over from the IBM days. An early move was to intitute a 5% pay cut in exchange for a profit sharing
Profit sharing
Profit sharing, when used as a special term, refers to various incentive plans introduced by businesses that provide direct or indirect payments to employees that depend on company's profitability in addition to employees' regular salary and bonuses...
program that could reap up to 30% of base pay. Another move was to make the same share offerings to everyone in the company, breaking with conventional options plans that offer the best prices to executives.
By the end of Celestica's first year of operations, they had signed up 40 new customers. Non-IBM customers had originally accounted for only 10% of their output, but was now standing at 30% and growing. This process was helped as major players in the computer industry started the process of outsourcing their own production systems. However, Polistuk felt that the only way to truly reach their potential was to have someone buy the company off of IBM.
Onex purchase
In May 1994, Polistuk met with Anthony Melman of Onex Corporation about a potential buy-out. IBM was not interested in selling, however, as the division was one of the most profitable sections of their Canadian operations. However, after continued agitation, in 1996 IBM Canada agreed to sell the business and hired Nesbitt Burns to find potential buyers. After a selection process, five were allowed to review Celestica's books. Onex's bid of $750 million for 69% of the company won the final selection in October 1996.This triggered rapid expansion at Celestica. In 1997 they bought UK-based Design to Distribution, the manufacturing division of International Computers Limited which itself was owned by Fujitsu
Fujitsu
is a Japanese multinational information technology equipment and services company headquartered in Tokyo, Japan. It is the world's third-largest IT services provider measured by revenues....
at that time. Later that year they purchased major portions of Hewlett-Packard
Hewlett-Packard
Hewlett-Packard Company or HP is an American multinational information technology corporation headquartered in Palo Alto, California, USA that provides products, technologies, softwares, solutions and services to consumers, small- and medium-sized businesses and large enterprises, including...
's manufacturing lines, including their PC board plant in Fort Collins, CO, their system assembly plant in New Hampshire
New Hampshire
New Hampshire is a state in the New England region of the northeastern United States of America. The state was named after the southern English county of Hampshire. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Atlantic Ocean to the east, and the Canadian...
, and their system design shop in Chelmsford, MA. In October they bought Ascent Power Technology, who had power supply manufacturing in Canada, the US and UK.
By the end of the year, only 25% of its business came from IBM.
Going public
In July 1998 Onex took the company public, raising $414 million, the largest IPO in the EMS field. This infusion of capital sparked another round of growth, and during the year the company bought International Manufacturing Services in Asia, and added factories in northern California, Mexico, and Ireland. By the end of the year, the company was turning over $3.2 billion annually.By 1998 the global EMS market was estimated to be around $60 billion, with projections that it would be over $150 billion 2003. Polistuk considered this to be conservative, noting "By 2001, to be among the largest contract manufacturers in this business, you'll need $10 billion in annual revenues. Just five years ago, nobody would have thought there would be a $10 billion EMS, but soon that is going to be the minimum to be a Tier 1 company."
Several additional stock offerings were made from the original Onex pool; $251 million in March 1999 and $225 million in May. A Second Public Offering in November added $488 million. The money was used to fund more purchases, adding five factories in the Czech Republic
Czech Republic
The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
, two in Italy and another each in Ireland, the US, Brazil and Malaysia. By the end of the year they had a turnover of $5.3 billion, making them the third largest EMS in the world. On 6 June 2001, Polistuk was appointed Chairman of the Board.
Crash
The dot-com crash and telecoms crashTelecoms crash
The 2001 Telecoms crash is often confused with the Dot Com crash which happened at around the same time. Unlike the dot com crash however, the telecoms sector relied on long engineering research and development cycles, and the development companies on the telecom operators buying software...
in 2001 led to a worldwide drying-up of EMS work. In April 2001 the company announced it was laying of 3,000 people, about 10% of its workforce. The company later announced that Polistuk would be taking a 1/3 pay cut as part of a wider series of compensation rollbacks.
Several rounds of lowered guidance followed, in spite of new supplier contracts and continued acquisitions. Losses mounted, and on 29 January 2004, the company announced that Polistuk would be retiring. In April, Stephen Delaney took over the CEO position. A second round of layoffs followed in 2005, along with the sale of several divisions. Operations stabilized, along with the rest of the market, through 2008.
Operations
Celestica’s global manufacturing network comprises more than 40 locations in the Americas, Europe and Asia. The company's global services include design and engineering, manufacturing and systems assembly, fulfillment and after-market services. Celestica also holds a contract for Xbox 360Xbox 360
The Xbox 360 is the second video game console produced by Microsoft and the successor to the Xbox. The Xbox 360 competes with Sony's PlayStation 3 and Nintendo's Wii as part of the seventh generation of video game consoles...
console repairs for defective units produced in Canada.
Controversy
On Friday, 12 January 2007 a shareholder class action suitClass action
In law, a class action, a class suit, or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued...
was filed in New York against Celestica and members of the company’s executive team. The complaint alleges that the company made materially false and misleading statements about the business and failed to disclose adverse facts, namely:
- (i) that the Company was experiencing declining demand in its Mexican operations and that the division was carrying significant amounts of unneeded inventory which would have to be written off;
- (ii) that the Company was experiencing declining demand in its Information Technology (IT) and Communications market segments as its larger customers scaled back purchases; and that the stock dropped when this information later became public.
This class action suit was dismissed in 2010.