updated 05:41 pm EDT, Thu September 26, 2013
If company leaves, BlackBerry left with one manufacturer of devices
The bad news for BlackBerry keeps accumulating. Reports are circulating today that the Canadian cell phone company's manufacturing partner it shares with Apple, Jabil Circuit, is looking to break ties. Jabil Circuit CEO Mark Mondello claimed in a disappointing quarterly earnings conference call for his company that BlackBerry's continuing financial condition is causing the executive to have serious doubts about the long-term viability of the partnership.
BlackBerry is Jabil Circuit's second-largest customer, giving the manufacturer 12 percent of its business. Apple comprises 19 percent of Jabil Circuit's manufacturing capacity. "We are faced with a strong possibility of disengaging with BlackBerry," Mondello said. "Our team has worked diligently over the past few days to comprehend the recently-announced changes ... we're in discussions right now on how we're going to wind down the relationship."
Mondello added that timelines are "fluid, but directionally, we have a path, a path that we believe is prudent and in the best interest of our shareholders, a path that also supports the needs of BlackBerry. We plan to take a restructuring charge, move swiftly and decisively and mitigate the impact to fiscal year 2014 as best we can."
Generally speaking, manufacturers shoulder a percentage of the raw materials and parts costs, with the company being paid back by the receiving corporation upon delivery. BlackBerry's uncertain financial future may be generating Jabil Circuit's CEO some concern that pending orders may be cancelled mid-manufacture, leaving the company with parts and finished goods that may never be paid for.
BlackBerry currently relies on Wistron and Jabil Circuit for phone manufacture. Canadian electronics supplier Celestica started breaking ties with BlackBerry in 2012 after once receiving 20 percent of its revenue from manufacture of the company's phones.
Jabil Circuit reported this week that it expects lower-than-expected earnings as a result of the BlackBerry decline. Revenue is expected to be at least $200 million off the expected target. It also expects to report $99 million in restructuring costs over two years, as well as $35 to $85 million in charges related to BlackBerry.
BlackBerry had very little to say about the matter when questioned. "We value our business partner relationships around the world, and we remain committed to working collaboratively with them to deliver industry-leading quality products and services," said the company through a statement. The final quarterly results will be formally announced by BlackBerry on September 27, and the company will not hold the de rigeur conference call after the numbers are released.