It might still be known best as a component manufacturer, but Celestica Inc. has a great deal more to offer its partners and clients, as president and CEO Rob Mionis made clear on Thursday.
In fact, the Toronto-based electronics design, engineering, and manufacturing services firm now earns more than 65 per cent of its revenue through cloud and communications support services, Mionis told reporters after the company’s annual general meeting on April 20, and the company is ensuring its continued health by pursuing what he called “advanced technology solutions” in five other sectors: health; smart energy; industry; semiconductor capital equipment; and aerospace and defense.
“We have a very long track record in [the cloud and communications] business,” Mionis told five media outlets, including ITBusiness.ca. “The market itself has been under a lot of technology transformation pressure, and our customers have been challenged with going from hardware to software, and software to services. But we’ve been adapting with our customers, and are there to support their transformation.”
There’s no question that Mionis, who stepped into his role in August 2015, has steered Celestica into profitable waters: In 2016 the company earned more than $6 billion in revenue (all figures USD), a seven per cent gain over the year before – and $136.3 million in profit. It also launched 24 new products, and recently opened a new customer experience centre in Silicon Valley that not only includes a demonstration centre of the company’s current products and services, but connects with its engineers around the world as well.
“If you take a look at where we’ve located the facility and draw a three-mile circle around it, you hit the majority of our current partners,” Mionis said. “We think of ourselves as a supply chain solutions company… So it’s good to have a place where we actually roll up our sleeves and collaborate with our customers to help solve their most complex supply chain challenges.”
Not bad for a company that started as a computer parts-manufacturing offshoot of IBM in 1994, and which has since grown to employ 27,000 people at 20 factories in 14 countries around the world.
From manufacturing to design to advanced technology solutions
Celestica’s transition from a manufacturing to solutions firm long predates Mionis’s arrival; during the dot-com boom, the company famously began laying off thousands between 2001 and 2007 before finally stabilizing around 2008.
Since then, its aim has been to build on its legacy of design and manufacturing expertise in the cloud-based services and telecommunications industries, while expanding into other sectors.
“In the areas of cloud and communications, we look at how that market is segmented between folks that are service providers, and folks that are supporting cloud infrastructure,” Mionis explains. “We understand the trends in the marketplace and where it’s going, and align our product road maps and customer targeting solutions to support those customers – and we actually do a very good job with that.”
The company uses a similar approach in other sectors, he says, though it tries to be selective in its efforts. It recently hired a chief strategy officer to build a team that is now researching potential new areas for growth the same way its sales and marketing team pursues new customers for its current sectors: by identifying the potential customer’s problem; observing the technology they’re using; and combining its marketing team’s observations with technology from its own innovation centres to present the potential customer with the perfect solution.
“Broadly speaking, we’re working on transforming our business and diversifying our business to products that have longer lifecycles, higher margins, and are stickier with customers,” Mionis says. “Our strategy… is to continue diversifying our business, and to pursue products that align best with our heritage for serving high-reliability, high-complexity solutions, which is the core of what we do well.”
As for why Celestica has made health, smart energy, industry, semiconductor capital equipment, and aerospace and defense its sectors of choice for providing advanced technology solutions, CFO Darren Myers, who has held three positions at the company since 2000 and his current job since 2012, says it came from a mix of acquisitions and exhaustive searches in other markets.
“Celestica is known for its high-engineering, high-complexity skills, and ability to deal with complexity in a reliable fashion, so we looked at other markets and said, ‘okay, where are companies in-sourcing today that will outsource in the future? Where do they really care about quality?’” he says. “And some of them are new – like smart energy was started because in Ontario we saw an opportunity to start doing solar panels.”
The markets chosen, he notes, in addition to being growth sectors benefitting from digital transformation, all share the distinction, so to speak, of being risk-averse – and one of Celestica’s strengths has always been helping risk-averse companies navigate the myriad ways technology can help them grow.
Then, depending on the company’s success in its chosen sector, it may choose to expand. Solar panels, for example, led to investments in wind energy and has ballooned into a global initiative.
Another common thread, Myers says, is that many of the companies Celestica supports do not operate in research-and-development-heavy industries – leaving it more than happy to do the heavy lifting for them.
“We don’t want to compete with our customers; we want to help them,” he says. “If someone has an idea and wants to design it for manufacturability, we say, ‘that’s a great idea, let us help you scale and design it at the quality you want.’ That’s where we excel… not, ‘I’ve got the next aerospace product to compete with somebody.’”