Motorola and Celestica ink outsourcing deal

Motorola, Inc. (NYSE: MOT) and Celestica, Inc. (NYSE: CLS) announced a $1 billion outsourcing agreement Wednesday that will cut 2,870 jobs at Motorola.

This is the second major outsourcing deal inked by Motorola this year and, according to the telecom company, is part of a long-term strategy to streamline its operations in order to improve the company’s bottom line and focus on core operations.

Shares of Motorola closed yesterday's session up 0.63 to 19. Celestica's stock rose over 6 percent, up 3.44 to 59.63 at market close.

Under the deal, expected to close in the first quarter 2001, Motorola will sell two of its manufacturing operations to Celestica for about $70 million, subject to post-closing adjustments. Motorola will also outsource the manufacturing of some cellular phone handsets, messaging devices, two-way radio products and accessories to Celestica.

For Motorola, the deal will allow for major restructuring, moving manufacturing facilities to software development plants and consolidating certain operations. As a result, around 2,870 positions will be cut, with some of the lay-offs being absorbed by Celestica.

Motorola lowered its guidance for 2000 and 2001 back in October.