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 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 63 cents 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 its two of its manufacturing operations to Celestica for approximately $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 the Celestica.

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

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