Eugene Polistuk quit as chairman and chief executive officer of Celestica Inc. late yesterday just as the troubled Toronto electronic manufacturing company revealed it had lost $165-million (U.S.) in the fourth quarter.
Mr. Polistuk, whose resignation takes effect immediately, said despite the loss, the fortunes of the sector and the company are improving and it is a good time to give the reins to new management.
"The tech depression is over. Things are really starting to pick up. We look forward and things, I think, look positive so it's an ideal transition point," Mr. Polistuk, 57, said in an interview. When asked about the timing of his departure coinciding with the company's fifth consecutive money-losing quarter, Mr. Polistuk suggested his critics "don't have the benefit of seeing what is ahead."
"You can feel the surge of a new era . . . the worst is over. You can see a very strong quarter on revenue. There is improvement and the time seemed right," he said. "There is never a perfect time from the point of view of making public announcements."
He has no immediate plans.
The company, controlled by conglomerate Onex Corp., reported a loss of $165-million or 80 cents a share compared with a loss of $435-million or $1.90 per share for the same period in 2002. The 2003 loss includes a charge of $106-million due to the writedown of assets and restructuring activities.
Revenue for the quarter was flat over 2002 at $1.9-billion.
Mr. Polistuk, who has led the company since 1994 when the company was formed, was replaced as CEO on an interim basis by Stephen Delaney, president of American operations, who has been with Celestica since 2001. Robert Crandall, a Celestica director and the former CEO of AMR Corp., the parent of American Airlines, was named chairman.
Investors and analysts interviewed were surprised by Mr. Polistuk's sudden departure but said his decision to leave is indicative of the sector's dire straits.
A downturn in the tech sector, weak demand for electronics equipment forced many electronics manufacturing service firms to slash costs and has put increasing pressure on profit margins. Since 2001, Celestica has shed about 20,000 jobs and shifted about 70 per cent of production to lower-cost jurisdictions in central Europe and Asia.
"If I was the CEO of an EMS company and quit to run a paper clip company, I'd still be making better margins," said Duncan Stewart, co-owner and portfolio manager at Tera Capital Corp. Mr. Polistuk has done "good job" in the "worst industry," Mr. Stewart said. The investment firm has a small position in Celestica stock.
One U.S. analyst who asked not to be identified suggested burn-out is taking its toll across the tech sector.
On Jan. 20, Rick Ackel, chief financial officer of Sanmina-SCI Corp., a U.S.-based rival of Celestica, also resigned.
"Guys don't want to leave on bad note, they don't want to leave in the middle of a downturn. If you want to leave, now is the time to do it," the analyst said.