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Report: Jabil would lose $2.1 billion in revenue by cutting BlackBerry ties

Jabil Circuit could pay a hefty price for severing its relationship with troubled smartphone maker BlackBerry — about $2.1 billion in revenue the first year, according to estimates from Moody's Investors Service.

Jabil CEO Mark Mondello said during an earnings conference call with analysts last week that the St. Petersburg contract electronics firm is likely to end its relationship with BlackBerry, its second-largest customer last fiscal year after Apple. The news drove Jabil's stock down 10 percent.

Mondello said the "probable disengagement" would happen in the coming months.

In a report Monday, Moody's said it expected Jabil to cut ties to BlackBerry as soon as possible. Jabil's credit would be negatively affected, but the pullback would not affect the company's credit rating, Moody's said.

BlackBerry's largest shareholder, Fairfax Financial Holdings, has made a bid to take the company private for $4.7 billion. Analysts have predicted it may pull out of the handset market amid growing losses.

Last week, Jabil estimated it will record about $35 million to $85 million in charges in the new fiscal year stemming from its exposure to Blackberry. It also projected that fiscal first-quarter results would fall below expectations.

Moody's predicted that Jabil would face up to $100 million in restructuring costs, including transitioning factories away from making BlackBerry handsets. But Moody's also concurred that Jabil would still be able to generate strong operating cash flows of about $1 billion in its current fiscal year, thanks in part to its acquisition of Nypro Inc.

In the 2013 fiscal year, Jabil earned $370 million on revenue of $18.3 billion.

Jabil is the Tampa Bay area's second-biggest public companies by revenue, behind only computer products distributor Tech Data Corp. Ironically, Clearwater-based Tech Data also drew notice in the Moody's report: It is expected to continue distributing BlackBerry's handset inventory as long as it is available "and on more advantageous trade terms," the report said.

Report: Jabil would lose $2.1 billion in revenue by cutting BlackBerry ties 10/08/13 [Last modified: Tuesday, October 8, 2013 7:50pm]
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