Citing pricing pressure, CellStar Corp. said it will discontinue providing fulfillment and logistics services for Leap Wireless International Inc.’s Cricket Communications’ company-owned and indirect sales channels when the current agreement expires Feb. 24.
“While we are disappointed to end a long, successful customer relationship, we feel that this decision is best for our company and our shareholders,” said Robert Kaiser, president and chief operating officer for CellStar. “Unfortunately, the pricing which Cricket requested going forward would not have supported our key profitability strategy.”
CellStar, which has worked with Cricket since 1998, noted that following Leap’s chapter 11 bankruptcy protection filing last April it converted the account to a primarily consignment model and has since worked with Cricket to ensure that both parties would be able to achieve their business goals.
CellStar added that the loss of the Cricket contract, which represented approximately 11 percent of its consolidated revenues for fiscal 2002 and approximately 6 percent in 2003, would result in a drop of between 3 cents and 5 cents in earnings per share for fiscal 2004. CellStar’s stock was trading down just more than 31 cents per share early Tuesday at $13.76.
Leap, which recently emerged from bankruptcy protection, announced late last week that Susan Swenson, president and chief operating officer, had resigned from the company.
