NEENAH, Wis. (AP) — Shares of supply chain provider Plexus Corp. plunged Wednesday after it said it had been dropped as a supplier to Juniper Networks Inc., a data network equipment maker.
The stock lost $7.45, or 26.7 percent, to close at $20.51 after falling as low as $19.65 earlier in the day, its lowest level since July 2009.
Plexus CEO Dean Foate said the Neenah, Wis.-based company was informed of the decision on Monday. He called it a "surprise." He told analysts on a conference call that Juniper told the company that it was moving from three to two manufacturing partners as it sought to cut operating costs.
He said business from Juniper, its largest customer, accounted for about $370 million in revenue for Plexus in fiscal 2012, about 16 percent of the company's revenue. Due to a transition period, Foate said he expected revenue from Juniper to fall to about $220 million to $270 million in fiscal 2013.
He expected no impact to Plexus' guidance for its fiscal first quarter through the end of December. Plexus said the timing of the separation as a supplier to Juniper wasn't clear but is expected to happen by the end of its fiscal year.
"Plexus has been an important strategic supplier to Juniper for more than a decade. While this is a significant event for us in the near term, our new business wins of $956 million during fiscal 2012, including in the networking/communications sector, provides us continued optimism in our strategy," Foate said in a statement.
A spokeswoman for Sunnyvale, Calif.-based Juniper confirmed the move was to help cut costs.
"We have taken actions to best align the company's resources to improve productivity and effectiveness," the Juniper statement said. "Our decision to consolidate contract manufacturers will enable us to further drive operational excellence. Our actions are being carefully planned and managed to maximize efficiencies in our cost structure while preserving the investments in innovation in our core businesses of routing, switching and security."
Citi analyst Jim Suva kept a neutral rating on Plexus shares but slashed his target price to $21.50 from $30. Suva said that Flextronics International Ltd. would be getting more business from Juniper because it offered a "more aggressive price," but he said the gain only amounts to about 1 to 2 percent of Flextronics sales. Suva named Juniper's other supplier as Canada's Celestica Inc.
Flextronics shares fell 13 cents to close at $5.96. Celestica shares rose 5 cents to $7.35.
Juniper shares rose 22 cents to close at $17.76.