Contract electronics manufacturer Plexus Corp said it would no longer make switches and network gear for its largest customer, Juniper Networks Inc, sending its shares down 24 percent after the bell.
Juniper (Sunnyvale, USA) said it was cutting the number of suppliers it uses and an analyst said price may have been an issue.
Plexis (Neenah, USA) did not give a reason for the contract loss but is expected to discuss the development in a conference call scheduled for Wednesday morning at 8 a.m. Eastern.
"This is very surprising news to us given our recent communications and activities with Juniper," Plexus CEO Dean Foate said in a statement.
Juniper informed Plexus on Monday of its decision and is expected to completely cut off its manufacturing relationship by the end of the year, Plexus said.
"Last quarter plexus talked about how they had to give some pricing concessions to a number of their networking customers, and I suspect it was a pricing issue that pulled away Juniper," RBC Capital Markets analyst Amit Daryanani said.
Juniper counts on contract manufacturers to build the network gear and switches it engineers, and until now Plexus won the lion's share of Juniper's business.
"We have taken actions to best align the Company's resources to improve productivity and effectiveness. Our decision to consolidate contract manufacturers will enable us to further drive operational excellence, a Juniper official said in an emailed statement.
Juniper did not disclose who would get Plexus' share of its business but it also contracts production from Flextronics International Ltd and Canada's Celestica Inc.
For the year ended October 2011, Juniper accounted for 17 percent of Plexus' sales of $2.23 billion.
Neenah, Wisconsin-based Plexus is a contract manufacturer of technical equipment and gets almost half of its revenue from sales of network and wireless infrastructure equipment.
Plexus shares were trading at $21.40 in extended trading, having closed at $27.96 on Tuesday on the Nasdaq.
(Reporting by Himank Sharma and Supantha Mukherjee in Bangalore; Editing by Rodney Joyce)