Why Plexus Shares Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of contract electronics manufacturer Plexus (NAS: PLXS) crashed 28% today after announcing that it will no longer be a supplier to networking gear maker Juniper Networks (NYS: JNPR) .

So what: Juniper happens to be Plexus' largest customer, accounting for 17% of its business in fiscal year 2011, so investors have no choice but to model considerably lower revenue going forward. Although Plexus didn't give a reason for Juniper's decision, some analysts suspect that pricing was the issue, sparking concerns that it might need to give its other customers some margin-crimping concessions to prevent further contract losses.

Now what: Juniper is expected to completely cut off its manufacturing relationship with Plexus by the end of the year. "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," Plexus President and CEO Dean Foate reassured investors. However, given all the uncertainty surrounding Plexus' revenue and margins at this point, I'd be cautious about buying into that bullishness.

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The article Why Plexus Shares Plummeted originally appeared on Fool.com.

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