Bloomberg News

Plexus Plunges on Loss of Biggest Client Juniper Networks

November 07, 2012

Plexus Corp. (PLXS:US) tumbled the most in more than six years after saying it will no longer be a supplier to Juniper Networks Inc. (JNPR:US), its biggest customer.

Plexus learned on Nov. 5 that Juniper would stop using its manufacturing services by the end of the current fiscal year, the Neenah, Wisconsin-based manufacturer said on a conference call today.

Juniper, the world’s second-largest maker of computer- networking gear, contributed 16 percent of sales in fiscal 2012. Plexus said increased competition among companies that design and manufacture networking equipment led Juniper to move more of its business to lower-priced alternatives.

“This is a very big blow to Plexus,” Brian Alexander, an analyst at Raymond James & Associates, wrote in an e-mail. “They alluded to pricing pressure from select customers. I can only conclude that this decision was made abruptly and without the consent of Plexus.”

Plexus shares retreated 27 percent to $20.51 at the close in New York, the biggest decline since July 2006. The stock has lost 25 percent this year.

“We have taken actions to best align the company’s resources to improve productivity and effectiveness,” Cindy Ta, a spokeswoman for Sunnyvale, California-based Juniper, said in an e-mailed statement. “Our decision to consolidate contract manufacturers will enable us to further drive operational excellence.”

Juniper Call

Juniper told Plexus in a scheduled conference call on Monday, Nov. 5, that they were changing from three to two manufacturers and that they would be eliminating Plexus as a supplier, said Plexus Chief Executive Officer Dean Foate on the conference call today.

“We were not informed of a strategy to go from three to two suppliers until we were informed that we were out,” said Foate. He said he was not on the phone with Juniper when the decision was communicated.

“This is a frustrating situation for us,” Foate said. “We don’t completely understand how they came to this decision, and at this point I guess it really doesn’t matter.”

Last month, Plexus forecast fiscal first-quarter revenue of $550 million to $580 million, missing the $615.8 million average analysts’ estimate, according to data compiled by Bloomberg. Profit will be 50 cents to 55 cents a share, the company said, less than the 64-cent average analyst estimate.

To contact the reporters on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net; Ryan Faughnder in New York at rfaughnder@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • PLXS
    (Plexus Corp)
    • $37.85 USD
    • -0.38
    • -1.0%
  • JNPR
    (Juniper Networks Inc)
    • $22.52 USD
    • -0.08
    • -0.36%
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