Shares of Flextronics ( FLEX - Get Report)plunged to a three year low Tuesday and sent other contract manufacturers down with it after the firm lowered estimates for its fiscal first and second quarters due to a continued decline in technology spending.

Flextronics, which makes printed circuit boards and electrical components for companies like Microsoft ( MSFT - Get Report) and Ericsson, saw its shares fall 19% to $10.01 after warning Monday night that it expects first quarter earnings of 5 cents to 8 cents a share on revenue of $3 billion. The company had originally forecast earnings of 10 cents to 13 cents a share on sales of $3 billion to $3.3 billion.

The news weighed heavily on other contract manufacturers, with Solectron and Sanmina-SCI ( SANM - Get Report)falling 6% to 7.20 and 10.10, respectively. Jabil Circuit ( JBL - Get Report) fell 3% to 21.18 and Celestica ( CLS - Get Report) lost 4% to 27.05.

Deutsche Bank Securities analyst Chris Whitmore said he believes consensus estimates for both Solectron and Sanmina-SCI are at "significant risk," noting that the pricing pressures faced by Flextronics are being felt by the entire industry.

Bear Stearns analyst Thomas Hopkins agreed that Flextronics' outlook for printed circuit boards does not bode well for Sanmina but he also pointed out that Sanmina has exposure to the PC sector, which Flextronics said was "more robust" than other areas.

Data communications and telecom industries were weaker than expected, according to the firm.

Needham analyst John McManus said while it is possible that other companies will warn as a result of weak technology spending and sluggish demand, Flextronics did have some company specific issues that contributed to the shortfall.

Indeed, the company said it will take a $150 million charge to reduce costs and consolidate some of its manufacturing facilities. Over the past 18 months, Flextronics has cut staff and shifted production to lower-cost regions in Asia but many analysts thought the restructuring charges had finally ended.

A.G. Edwards analyst Tony Boase said the fact that Flex is transferring production to low cost regions will hurt the company's margins over the next couple of quarters.

Production of Microsoft's video game console Xbox is being moved from Hungary to China, said Boase, but the cost of doing this will be borne mostly by Flextronics.

"Flex will probably offer China-based prices even though the program hasn't been completely transferred to China," he said.

Boase also noted that the restructuring efforts won't impact the printed circuit board business, which is the area showing the most weakness.

For the second quarter, Flextronics projected earnings of 7 cents to 10 cents a share on revenue of $3.2 billion. Thomson Financial/First Call had projected earnings of 13 cents a share. Still, executives remain optimistic that the worst is over.

"We are seeing many clear signs in our business that the end of the bottom is near," said Chief Executive Michael Marks during a conference call.