Shares of EZchip fell more than 25 percent this morning as the company disclosed that its largest customer — probably Cisco — might not use EZchip's next network processor in a particular router.

Instead, Cisco would do what Cisco's been doing for years: Spin its own chip.

We're assuming the customer is Cisco because the networking giant accounted for 39 percent of EZchip's 2014 revenues. But EZchip didn't specify a name as it announced the setback alongside its first-quarter earnings.

What's happening is that Cisco is preparing new line cards for a router that's been using EZchip's NP line of network processors. The router might be the ASR 9000, Cisco's edge-router line that was shipping with NP-based line cards back in 2008.

In any event, some product of Cisco's has progressed to using the NP5 from EZchip. But the next EZchip offering, a different line called the NPS-400, isn't in the running for that product's next line cards.

EZchip believes Cisco wants more throughput than the NPS-400 can provide, and that Cisco is therefore preparing an ASIC for the job.

This doesn't mean EZchip is shut out from Cisco. EZchip's release notes that the NPS-400, which is due to sample in the second half of this year, is being considered by the large customer in question for use in "other substantial platforms."

EZchip is also preparing the NPS-1000, which would have on-paper throughput of 1 Tb/s. That chip might be sampling by the time that customer gets its ASIC finished, EZchip's release states.

No offense to EZchip, but the main takeaway here is about Cisco. Even with high-end merchant chips becoming available from more sources (and making Arista into a serious competitor), Cisco has said it still believes in the advantages of designing its own ASICs. Today's EZchip announcement shows the company sticking to its guns on that.

EZchip's stock was down $4.91 (25%) at $14.66 in midafternoon trading.