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OSI Systems Inc., one of the U.S. Transportation Security Administration’s primary contractors for airport security equipment, fell as much as 10.2 percent after losing a $60 million order for screening machines.

OSI, based in Hawthorne, California, had hundreds of its passenger-imaging machines — derisively called naked scanners by some privacy advocates — removed from U.S. airports earlier this year after the TSA concluded the company couldn’t meet a congressional deadline to make revealing images more generic.

“The failure sounds rather pedestrian but in the context of the recent dispute with the TSA raises serious questions about the day-to-day management of OSI’s most important segment,” Oppenheimer & Co. Inc. analysts Yair Reiner and William Lee said in a research note.

The shares fell to $65.78, down 8.3 percent, at 10:10 a.m. on Nasdaq.

TSA terminated the contract, signed Sept. 26, for the latest machines with OSI subsidiary Rapiscan Systems Inc. for default, the company said in a statement. TSA will issue a revised solicitation for the systems in the future, OSI said.

Editors: Bernard Kohn and Elizabeth Wasserman.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net. To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net.

Tags: security, tsa
Photo Credit: A man is screened with a backscatter x-ray machine at a TSA security checkpoint in terminal 4 at LAX, Los Angeles International Airport, in Los Angeles May 2, 2011. Danny Moloshok / Reuters