Test & Measurement

Agilent: Ready to Spend

With two big divestitures done, Agilent Technologies Inc. (NYSE: A) considers itself to be in a new phase of life that could include more acquisitions, company officials told analysts on an earnings call today.

Agilent reported net income of $2.8 billion, or $5.83 per share -- yes, that's five dollars -- when it reported earnings this morning for the quarter that ended Jan. 31. But much of that money came from Agilent's divestiture moves. Agilent sold its semiconductor division to private equity groups for $2.7 billion; the division was launched in December as Avago Technologies Pte. (See Avago Springs From Agilent.)

Agilent also grabbed $1 billion by selling its 47 percent stake in Lumileds Lighting International BV to Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) Lumileds was a joint venture of HP Inc. (NYSE: HPQ) and Philips, created before Agilent spun off from H-P.

Minus those gains, Agilent's first quarter saw net income of $154 million, or 32 cents per share, on revenues of $1.34 billion, compared with net income of $26 million, 5 cents per share, on revenues of $1.41 billion for the previous quarter. (See Agilent Reports Q1.)

For its first quarter a year ago, Agilent reported net income of $103 million, 21 cents per share, on revenues of $1.66 billion.

Analysts polled by Thomson Financial expected Agilent to report net income of 30 cents per share and revenues of $1.36 billion.

For the current quarter, which ends in April, Agilent expects revenues of $1.37 billion to $1.43 billion, with earnings per share between 35 and 40 cents. Both ranges match analyst expectations, but maybe investors wanted a little more: Agilent stock fell $1.69 (4.7%) to $34.18 by mid afternoon.

There's one more unit Agilent wants to divest: its test businesses for systems-on-chip and flash memory. The plan is to spin off that unit, named Verigy, in a midyear IPO.

Combined with layoffs, the divestitures will cut 9,400 of Agilent's 28,000 employees, officials said when they announced the restructuring plan in August. (See Agilent Launches Extreme Makeover.)

So, what to do with the new, streamlined company? Agilent has $2 billion in what it's calling surplus cash, and foresees having $3 billion in 2007. That opens the door to acquisitions in order to fuel growth: Agilent made six small buys during the past five quarters and is hungry for more, reported CEO Bill Sullivan on the earnings call.

Bigger acquisitions are certainly a possibility, he admitted, but going along with Agilent's recent slimming down, candidates have to be related to its measurement business. And Agilent's goal in any acquisition would be "20 percent incremental return on invested capital by Year 3," Sullivan said.

— Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:06:18 AM
re: Agilent: Ready to Spend I'll admit I haven't kept up on the measurement industry, particularly on the biotech side. Anybody got ideas on what you'd like to see Agilent acquire? Big names preferred, even if they're not related to telecom ...
SPecial_Guy 12/5/2012 | 4:06:18 AM
re: Agilent: Ready to Spend I have no basis for these guesses, but I'm going for it anyways since the boards look quiet.

1. Ixia - Fat on cash and strong leaders in IP; Agilent could run up margins at key accounts with best-in-class routing (N2X) and switching (Ix) test

2. Ineoquest, QoSmetrics, Brix or Pixelmetrix - IP Video always seems like a likely diversion.

3. Imperfect Networks - They built the Network Analyzer around the same team, and it would be a blow to Spirent

4. SeaSolve, VeriWave, LitePoint or Azimuth - Wireless always seems like a good bet
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