Agilent to Sell Unit for $2.66B, Cut Jobs

Monday, August 15th 2005, 9:26 am

By: News On 6

SAN JOSE, Calif. (AP) _ Agilent Technologies Inc. on Monday said it will sell its chip unit to two buyout firms for $2.66 billion, as well as sell and spin off other assets and cut 1,300 jobs as part of a restructuring program.

The Palo Alto-based maker of electronic test and measurement products plans to use proceeds from the deals for a $4 billion share repurchase program.

Kohlberg Kravis Roberts & Co. and Silver Lake Partners said their purchase of Agilent's chip business will create the world's largest privately held independent semiconductor company. The companies said they are equal partners in the venture.

``Today starts a new chapter of Agilent,'' said Bill Sullivan, the company's chief executive officer. ``We have made decisions today for us to be able to focus on our core that we have been a leader in for the last 65 years.''

Shares of Agilent soared 13.4 percent, up $3.53, to $29.94 in Monday morning trading on the New York Stock Exchange.

Agilent was spun off from Hewlett-Packard Co. in 2000, but has never reached its potential because of interests outside its core business of measurement gear, said Adrian Dillon, Agilent's chief financial officer.

``It's been true since the inception of the company, we've performed more like a sluggish semiconductor company than the world's premiere measurement company,'' he said. ``It has been a case of the semiconductor tail wagging the measurement dog.''

The company expects to cut cots by $450 million in the restructuring. It said the job cuts _ about 4.6 percent of its 28,000 employees _ will be made through a combination of transfers to the divested businesses, attrition and layoffs.

Agilent also said it expects the chip divestiture to be completed by Oct. 31, the end of its current fiscal year.

As part of the restructuring, Agilent, also said it agreed to sell its 47 percent stake in San Jose, Calif.-based lighting company Lumileds to Royal Philips Electronics for $950 million plus $50 million in debt and spin off its system-on-a-chip and memory test businesses in 2006.

The deal will give Amsterdam-based Philips a controlling stake of 96.5 percent of Lumileds altogether, while Lumileds employees will own the remaining 3.5 percent.

Lumileds had sales of $324 million and operating profit of $83 million over the last 12 months, Philips said.

The company said it will use the cash proceeds for a $4 billion share repurchase program, and it will call its $1.15 billion convertible debt. The repurchase will begin immediately, while the call is expected to cut its outstanding shares by 36 million.

The company said it anticipates about $200 million in restructuring costs to be largely offset by proceeds of its asset sales.

Agilent also said fiscal third-quarter earnings rose to $104 million, or 21 cents per share, from $100 million, or 20 cents per share, a year earlier. Excluding charges, tax benefits and other items, the company earned $142 million, or 28 cents per share, down from $154 million, or 30 cents per share, last year.

Revenue fell 10 percent to $1.69 billion from $1.89 billion last year, just below its expectations of $1.7 billion to $1.8 billion.

Analysts expected the company to earn 26 cents per share on revenue of $1.74 billion.

Agilent said it still expects fiscal fourth-quarter operating earnings of 33 cents to 38 cents per share, excluding items, on revenue of $1.79 billion to $1.89 billion. Analysts expect a fourth-quarter profit of 34 cents per share on $1.85 billion in revenue.