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Agilent to Sell Chip Unit to Focus on Core Measurement Business

From Associated Press

Dramatically narrowing its corporate focus, Agilent Technologies Inc. is shedding its chip unit and spinning off other assets as it concentrates on the test-and-measurement business at its historic core.

About 1,300 jobs will be cut in the reorganization, which will take the company back to roots that extend to the earliest days of its former parent, Hewlett-Packard Co. Agilent was spun off from HP in 2000.

“It’s been true since the inception of the company, we’ve performed more like a sluggish semiconductor company than the world’s premier measurement company,” Agilent Chief Financial Officer Adrian Dillon said Monday. “It has been a case of the semiconductor tail wagging the measurement dog.”

Shares of Palo Alto-based Agilent soared $3.92, or 15%, to $30.33 on Monday.

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Agilent is selling its semiconductor business to the buyout firms Kohlberg Kravis Roberts & Co. and Silver Lake Partners for $2.66 billion. The division builds chips for products including mobile phones, computer mice and optical networking gear.

Agilent also agreed to sell its 47% stake in San Jose-based lighting company Lumileds to Royal Philips Electronics for $950 million and the repayment of $50 million in debt. Lumileds had sales of $324 million and operating profit of $83 million over the last 12 months, Philips said.

Agilent also plans to spin off its system-on-a-chip and memory test businesses in 2006.

“Today starts a new chapter of Agilent,” said Chief Executive Bill Sullivan. “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.”

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Agilent said it would use the cash proceeds of its reorganization for a $4-billion share-repurchase program, and it would 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, which expects about $200 million in restructuring costs to be largely offset by proceeds from its asset sales, expects to save $450 million. It said the job cuts -- about 4.6% of its 28,000 employees -- would be made through transfers to the divested businesses, attrition and layoffs.

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

Agilent’s test-and-measurement business sells gear that scientists, doctors and electronics engineers use to make precise measurements for complex analyses.

Agilent also announced it latest results Monday. Fiscal third-quarter earnings rose to $104 million, or 21 cents a share, from $100 million, or 20 cents, a year earlier. Excluding charges, tax benefits and other one-time items, the company earned $142 million, or 28 cents a share, down from $154 million, or 30 cents, last year.

Revenue fell 10% to $1.69 billion, just below its expectations of $1.7 billion to $1.8 billion.


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