10-QPeriod: Q1 FY2004

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q1 Ended Jan 31, 2004

Filed March 4, 2004For Securities:A

Summary

Agilent Technologies, Inc. reported a significant turnaround in its financial performance for the three months ended January 31, 2004, compared to the same period in the prior year. The company achieved a net income of $71 million, a substantial improvement from a net loss of $369 million in the prior year. This marks the second consecutive quarter of profitability, driven by the continued strength in consumer electronics markets, particularly in the Asia Pacific region, and successful cost reduction efforts. Total net revenue increased by 16% year-over-year to $1.64 billion, with notable growth in Europe and Asia Pacific. The company also achieved its goal of reducing its quarterly operating cost structure to $1.4 billion ahead of schedule, reflecting the successful completion of major restructuring plans. Investors should note the positive operational cash flow of $40 million, a significant recovery from the previous year's cash burn. While seasonality is shifting due to the strength in consumer electronics, management remains cautiously optimistic about continued gradual market recovery. The company has made substantial progress in transforming its operations and cost structure, positioning itself for potential future growth as the global economy improves. Key areas of strength include strong order growth in the automated test and semiconductor products segments, indicating robust demand in critical technology sectors.

Key Highlights

  • 1Achieved net income of $71 million, a significant improvement from a net loss of $369 million in the prior year's quarter.
  • 2Total net revenue increased 16% year-over-year to $1.64 billion, with strong growth in Europe (+23%) and Asia Pacific (+31%).
  • 3Successfully reduced quarterly operating cost structure to $1.4 billion, ahead of schedule, driven by ongoing restructuring.
  • 4Generated positive net cash from operating activities of $40 million, marking the second consecutive quarter of positive cash flow.
  • 5Orders increased by 27% year-over-year, with notable strength in the semiconductor products (+53%) and automated test (+74%) segments.
  • 6Test and Measurement segment returned to profitability with an operating income of $4 million, a $136 million improvement year-over-year.
  • 7Significant progress in workforce reduction, with headcount reduced to approximately 28,000 from 35,000 a year ago.

Frequently Asked Questions

Agilent's return to profitability was primarily driven by the continued strength in consumer electronics markets, particularly in the Asia Pacific region, and the company's successful efforts in significantly reducing its quarterly operating cost structure through ongoing restructuring initiatives.

Total net revenue increased by 16% year-over-year to $1.64 billion. This growth was supported by strong performance in Europe and Asia Pacific, which saw revenue increases of 23% and 31%, respectively. The Americas region remained relatively flat.

Agilent expects a gradual recovery in most of its markets, driven by consumer electronics. However, management notes uncertainty regarding the sustainability of this recovery and continued pricing pressures and intense competition. Potential risks include declines in customer markets or general economic conditions, which could negatively impact demand, gross margins, and the company's ability to collect receivables. The company is also subject to risks associated with its ongoing implementation of new IT systems and potential disruptions.

Agilent has executed significant restructuring plans, including workforce reductions and facility consolidations, which have substantially reduced its operating cost structure. As of January 31, 2004, the workforce had been reduced by approximately 16,000 people. The company has met its expected savings goals from these plans and anticipates further cost reductions through the end of the year, primarily related to the 2003 Plan.