10-QPeriod: Q1 FY2006

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q1 Ended Jan 31, 2006

Filed March 9, 2006For Securities:A

Summary

Agilent Technologies, Inc. reported a significant net income of $2,816 million for the three months ended January 31, 2006, a substantial increase from $103 million in the prior year period. This surge was primarily driven by a $901 million gain from the sale of its stake in Lumileds and a $1,831 million gain, net of taxes, from the divestiture of its semiconductor products business. Excluding these one-time gains, the company's core operations showed improvement, with net revenue up 10% to $1,336 million, and income from continuing operations reaching $979 million. The company also announced a new $4.466 billion stock repurchase program, of which $3.3 billion had been executed as of January 31, 2006, demonstrating a commitment to returning capital to shareholders. Strategically, Agilent is continuing its transformation into a focused measurement company, having completed the semiconductor products divestiture and planning to spin off its semiconductor test solutions business. The company reported strong order growth across its segments, particularly in semiconductor test solutions, which more than doubled year-over-year. Management expresses confidence in new product introductions and maintaining operating discipline as it moves forward.

Key Highlights

  • 1Net income surged to $2.816 billion due to significant gains from divested businesses (Lumileds and semiconductor products), a notable increase from $103 million in the prior year.
  • 2Net revenue grew 10% year-over-year to $1.336 billion, driven by broad-based order growth across business segments.
  • 3Completed the divestiture of the semiconductor products business, receiving approximately $2.579 billion in cash and recognizing an $1.831 billion gain (net of taxes).
  • 4Sold stake in Lumileds for approximately $949 million, recognizing a $901 million gain.
  • 5Announced and initiated a significant stock repurchase program of up to $4.466 billion, with $3.3 billion repurchased by January 31, 2006.
  • 6Semiconductor Test Solutions segment experienced exceptional growth, with orders increasing 115% and net revenue up 117% year-over-year.
  • 7Adoption of SFAS No. 123 (R) for share-based payments began, impacting expense recognition and requiring new disclosures.

Frequently Asked Questions

The substantial increase in net income was primarily driven by non-recurring gains from the sale of its stake in Lumileds ($901 million) and the divestiture of its semiconductor products business ($1,831 million net of taxes). These one-time events significantly boosted the reported net income.

Excluding the gains from divestitures, Agilent's core operations showed positive momentum. Net revenue from continuing operations increased by 10% to $1.336 billion. Income from continuing operations before taxes and equity income was $93 million, and net income from continuing operations was $979 million, indicating underlying operational improvement.

Agilent has a strong focus on capital allocation, as evidenced by its aggressive stock repurchase program. The company authorized a repurchase of up to $4.466 billion of its common stock and had already repurchased $3.3 billion by the end of the quarter, demonstrating a commitment to returning value to shareholders.

Agilent is undergoing a strategic transformation to become a 'pure play' measurement company. This includes the recent completion of the semiconductor products divestiture and plans to spin off its semiconductor test solutions business. The company aims to focus on its bio-analytical and electronic measurement segments.