10-QPeriod: Q2 FY2006

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q2 Ended Apr 30, 2006

Filed June 6, 2006For Securities:A

Summary

Agilent Technologies, Inc. reported strong financial results for the period ending April 30, 2006, with significant year-over-year growth in both orders and net revenue. Total orders increased by 21% and net revenue grew by 12% for the three months ended April 30, 2006. This growth was driven by strong performance across its Electronic Measurement and Bio-analytical Measurement businesses, with positive contributions from General Purpose Test and Life Sciences products, respectively. The company also reported substantial net income, significantly boosted by the gains from the divestiture of its semiconductor products business and the sale of its stake in Lumileds. Operationally, Agilent demonstrated improved efficiency, with an increase in gross margin and a reduction in inventory days. The company continued its strategic focus on streamlining operations and reducing costs, including the planned spin-off of its semiconductor test solutions business. Agilent also returned significant capital to shareholders through its robust stock repurchase program, having bought back approximately $3.8 billion worth of shares by period end. The company maintained a strong liquidity position with substantial cash and cash equivalents.

Key Highlights

  • 1Total net revenue increased by 12% year-over-year to $1.43 billion for the three months ended April 30, 2006.
  • 2Orders grew by 21% year-over-year to $1.59 billion for the three months ended April 30, 2006.
  • 3Net income for the six months ended April 30, 2006 was $2.93 billion, significantly impacted by gains from the sale of the semiconductor products business ($1.82 billion net) and the Lumileds investment ($901 million net).
  • 4The company repurchased approximately 105 million shares for approximately $3.8 billion under its stock repurchase program.
  • 5Gross margin improved to 51% for the three months ended April 30, 2006, up from 50% in the prior year period.
  • 6Cash and cash equivalents stood at $2.66 billion as of April 30, 2006, an increase from $2.23 billion at the end of the previous fiscal year.
  • 7Agilent is actively pursuing strategic divestitures and spin-offs, having completed the semiconductor products business divestiture and planning the spin-off of its semiconductor test solutions business.

Frequently Asked Questions

Revenue growth was driven by strong performance across Agilent's core businesses. The Electronic Measurement segment saw growth from General Purpose Test products, particularly in aerospace/defense and across its oscilloscope product line, despite some weakness in communications test. The Bio-analytical Measurement segment experienced modest growth, supported by demand for proteomics and genomics products from biotech firms and sustained strength from generic pharmaceutical companies, although traditional U.S. pharmaceutical customers showed cautious spending.

The divestiture of the semiconductor products business and the sale of Agilent's stake in Lumileds significantly boosted net income, contributing $1.82 billion (net) and $901 million (net) respectively. The company is also progressing with the planned spin-off of its semiconductor test solutions business, which is expected to further refine its focus as a pure-play measurement company. These strategic actions are reshaping Agilent's business structure and financial profile.

Agilent demonstrated strong liquidity with $2.66 billion in cash and cash equivalents. The company is actively returning capital to shareholders through a substantial stock repurchase program, having bought back approximately $3.8 billion of its stock by period-end. Agilent also has $1.5 billion in long-term debt related to a Master Repurchase Agreement. Overall, the company appears financially sound with a clear strategy of focusing on core measurement businesses and optimizing its capital structure.

Yes, Agilent is actively engaged in cost-reduction efforts. This includes aligning its workforce with its reduced revenue base following divestitures, as evidenced by a new restructuring program launched in Q4 2005. The company has also reduced global infrastructure costs by moving services to lower-cost regions and realizing IT and facilities savings related to the semiconductor products group divestiture. These efforts aim to streamline operations and improve profitability.