10-QPeriod: Q3 FY2006

AGILENT TECHNOLOGIES, INC. Quarterly Report for Q3 Ended Jul 31, 2006

Filed September 6, 2006For Securities:A

Summary

Agilent Technologies, Inc. reported strong performance for the third quarter and first nine months of fiscal year 2006, demonstrating significant revenue growth and improved profitability. The company's strategic shift towards core bio-analytical and electronic measurement solutions is showing positive results, with notable revenue increases in both segments. The divestiture of the semiconductor products business and the initial public offering (IPO) of its semiconductor test solutions business (Verigy) are key strategic moves reshaping the company's profile and focus. The company reported a substantial increase in net income, significantly boosted by one-time gains from the sale of its investment in Lumileds and the divestiture of its semiconductor products business. Excluding these significant items, the operational performance of the continuing businesses remains robust, indicating underlying strength in Agilent's core markets.

Key Highlights

  • 1Total net revenue increased by 17% and 13% for the three and nine months ended July 31, 2006, respectively, compared to the prior year.
  • 2Net income for the nine months ended July 31, 2006, was significantly impacted by a $901 million gain from the sale of Lumileds and a $1,809 million gain from the divestiture of the semiconductor products business.
  • 3The Electronic Measurement segment showed growth with orders up 4% and 7% for the three months ended July 31, 2006, in communications and general purpose test, respectively.
  • 4The Bio-analytical Measurement segment experienced strong demand, with orders up 11% and 13% for the three months ended July 31, 2006, driven by new product introductions in chromatography and mass spectrometry.
  • 5Agilent completed its $4.466 billion stock repurchase program, acquiring approximately 125 million shares.
  • 6The company announced its intention to distribute its remaining ownership in Verigy to Agilent shareholders by the end of the fiscal year.
  • 7Gross margin improved significantly, increasing by 6 percentage points for the three months and 3 percentage points for the nine months ended July 31, 2006, reflecting improved operational efficiencies and favorable product mix.

Frequently Asked Questions

Revenue growth was driven by strong performance in both the Electronic Measurement and Bio-analytical Measurement segments. The Electronic Measurement segment saw increased demand in wireless and general-purpose test, while the Bio-analytical Measurement segment benefited from new product introductions, particularly in liquid chromatography and mass spectrometry systems.

The divestiture of the semiconductor products business and the sale of the Lumileds investment resulted in significant one-time gains, substantially boosting net income for the nine months ended July 31, 2006. The ongoing separation of the semiconductor test solutions business (Verigy) through an IPO is also a key strategic event shaping the company's future.

Agilent maintained a strong liquidity position with cash and cash equivalents of $2,249 million as of July 31, 2006. The company generated positive cash flow from continuing operations and successfully completed a significant share repurchase program, demonstrating financial stability.

Agilent expects continued growth in its core Electronic Measurement and Bio-analytical Measurement businesses, driven by new product innovation, expanding leadership in core markets, and strategic moves into adjacent markets. The company's focus is on leveraging its operating model for profitable revenue growth.