Agilent shares leap on job cuts and disposals

Shares in Agilent Technologies shot up about 12 per cent on Monday after the world's largest testing equipment maker agreed to jettison several business lines, including its semiconductor unit, and eliminate 1,300 jobs as part of a restructuring plan that will cut costs by $450m.

Private equity firms Kohlberg Kravis Roberts and Silver Lake Partners will pay about $2.66bn for Agilent's chip business. Philips of the Netherlands has agreed to buy Agilent's 47 per cent stake in Lumileds Lighting, the light-emitting diode maker, for about $945m.

Agilent said the deals would allow it to focus on its testing and measurement business. The group said it would repurchase about $4bn in shares and buy back $1.15bn in convertible debt in a bid to boost its stock price. “I believe after we complete these transactions by the middle of next year our restructuring will be 85 per cent complete,” said Bill Sullivan, chief executive.

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

The company has weathered ahard times since it was spun off from Hewlett-Packard, the computer and printer maker, in 2000. Analysts have argued that the company's poor performance has been in part because of its cash-intensive semiconductor business, which has suffered from sharp cyclical swings. The company had signalled that it wanted to sell the chip business.

Agilent said it would use proceeds from the sales to acquire product lines more closely related to its core measurement business. The group makes equipment used to test and measure scientific instruments, electronic gear and chemicals.

Mr Sullivan said Agilent would look at acquisition opportunities in the bio-analytical measurement market, which includes food and life-sciences testing. He also pointed to opportunities in nanotechnology and homeland security, noting the demand for equipment to monitor air and water quality. He said the moves announced on Monday would reduce the headcount by about 9,400, about one-third of its workforce. In addition to losing about 8,000 jobs via divestments, an additional 1,300 employees would be cut through transfers, attrition and workforce reduction.

The company also reported third-quarter earnings that topped Wall Street estimates, as cost-cutting offset a 10 per cent drop in sales.

Agilent said net income rose to $104m, or 21 cents a share, in the quarter ended July 31, compared with $100m, or 20 cents, in the year-earlier period. Revenue fell to $1.7bn from $1.9bn and gross margins improved by more than 2 percentage points over last year.

Agilent shares closed up $3.92 at $30.33 on Monday in New York.