NEW YORK (GenomeWeb) – Agilent Technologies announced today that it is exiting the nuclear magnetic resonance market, saying that its business in this area "has not met growth and profitability objectives."
The company expects to eliminate 300 jobs as a result, with the majority of the layoffs to occur during the next 12 months. The positions are mostly located in Yarnton, UK and Santa Clara, Calif. Agilent will take a $72 million restructuring charge in the fourth quarter to cover the cost of the business exit, and it anticipates a $20 million to $30 million decline in revenues for fiscal 2015 resulting from the closure. A positive impact of about $10 million in operating profit is expected in FY 2015, however, the company said.
Agilent acquired the NMR business in 2010 as part of its $1.5 billion acquisition of Varian. It said that the shuttering of the business is part of the company's strategy to address business shortfalls of its Research Products Division. Since early 2013, Agilent has left the original equipment manufacturing and Specialty Magnet business, as well as the MRI business, in order to focus on the core NMR portfolio. The NMR business, however, continued to miss growth and profitability objectives, it said.
"Today's announcement represents a difficult decision necessary to drive improved profitability," Agilent President, COO, and CEO-elect Mike McMullen said in a statement. "The NMR team has been extremely dedicated and has made many excellent contributions. However, this action is a step in ensuring that our investments are placed on higher-value life sciences, applied markets, and diagnostics solutions that will continue to drive growth across the company."
Agilent is not taking new NMR system orders but will meet commitments on customer orders in progress and honor ongoing support contracts. It will also continue providing service on all installed NMR instruments.
Some investment analysts looked favorably on Agilent's decision. The ISI Group's Ross Muken said in a research note, "Bottom line, this afternoon's news should be received as a modest positive to shares (particularly from a strategic perspective), with management prudently exiting a loss-generating business despite the associated top-line hit and headcount cuts."
Wells Fargo analyst Tim Wells said that when Agilent purchased Varian, it had anticipated turning the NMR business around. The fact that it didn't happen "suggests Agilent overpaid for the business," he said. "We think Agilent's upcoming spin-off will force more discipline around capital deployment and will hopefully reduce the likelihood of such missteps in the future."
He also called today's announcement a positive for Bruker as it takes a competitor out of the picture, "which should enhance Bruker's positioning and pricing power."
Agilent today also reiterated its Q4 FY 2014 guidance for non-GAAP EPS in the range of $.87 to $.91. It projected revenues will be negatively affected by currency by about $13 million and NMR-related revenues to be about $12 million lower year over year.
Agilent's shares were down nearly 1 percent at $52.41 on the New York Stock Exchange in afternoon trading on Tuesday. Shares of Bruker were up 3 percent at $19.11 on the Nasdaq.