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Agilent Restructures, Laying off 450; Q2 Revenues Flat

NEW YORK (GenomeWeb News) – Agilent Technologies announced after the close of the market on Tuesday a restructuring program expected to reduce its headcount by about 450 employees and save the company $50 million annually in operating expenses.

The Santa Clara, Calif.-based firm also reported that revenues were flat year over year in its fiscal second quarter and that its board approved an additional $500 million to its existing share buy-back program.

Agilent said the restructuring program will reduce its global workforce by about 2 percent. The timing and scope of the reductions will "vary based on local legal requirements," it said.

On a conference call following the release of the company's results, CEO Bill Sullivan said that the focus of the restructuring will be on Agilent's Electronic Measurement Group and that the company will explore opportunities "to streamline our organization around the world."

The restructuring and the increase to the buyback program comes as the company sees little room for revenue growth moving ahead as macroeconomic conditions continue to drag on the firm's results. Sullivan said on the call that "the hard reality" is that a macroeconomic recovery in the second half of the year is not likely to happen.

"The continued issues in the US and Europe, Japan stimulus hasn't kicked in, China is going to grow at 7.5 to 8 percent — we are not going to get the type of revenue growth that is going to be able to maintain our margins," he said.

The restructuring was announced concurrent with Agilent's earnings results. For the three months ended April 30, total revenues came in at $1.73 billion, even with the second quarter of its Fiscal Year 2012, but just below the consensus Wall Street estimate of $1.74 billion.

Orders companywide were down to $1.69 billion, an 8 percent decrease from $1.84 billion a year ago.

The pharmaceutical end market was up 8 percent year over year, while the academic/government end market was down 5 percent. Food safety grew 8 percent, offsetting softness in forensics and environmental markets. Petrochemicals increased 3 percent, Sullivan said.

Revenues in the Life Sciences segment rose 3 percent year over year to $405 million from $395 million, Agilent said, "with continued strength in pharmaceutical markets."

The LC and LC-MS business, as well as recurring revenues, drove growth in the segment, Sullivan said.

Diagnostics and Genomics revenues jumped 124 percent to $166 million from $74 million a year ago. Excluding the effects of the Dako acquisition completed last summer, the segment was down 3 percent, Agilent said.

On Dako, Lars Holmkvist, president of the Diagnostics and Genomics Group, said on the call that the business grew 4 percent year over year on a currency-neutral basis.

Chemical Analysis was up 3 percent to $401 million from $388 million, and Electronic Measurement fell 13 percent to $760 million from $876 million.

Agilent's profit for the quarter narrowed to $166 million, or $.48 per share, compared to a profit of $255 million, or $.72 per share, a year ago. On a non-GAAP basis, EPS was $.77, beating the average Wall Street estimate of $.67 per share.

The firm's R&D expenses increased 9 percent to $181 million in the second quarter compared to $166 million a year ago, while SG&A costs rose 10 percent to $497 million from $452 million.

Agilent said that it recorded restructuring costs of $55 million in the recently completed quarter, as well as intangible amortization of $51 million, and acquisition, integration, and transformation costs of $9 million. It recognized a tax benefit of $18 million.

The firm finished the quarter with $2.52 billion in cash and cash equivalents.

For the fiscal third quarter, Agilent gave revenue guidance in the range of $1.63 billion to $1.66 billion. Non-GAAP EPS is anticipated to be between $.60 and $.64.

The company lowered its Fiscal Year 2013 revenue guidance to a range of between $6.75 billion and $6.85 billion. In its fiscal first-quarter earnings release, Agilent had lowered FY 2013 revenue guidance to a range of $6.9 billion to $7.1 billion.

The high end of its non-GAAP EPS guidance was also lowered again. EPS is now anticipated in the range of $2.70 to $2.85 from a previous range of $2.70 to $3.00.

Lastly, Agilent said that its board has authorized an increase of $500 million to its existing stock repurchase program. The company is now authorized to buy back up to $1 billion of its stock, inclusive of amounts repurchased since Nov. 1, 2012. Agilent expects the buyback program to be completed by the end of the calendar year 2013.

Agilent repurchased 3.3 million shares of its stock in the second quarter, on top of 2 million shares repurchased in the first quarter, it said. Under the increased program it has $781 million of stock remaining to be repurchased.

In Wednesday morning trade on the New York Stock Exchange, shares of Agilent were up nearly 5 percent at $45.99.