By Mardi Balgochian Scalise, Lightwave Web Editor
Agilent Technologies Inc. (NYSE: A) reported third quarter results this week, along with workforce reductions across the company's geography and business units.
The company cited orders of $1.3 billion and revenue of $1.8 billion for the quarter ended July 31. On an earnings before goodwill basis, the company lost 24 cents per share versus the consensus estimate of a 35-cent-per-share loss. These results represent continuing operations, excluding Agilent's recently sold healthcare business. The company said that third-quarter orders for its communications and semiconductor products continued to be very weak, reflecting the severe slowdown that has plagued these industries in recent months.
In a conference call this week, Ned Barnholt, Agilent president and CEO, said, "Like many others in the industry, earlier this year we believed business would begin to improve by this point in 2001, but the downturn is deeper and clearly will last longer than we thought."
In addition to expense reduction actions that Agilent has already taken, the company announced that it will reduce its workforce by approximately 4,000 people, or about 9 percent, by the middle of next year in order to restore the company to profitability as soon as possible. The company believes many will leave through normal attrition, but some will be affected by restructuring. Eliminating those 4,000 positions will save Agilent about $500 million per year.
"Based on our outlook earlier in the year, we implemented a variety of aggressive cost-control measures -- including a temporary 10-percent pay cut -- to try to avoid layoffs," said Barnholt. "We are now taking additional actions to bring the size of our workforce more in line with anticipated business levels." Agilent expects to incur restructuring expenses of approximately $200 million to reflect the impact of severance packages and related costs associated with the workforce reductions.
"This is by far the worst industry downturn I've seen in my 34 years with the company," Barnholt said. "Although there are indications that we may be at the bottom in some businesses, we are not yet seeing definitive signs of an upturn," citing delayed customer spending and other factors.
Weak customer demand coupled with excess capacity and inventory in key industries Agilent serves drove net orders down 54 percent -- to $1.3 billion -- from a very strong third quarter a year ago. Net orders declined 5 percent from last quarter. Cancellations were about $240 million, down from Q2 but higher than expected. Third-quarter revenue was $1.8 billion, a 23-percent decrease year over year. Revenue declined 24 percent from last quarter.
On a more optimistic yet generic note, Barnholt said, "The downturn enables us to accelerate the programs to streamline our operations," including new IT systems and the customer-oriented Agilent.com services.
Looking forward, the company said it expects a slight increase in total Q4 orders over this quarter's $1.3 billion. Because backlog is at very low levels across the company's test and measurement and semiconductor businesses, revenue will be dependent to a large extent upon new orders. Revenue is expected to be between $1.3 and $1.5 billion, which would lead to an expected loss of between 50 and 70 cents per share on an earnings before goodwill basis, excluding restructuring charges.
"We will continues to manage cash carefully and invest for growth," Barnholt said. About the future of the company, the CEO concluded with: "Great for longer term, but difficult for the short term."
About Agilent Technologies:
Agilent Technologies Inc. (NYSE: A) is a global technology provider in the communications, electronics and life sciences markets. For more information, visit www.agilent.com.