Agilent to cut 4,000 workers, posts Q3 losses

Duncan Martell

SAN FRANCISCO: Electronics testing equipment maker Agilent Technologies Inc.

said on Monday that it would cut 9 per cent of its work force and reported a

third-quarter operating loss as it struggles to restructure its business amid

persistent soft demand.

Agilent reported a pro forma loss from continuing operations of $109 million,

or 24 cents per share, compared to a profit of $158 million, or 34 cents per

diluted share in the quarter a year ago. Sales fell to $1.81 billion from $2.35

billion during the year-ago quarter.

Analysts polled by Thomson Financial/First Call had forecast a loss per share

of 26 cents to 48 cents per share, with a consensus of 35 cents, on sales of

$1.8 billion.

The Palo Alto, California-based firm said the job cuts amounting around 4,000

workers, would be completed by the middle of next year. Agilent's sales caved in

as telecommunications and other customers found themselves with huge inventories

as economies slowed and the high-tech sector headed into a recession.

"This last quarter, we thought when we announced our second quarter we'd

begin to see a little bit of an upturn in the third quarter, but we just didn't

see that," said Agilent president and chief executive Ned Barnholt in an

interview. "Business continued to deteriorate even further."

"It we had not done these job cuts, it would've taken a much more rapid

recovery, or could have certainly taken us longer to restore profitability, and

we didn't think that was the right thing to do for the long-term health of the

company," said Barnholt.

Rough days ahead



Agilent, like many other high-tech companies with exposure to the once
high-flying telecommunications industry, is having a hard time seeing any return

of demand on the horizon. Indeed, the company forecast fourth-quarter sales of

$1.3 billion to $1.5 billion and earnings per share loss before goodwill and

excluding restructuring costs of 50 cents to 70 cents.

"We are not seeing definitive signs of an upturn," Barnholt said on

a conference call. "Many customers have made progress in cutting down their

inventories, but excess capacity is still a major issue across the

country." Management said that it needs at least $1.9 billion in sales to

break even, but that this will not happen until 2002, and executives couldn't

say precisely when in 2002 Agilent would hit that level of sales.

Among the different industries Agilent sells its equipment to, Barnholt said

that the last likely to bounce back is in the optical networking segment, where

Agilent sells test equipment. He added the company is seeing early, initial

signs of some demand returning in segments of the semiconductor industry.

In computer, personal computer and peripheral and storage networks

industries, "Those market have tended to firm up and the inventories are in

better balance," Barnholt said. The company said it expected to post

restructuring expenses of $200 million for severance packages and other costs

associated with the job cuts. The job cuts will result in about $500 million in

annualized savings, the company said.

But Barnholt said that, despite the downturn, Agilent is still spending more

than $1 billion on research and development this year to prepare for a return in

demand, and has already even marked some gains in market share against rivals.

"The number of new products we introduce this year and early next year we

think will allow us to gain more market share as well as to enter some markets

that we're not even in today," Barnholt said.

(C) Reuters Limited 2001.