Agilent CEO Calls Q1 'Disappointing,' Cuts 4,000 Jobs
Online staff -- Electronic News, 2/21/2003
Agilent Technologies Inc. today reported orders of $1.36 billion and revenue of $1.41 billion for its fiscal Q1 ended Jan. 31 – results that the Palo Alto, Calif.-based company's chief executive was not happy with and as such announced a further 4,000 employee layoff at the struggling company.
"Our first quarter results were disappointing," said Ned Barnholt, Agilent's chairman, president and CEO, in a statement. "Orders were weaker than expected due to a general climate of uncertainty. In addition, margin pressures continued to impact several of our businesses. Based on these results, we are taking additional aggressive cost-cutting actions to return Agilent to profitability during the second half of this year."
After $12 million of non-cash amortization charges and $42 million of restructuring expenses, the net loss from continuing operations was $112 million. In addition, the company took a $257 million one-time goodwill write-off in the quarter related to the adoption of a new accounting rule, SFAS 142.
Barnholt said that Agilent's orders were down 22 percent compared to a year ago in the Americas, about flat in Europe, and up 7 percent in Asia.
"Our first quarter results reflect a collective hesitation by many of our customers, who are deferring capital expenditures," the CEO noted. "Geopolitical uncertainty, on top of the general economic weakness we've experienced in the last year and a half, has resulted in a continuing pattern of weak orders."
While all of Agilent's business segments were relatively soft in Q1, the company said it saw particular weakness in its semiconductor equipment, which saw a sharp decline in hardcopy ASICs orders; test and measurement, which saw orders fall 8 percent year-over-year and 12 percent sequentially, and chemical analysis businesses, with orders down 9 percent year-over-year and down 13 percent from Q4, compared to prior expectations.
"Our near-term outlook calls for a modest improvement in second quarter orders and revenues based on a rebound in semiconductor equipment and seasonally higher semiconductor orders," Barnholt said. "However, visibility has never been worse, and we have no reason to believe that business will improve materially in the quarters immediately ahead."
Agilent said it has achieved about $1.25 billion of annualized savings from its previously announced restructuring programs, which have included job and pay cuts since its downturn began. The company said it had expected to finish this year with a normalized quarterly breakeven cost structure of about $1.57 billion, but that expectation has since dropped.
On the less than stellar results, Agilent said it will reduce the workforce by an additional 4,000 jobs in the next few months and bring the company's cost structure down an additional $125 million per quarter in order to achieve a targeted Q4 breakeven cost structure of $1.45 billion. This is the third 4,000-employee layoff the company has seen since November 2001.
"These actions will be extraordinarily painful, but we have no alternative," Barnholt said. "Agilent must return to profitability as soon as possible. Our commitment is to move quickly and to make the critical trade-offs that will ensure our profitability without jeopardizing our long-term success. We are confident that we are up to the challenge."
Capital spending will also take a hit. Agilent's Q1 $61 million was below last year and below the level of depreciation, and the company said it expects to spend only $250 million on capex this year, compared to $301 million in 2002 and $881 million in 2001.
The company also today announced guidance for Q2 revenues in the range of $1.4 billion to $1.5 billion.
"Business conditions are very difficult, and we have much left to do to restore Agilent to financial health, but we should not ignore the progress we are making," Barnholt concluded. "In short, we are confident we will restore Agilent to financial health in the short term while continuing to reinforce our global technology leadership position for the long term."
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