Does Jettisoning Semiconductor Business Boost Agilent's Life Science Segment?

Agilent yesterday announced that it is selling its semiconductor business and divesting its Lumileds stake to get back to basics – making stuff that measures things.

The moves will bring the company, which reported some $2.8 billlion in cash on hand at the end of the quarter, an additional $3.5 billion that the company said will be spent repurchasing some $4 billion in its stock, and retiring some $1.5 billion in convertible debt.

The moves, which lifted the stock before Monday's market open, were predictable because although the semiconductor business was robust and mature, the ups and downs of the sector tended to drag down Agilent's overall results, overshadowing a successful rebound from the doldrums of the high tech downturn.

Agilent is one of the players in the New Biology Economy and is creating value in its Life Sciences business, which is the No. 2 player in the microarray market, a key provider in mass spectrometry, and is rapidly gaining momentum with acquisitions in the bioinformatics sector.

But, in announcing its third-quarter results yesterday, overall revenues of $1.7 billion were down 10 percent over the year-ago quarter, while net income of $104 million was up 4 percent over Q3 2004.

In its life sciences, revenues of $341 million were up 2 percent over $335 million in the year-ago quarter, while operating profit fell to $42 million compared to $45 million in the same quarter last year. Still, the company's internal measurement of the segments' success, return on invested capital, grew to 27 percent from 22 percent for the same period last year.

The company said it expects the life sciences unit to return to double-digit growth in the fourth quarter.

With all the moves announced yesterday, Agilent's life sciences and chemical analysis unit rises in stature, and expectations.