Thursday, Agilent Technologies Inc. (A), a provider of bio-analytical and electronic measurement solutions, revealed a major restructuring of its Electronic Measurement businesses in response to the most severe global downturn in the company's history and announced elimination of about 2,700 employees at its Semiconductor & Board Test segment. Further, the company said its share repurchase program is temporarily suspended until the end of fiscal 2009.

Santa Clara, California-based Agilent said the Semiconductor & Board Test segment will undergo a further restructuring to reduce annual costs by an additional $10 million. This restructuring will affect about 2,700 employees and have a cash cost of about $160 million. While announcing the first-quarter results last month, the company had revealed slashing of 600 positions.

The company would cut costs in its Electronic Measurement Segment by an annualized $300 million over the next four quarters, sizing the segment to achieve a 12% operating margin and a 21% Return On Invested Capital at annualized revenues of $2.3 billion.

Agilent said revenue in fiscal 2009 for the Electronic Measurement Segment is expected to be down about 30% from last year, which is the lowest level in the company's 10-year history. Revenue in the Semiconductor & Board Test segment is expected to be down over 50% from the previous year, and off 65% from its peak volume.

On March 23, Credit Suisse upgraded Agilent shares to Outperform from Neutral and increased its price target to $20 from $15. The brokerage believes that investors have traditionally focused more on Agilent's electronic measurement business, and less on its bio-analytic measurement business, owing to the former's much larger revenue & operating profit contribution.

In 2009, the analyst expects investors to shift their focus to bio-analytic measurement owing to its greater resiliency in the downturn, higher long-term growth, bigger operating profit contribution as well as more robust set of comparable companies.

Further, the company said Thursday that in order to fully fund the restructuring and conserve cash, it decided to temporarily suspend its share repurchase program until the end of its 2009 fiscal year.

Commenting on the resizing, Bill Sullivan, Agilent's president and chief executive officer, said, We have been very aggressive to date in addressing the downturn in electronic measurement markets. However, business remains severely depressed, and there are no prospects for a meaningful recovery in the foreseeable future. Therefore, we have no choice but to resize our electronic measurement businesses for the realities of the marketplace.

Last month, the company reported first-quarter GAAP net income of $64 million or $0.18 per share, lower than $120 million or $0.31 per share in the year-ago quarter. Excluding restructuring and asset impairment charges, net income for the first quarter was $72 million or $0.20 per share, compared to $136 million or $0.36 per share in the prior year quarter. Revenue for the first quarter dropped 16% to $1.17 billion from $1.39 billion in the same quarter last year.

Credit Suisse said earlier this week that Agilent's fiscal first quarter results showed that, while demand continues to be uncertain, the company's cost conscious response continues to deliver a 30%-40% contribution margin. As a result, the firm feels the company's earnings level will remain solidly positive even if demand were to fall by 30% in fiscal 2009, making Agilent a potential safe haven relative to other tech stocks in an extended downturn scenario.

Among peers, scientific instruments maker Thermo Fisher Scientific Inc. (TMO) recently issued forecast for its full year 2009 below analysts' estimates and said the economic climate would likely continue to restrain capital budgets, especially through the first half of fiscal 2009.

In a separate release, Agilent said it appointed Ron Nersesian as senior vice president and general manager of the company's Electronic Measurement Group. Under the new organization, Nersesian will oversee all business operations of both the Electronic Measurement as well as Semiconductor & Board Test segments. 49-year-old Nersesian has 27 years of experience in engineering, marketing and general management at Agilent, Hewlett-Packard Co. (HPQ) and other high-tech companies.

A is currently trading at $16.77, up $0.81 or 5.08%, on 1.48 million shares. For the past year, the stock traded in the range of $12.02-$38.00.

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