Chips, LEDs to go in Agilent shake-up

$4bn windfall to buyback shares

The heart of the original Hewlett Packard company, Agilent, is spinning off its semiconductor in a major restructuring. It's also agreed to sell its stake in its LED joint venture Lumileds to JV partner Philips. More divestments will follow, as Agilent said it will seek buyers for its system on a chip and memory testing businesses next year. Agilent itself was itself spun off from HP five years ago.

1,300 of Agilent's 28,000 staff will lose their jobs in the shake-up.

"It has been a case of the semiconductor tail wagging the measurement dog," Agilent CFO Adrian Dillon said today. Two private investment firms will acquire the chip business for $2.66 billion.

While analysts have longs since urged the company to divest itself of semiconductors, the decision to sell its LED interests is more surprising. Lumiled's profits and revenue surged last year, grossing net income of $62 million in the last full fiscal year on sales of $280 million. Agilent's 47 per cent stake will be picked up by to founding partner Philips for $950 million.

Agilent also reported its earnings today, announcing net income of $104 million on revenues of $1.60 billion.

The restructuring program leaves Agilent with $4 billion extra in the kitty. So what new technology areas will Agilent spend this windfall on to help maintain its lead against Asian rivals?

Er, it will call in $1.15 billion of debt and blow the rest on a stock repurchasing program. Which should please the bankers, if no one else. ®

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