Agilent Technologies is a broad-based OEM of test and measurement
equipment. The company's third quarter earnings were above the
Zacks Consensus Estimate. Agilent's focus has shifted to life
sciences, genomics, diagnostics and wireless test markets, where
the company has made a few important acquisitions. The Electronic
Measurement spin-off should reduce the cyclicality of the business.
However, the macro weakness in the U.S. and Europe may temper
revenue growth with the significant increase in operating expenses
impacting the bottom line. We therefore have a Neutral
recommendation on Agilent shares.
Palo Alto, CA-based Agilent Technologies, Inc. (A) was
originally a spin-off from Hewlett-Packard. The company is an
original equipment manufacturer (OEM) of a broad-based portfolio of
test and measurement products serving multiple end markets.
In fiscal year 2008, the company had two operating segments
Electronic Measurement (EM) and Bio-Analytical Measurement (BAM).
In 2009, the company restructured the business and reported results
in three segments EM, BAM and Semiconductor Board & Test (SBT).
In 2010, the reporting structure was changed again, splitting BAM
into the Chemical Analysis and Life Sciences segments, while the
rest of the business was reported under EM. Following the Dako
acquisition, which was completed in the third quarter of fiscal
2012, Agilent created a fourth reporting segment, which it is
calling Diagnostics and Genomics. In 2013, the structure was again
changed, with Diagnostics being merged with Life Sciences to create
the Life Sciences & Diagnostics Segment. Therefore, segment
contribution in 2013 was as follows- EMG 43% (down 12.9%), LDG 34%
(up 15.9% from 2012) and CAG 24% (up 2.2%).
The EM segment (to be spun off as a wholly owned subsidiary of
Agilent to operate as Keysight Technologies from Aug 1, 2014) can
be further split into the general purpose test and communications
test businesses. General purpose test products, including general
purpose instruments, modular instruments and test software, digital
test products, semiconductor and board test solutions, electronics
manufacturing test equipment, atomic force microscopes and radio
frequency and network surveillance solutions are primarily targeted
at electronics, aerospace & defense and computing markets.
Communications test products and services are used in wireless
communications and microwave networks, as well as voice, broadband,
data and fiber optic networks.
The Life Sciences and Diagnostics product line includes liquid
chromatography, mass spectrometry, micro-array, polymerase chain
reaction (PCR) instrumentation, bio-reagents, lab software,
informatics automations and robotics, electrophoresis, and software
and informatics products. With the addition of Varian, the segment
now also caters to the magnetic resonance imaging (MRI) and nuclear
magnetic resonance (NMR) systems and X-ray diffractometers and
related consumables and services. The diagnostics side includes
products and techniques like IHC, ISH, H&E and other special
staining, gene diagnostics among others. It also collaborates with
pharma companies to develop companion diagnostics information. The
products are targeted at both for-profit organizations, such as
pharmaceutical and biotechnology companies, contract research
organizations and manufacturing organizations and not-for-profit
organizations, such as academic institutions, large government
institutes and privately funded organizations.
Chemical Analysis products include the company's gas
chromatography, mass spectrometry, spectroscopy, vacuum technology
products, as well as various consumables and supplies.
The company uses a direct sales model for the distribution of
its products, which is supplemented by distributors, resellers,
manufacturer's representatives, telesales and electronic commerce,
Important competitors in the EM segment include Aeroflex,
Applied Wave Research, EXFO, JDS Uniphase, Rohde & Schwartz,
Tektronix, Fluke Corp, Keithley Instruments, LeCroy Corporation,
National Instruments Corporation, Photon Dynamics, Teradyne and
Most of the competition for LifeSciences & Diagnotics and
Chemical Analysis segments comes from Bruker Corp., Danaher Corp,
Affymetrix, GE Healthcare, Life Technologies Corp., Thermo Fisher
Scientific, Waters Corp., Illumina, Inc., Life Technologies Corp.,
Abbott Laboratories, Sakura, Roche, Perkin Elmer Corp., Shimadzu
Corp, Heidenhain Corp., Malvern Instruments, Seiko Instruments,
Veeco Instruments and Zygo Corp.
The geographical distribution of revenue in fiscal 2013 was as
follows. The Asia/Pacific region was the largest geography
contributing 38% of revenue, followed by the Americas at 38% and
Europe at 26%.
Agilent Technologies, Inc (A): Read the Full
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