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Agilent Dumps Semiconductors

Citing a need to focus its energies on its core business, equipment test manufacturer Agilent sold its semiconductor business for $2.66 billion and shed roughly 1,300 jobs from its roster Monday.

The Palo Alto, Calif., company also announced its intention to sell its stake in Lumileds for $950 million and repay $50 million of debt from the LED manufacturer.

The money will be used in an immediate share repurchase program valued at $4 billion. Agilent officials said they intend to pay the company's $1.5 billion convertible debenture -- a debt that can be converted to stock later by the investor -- which could reduce the company's outstanding shares by 36 million.

The deals are expected to close by the end of October, pending regulatory and governmental approvals.

Bill Sullivan, Agilent president and CEO, said the moves were made to focus its business as a pure-play test measurement company and reduce global infrastructure costs by $450 million.

"It has become increasingly clear that investors also prefer this exclusive focus on the $40 billion measurement market," he said in a statement. "Returning the proceeds of these divestitures via share repurchases demonstrates Agilent's commitment to realizing superior value for our owners as well as our customers."

Agilent made the announcement the same day it announced its third quarter 2005 results, which showed the company fell slightly behind market expectations of $1.7 billion to $1.8 billion for the quarter. Third-quarter revenues reached $1.69 billion.

The company expects the restructuring to cost $200 million. Officials said the layoffs will be accomplished through a combination of employee moves from Lumileds and semiconductor business, work-force reductions and attrition.

A joint investment group of Kohlberg Roberts & Co. and Silver Lake Partners bought Agilent's semiconductor business, while Royal Philips Electronics forwarded the $950 million for Lumileds.

Officials said they aren't finished shedding divisions non-essential to its new focus on test equipment. They plan to spin off its System on a Chip test and memory test businesses as soon as practical in 2006.



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