Agilent Technologies Reports Second-Quarter 2003 Results

Monday, April 19, Drive to Quarterly Operating Breakeven Continues

PALO ALTO, Calif., May 19, 2003 -- Agilent Technologies Inc. (NYSE: A) today reported orders of $1.53 billion and revenue of $1.47 billion for the fiscal second quarter ended April 30, 2003. The company reported a GAAP net loss of $146 million, or $0.31 per share, which includes $74 million of net restructuring charges and intangibles amortization. Excluding those items, Agilent reported a net loss of $72 million, or $0.15 per share. 

"Our second quarter results were mixed," said Ned Barnholt, Agilent chairman, president and chief executive officer. "We're encouraged by orders and revenue that came in near the top of our expectations, despite world events. Earnings, however, were at the low end of our range because of delays in realizing restructuring savings as well as ongoing pricing pressures in our markets. But, we did achieve $35 million in structural cost reductions during the quarter, and we reduced headcount by nearly 2,500. We remain committed to achieving an operating breakeven of $1.45 billion in the fourth quarter of this year."(1)

Overall, Agilent's second-quarter orders and revenue were in the same range as those of the past six quarters. The company reported a rebound in semiconductor test equipment orders, which reached their highest level in two-and-a-half years. Semiconductor component orders were also seasonally higher, although they remained well below last year's second-quarter spike. Activity in Agilent's other business segments was basically flat compared to the prior year.

The company also demonstrated good balance sheet management during the quarter, generating $28 million from working capital despite sequentially higher revenue. Capital spending, at $38 million, was about $50 million below depreciation expense.

"We continue to invest in Agilent's future by maintaining our significant investment in R&D," Barnholt said. "This enables us to keep delivering innovative new products to our customers, and has resulted in our winning market share across many of our businesses in the first half of the year." 

Looking ahead, the company said it sees no material change in the outlook for its end markets. Agilent expects third-quarter revenue in the range of $1.45 billion to $1.55 billion. Earnings before restructuring and amortization charges are expected to be in a range of a loss of $0.10 per share to an operating breakeven.(1)

"Our fourth-quarter priority remains firmly focused on achieving a $1.45 billion operating breakeven," (1) Barnholt said. "We are confident that by reaching this milestone, we will have laid the foundation for sustained profitability in 2004."

Segment Results

Test and Measurement
(in millions)	Q2:F03	Q1:F03	Q2:F02
Orders	608	594	639
Revenues	652	633	660
Operating Profit(2)	(103)	(132)	(172)

Second quarter Test and Measurement orders were down 5 percent from one year ago and were up 2 percent from the first quarter. By market segment, communications test orders were down 7 percent from last year because of weakness in the wireline test market, and were down 1 percent compared to the first quarter. General purpose test was flat compared to last year and up 11 percent from a very soft first quarter despite continued weakness in aerospace and defense. Second-quarter revenues of $652 million were off 1 percent from last year and up 3 percent sequentially. Aggressive restructuring helped comparative operating results. The second-quarter operating loss of $103 million was $29 million better than first quarter results on only $19 million higher revenues. The operating loss was reduced by $69 million compared to last year despite $8 million lower revenues.

Automated Test
(in millions)	Q2:F03	Q1:F03	Q2:F02
Orders	219	115	197
Revenues	153	136	154
Operating Profit(2)	(37)	(48)	(30)

As expected, the Automated Test segment rebounded from the first quarter weakness caused by both geopolitical uncertainty and a temporarily weak flash memory test market. Second-quarter segment orders of $219 million were up 11 percent from last year to the highest level since the first quarter of 2001. Sequentially, orders were up 90 percent, with all semiconductor test products up sharply. Revenues of $153 million were flat with last year and up 13 percent from the first quarter. Automated Test's second quarter book-to-bill ratio of 1.43 was substantially ahead of the industry's April reading of 1.21. The second quarter operating loss of $37 million was affected by a $5 million inventory charge. Adjusted for that charge, operating results were essentially equal to last year on similar volume and $16 million better than the first quarter on $17 million higher volume. 

Semiconductor Products
(in millions)	Q2:F03	Q1:F03	Q2:F02
Orders	420	381	476
Revenues	376	367	371
Operating Profit(2)	(43)	(48)	(37)

Semiconductor Products' orders of $420 million were down 12 percent from last year and were up 10 percent from the first quarter. Excluding hardcopy ASICs, segment orders would have been up 2 percent from last year and up 10 percent sequentially. Revenues of $376 million were up 1 percent from last year despite the lower ASIC business and were up 2 percent sequentially. The segment book-to-bill ratio of 1.12 compares to 1.04 in the first quarter and 1.28 one year ago. The $6 million deterioration in second-quarter operating results compared to last year was caused by costs associated with the continued ramp of FBAR filter and E-pHEMT power module products. At the end of the quarter, the company ended production in the Newark, Calif. fab and closed the facility. Compared to the first quarter, the operating loss was improved by $5 million on additional volume of $9 million.

Life Sciences and Chemical Analysis
(in millions)	Q2:F03	Q1:F03	Q2:F02
Orders	280	268	285
Revenues	286	276	272
Operating Profit(2)	20	34	20

Life Sciences and Chemical Analysis continued its generally flat business profile, with second-quarter orders of $280 million off 2 percent from last year and up about 4 percent sequentially. Life Sciences orders were down 4 percent from one year ago and up 1 percent sequentially, while orders for chemical analysis were flat year-to-year and up 7 percent from the first quarter. Revenues of $286 million were 5 percent ahead of one year ago and up 4 percent from the first quarter. Because of the seasonality of operating expenses, operating profits were off $14 million sequentially, similar to the quarterly pattern in 2002. Compared to last year, profits were unchanged despite $14 million higher revenues because of increased R&D spending in life sciences and temporarily higher IT expenses associated with the CRM implementation.

About Agilent Technologies

Agilent Technologies Inc. (NYSE: A) is a global technology leader in communications, electronics, life sciences and chemical analysis. The company's 32,000 employees serve customers in more than 110 countries. Agilent had net revenue of $6 billion in fiscal year 2002. Information about Agilent is available on the Web at www.agilent.com.

More financial information about this quarter's earnings is available at www.investor.agilent.com.

Agilent management will host a live webcast of its quarterly conference call with the investment community in listen-only mode today at 1:30 p.m. (PT). Listeners may log on at www.investor.agilent.com and select "conference calls." The webcast will remain on the company site for seven days.

A telephone replay of the conference call will be available starting at 4:30 p.m. (PT) on May 19 through May 26 by dialing +1 719 457 0820 and entering pass code 468550.

Safe Harbor Statement

This news release contains forward-looking statements (including, without limitation, information regarding projected revenue, earnings, breakeven and profitability, delivery of new innovative products and the outlook for the markets that Agilent serves) that involve risks and uncertainties that could cause results of Agilent to differ materially from management's current expectations. 

In addition, other risks that Agilent faces in running its operations include: the ability to execute successfully through the current economic downturn and an upturn while it continues to implement significant workforce and other cost reductions; the ability to meet and achieve the benefits of its cost reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; increasing competitive, pricing and gross margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the risk that we may be required to take a valuation allowance on our deferred tax assets, which would reduce our GAAP tax benefit rate, would significantly reduce our GAAP earnings and may reduce our non-GAAP earnings; the impact of Severe Acute Respiratory Syndrome (SARS) in the Asian marketplace and on our ability to conduct business in Asia; the impact of geopolitic al uncertainties on our markets and our ability to conduct business; the successful implementation of Agilent's ERP and other information systems and the ability to realize the benefits from these and other IT systems investments; the ability to improve asset performance to adapt to the current economic slowdown and other changes in demand; the ability to successfully introduce new products at the right time, price and mix, and other risks detailed in the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended Oct. 31, 2002, its Quarterly Report on Form 10-Q for the quarter ended Jan. 31, 2003 and its Current Report on Form 8-K filed Apr. 4, 2003. The company assumes no obligation to update the information in this press release.

(1) Agilent's goal of achieving an operating breakeven of $1.45 billion in the fourth quarter and the company's guidance range for the third quarter do not include restructuring costs and intangibles amortization. Restructuring costs for the third and fourth quarters cannot be reliably estimated and may be significant. Amortization of intangibles is expected to be about $12 million quarterly.

(2) Before restructuring charges in all periods.

NOTE TO EDITORS: Further technology, corporate citizenship and executive news is available on the Agilent news site at www.agilent.com/go/news.

CONTACTS: Michele Drake, Agilent (U.S.), +1 650 752 5296, michele_drake@agilent.com
Jorgen Tesselaar, Agilent(Europe and Asia), +31 20 547 2825, jorgen_tesselaar@agilent.com
Christina Maehr, Agilent Life Sciences and Chemical Analysis, +1 408 553 7205, christina_maehr@agilent.com

INVESTOR CONTACT: Hilliard Terry, Agilent, +1 650 752 5329, hilliard_terry@agilent.com
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Victor Truong
Press Relations Associate
Life Science & Chemical Analysis
Agilent Technologies, Inc.

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