With the bifurcation, the two companies, will be able to implement growth strategies, business policies and practices, uniquely suited to their individual markets and customer needs
By Srabani Sen & Richa Chakravarty
Thursday, October 03, 2013: Agilent Technologies, a leading global electronic measurement (T&M) company, announced its plan to split into two public companies. The company that will retain Agilent’s name will focus on life sciences, diagnostics and applied (LDA) markets. The other company, which is yet to be named, will deal with Agilent’s range of electronic measurement (EM) products. While Bill Sullivan will remain as CEO of Agilent, Ron Nersesian, currently COO, has been designated as CEO of the new company.
Such splits are not new for Agilent, as in 1999, Agilent separated from Hewlett-Packard Co and had four major spinoffs itself since 2005. After the split, Agilent is expected to have a revenue of $3.9 billion in FY2013 and the EM business will have a revenue of about $2.9 billion in FY2013.
As per the company, the split is a strategic move to maximise growth and success of both the divisions. “Each of the businesses is strong enough financially to compete on its own and no major acquisitions or divestitures are expected,” Bill Sullivan has been as quoted saying by global news reports.
Agilent also believes that this separation will result in material benefits for the two standalone companies as they can better focus on the distinct businesses of life sciences and EM. The two companies will have two independent and unique investment profiles. Also, both the companies will be able to devote resources to the growth of their individual businesses.
What will be the implications
“As Agilent’s life science and diagnostics business has grown, it has attracted healthcare investors who have had a hard time valuing the company’s EM business,” Ross Muken, an analyst with International Strategy & Investment Group LLC in New York, told Bloomberg. “The split should help drive Agilent’s share price higher with a different group of investors who can focus just on the healthcare assets,” he said.
Commenting on the development, Gautam Awasthi, general manager, Agilent Technologies, says, “This development will help the company to devote resources solely to serving the T&M customers. With this focus, the company will be in a better position to optimise to the customers’ specific needs and continue to provide the best solutions, support and value. Agilent Technologies India is excited about this announcement and hopes that its customers see this as a positive move in the company’s continued effort to become their T&M partner of choice.”
The news of the split, however, has given rise to several speculations. Commenting on the development at EETimes, an industry expert wrote, “Agilent has separated the EM business because the company thinks that they will do a killing business in healthcare market and do not want EM to drag them down.”
Countering such speculations, Gautam Awasthi, says, “To respond to this speculation, I would like to point out that LDA and EM are two very distinct businesses with very different business models, sales channels and customers. Unlike the speculations, EM or T&M businesses of Agilent is operationally and financially a very strong investment-grade business. This split would give the EM company greater flexibility to pursue its unique growth strategies in its own markets.”
Impact on Agilent’s business in India
According to Awasthi, customers in India should expect the same innovative technology and high-quality attention to their needs as Agilent has always delivered. “Once the separation is completed, the two companies will be able to implement growth strategies, business policies and practices uniquely suited to their individual markets and customer needs,” he adds.
Agilent gave EM group the opportunity to choose a new name as it becomes an independent company with its own identity. “The new EM company will continue to focus on major markets like communications, aerospace and defence, industrial, computers and semiconductors.
While the T&M industry in India is concerned if a new name would affect Agilent’s T&M business in India, Awasthi points out, “EM brand is affiliated to innovative technology and high-quality support, and that do not change with this split. Therefore, there will be no negative impact on our business in India,” he adds.
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