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Agilent to sell chip unit to equity firms, says reports

Posted: 15 Aug 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor?

Agilent Technologies Inc. is expected to announce today (Aug. 15) that it will exit the semiconductor business by selling its chip unit to private equity firms Kohlberg Kravis Roberts & Co. (KKR) and Silver Lake Partners for about $2.65 billion, according to several news reports.

No details were available about the transaction as of late Friday (Aug. 12), but the reported move impacts the worldwide supply chain and thousands of employees at the company.

In 2004, Agilent's chip business realized profits of $166 million on sales of $2.02 billion. As of Oct. 31, 2004, the company's semiconductor products group employed about 6,800 people worldwide, according to its Web site.

But for some time, Agilent (Palo Alto, Calif.) has been looking to sell the semiconductor unit, which has been a drag on earnings in recent quarters due to the current down cycle in the chip sector (see June 6 story).

Rumors were also running rampant at the recent Semicon West trade show that Agilent is looking to sell its automatic test equipment (ATE) business as well. No word on which company would buy the business, but Japanese rival Advantest Corp. is reportedly looking at that unit (see July 11 story).

Agilent's reported move to sell the chip unit represents company's effort to return to its higher-margin - if not more stable - test and measurement roots. In 1999, Agilent spun-off from Hewlett-Packard Co., which itself initially started in the instrumentation business back in 1938.

And by exiting the semiconductor business, Agilent will reduce its main product groups from four to three, including ATE, test and measurement and life sciences.

Tough road

Indeed, it's been a tough road for Agilent, especially in semiconductors. In May, the company said revenues were $1.69 billion for its second fiscal quarter, down 8 percent from the like period a year ago. Orders were $1.73 billion for the period, 9 percent below one year ago.

Second quarter GAAP net earnings for Agilent were $95 million, or $0.19 per diluted share, compared with $104 million, or $0.21 per share, in last year's second quarter.

In its semiconductor business, Agilent said products orders of $464 million during the second quarter were up 5 percent from one year ago and up 22 percent sequentially. Second quarter revenues of $414 million were 9 percent below last year and up 9 percent sequentially.

Segment profits of $12 million were $38 million below last year on a $43 million drop in revenues due to the ongoing inventory glut (see May 16 story).

For the six-month period of this year, Agilent's chip business realized a mere $39 million in profits on sales of $914 million.

The company makes chips for mobile phones, printers, PC peripherals and consumer electronics. This includes radio frequency and microwave communications devices, such as power amplifiers, infrared emitters, detectors and transceiver module products.

It also makes printing application-specific integrated circuits (ASICs), optical image sensors, optical position sensors, light emitting diodes (LEDs) and optocoupler products. Networking products include Fibre Channel controllers and others.

Meanwhile, Silver Lake Partners (New York) is no stranger to high technology. The private equity firm claims that it is focused solely on making large-scale investments in leading technology companies, including Gartner, Flextronics, Seagate, Thomson and others.

Silver Lake Partners recently announced that John Joyce, formerly senior vice president and chief financial officer of IBM Corp., joined the firm as managing director.

KKR (New York) is one of the world's oldest private equity firms specializing in management buyouts. Over the past 29 years, KKR has invested in more than 130 transactions with a total value of $146 billion.

It has made big headlines over the years as well. An investment group consisting of affiliates of Bain Capital Partners LLC, KKR and Vornado Realty Trust recently announced the completion of the acquisition of toy retailer Toys "R" Us Inc. for $6.6 billion.

- Mark LaPedus

EE Times





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