Agilent ditching chip unit

SAN JOSE, Calif. — Dramatically narrowing its corporate focus, Agilent Technologies Inc. is shedding its chip unit and spinning off other assets as it concentrates on the test-and-measurement business at its historic core.

About 1,300 jobs will be cut in the reorganization, which will take the company back to roots that extend to the earliest days of its former parent, Hewlett-Packard Co. Agilent was spun off from HP in 2000.

"It's been true since the inception of the company, we've performed more like a sluggish semiconductor company than the world's premier measurement company," Adrian Dillon, Agilent's chief financial officer, said Monday. "It has been a case of the semiconductor tail wagging the measurement dog."

Shares of Palo Alto-based Agilent soared $3.92, or 15 percent, to close at $30.33 Monday on the New York Stock Exchange.

Agilent is selling its semiconductor business to the buyout firms Kohlberg Kravis Roberts & Co. and Silver Lake Partners for $2.66 billion. The division builds chips for a range of products, from mobile phones and computer mice to optical networking gear.

Agilent also agreed to sell its 47 percent stake in San Jose-based lighting company Lumileds to Royal Philips Electronics for $950 million and the repayment of $50 million in debt. Lumileds had sales of $324 million and operating profit of $83 million over the last 12 months, Philips said.

Agilent also plans to spin off its system-on-a-chip and memory test businesses in 2006.

"Today starts a new chapter of Agilent," said Bill Sullivan, the company's chief executive. "We have made decisions today for us to be able to focus on our core that we have been a leader in for the last 65 years."

Agilent said it will use the cash proceeds of its reorganization for a $4 billion share repurchase program, and it will call its $1.15 billion convertible debt. The repurchase will begin immediately, while the call is expected to cut its outstanding shares by 36 million.

The company, which expects about $200 million in restructuring costs to be largely offset by proceeds from its asset sales, expects to save $450 million. It said the job cuts — about 4.6 percent of its 28,000 employees — will be made through transfers to the divested businesses, attrition and layoffs.

Agilent expects the chip divestiture to be completed by Oct. 31, the end of its current fiscal year.