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Home > About Agilent > Investor Relations > 2000 Annual Report > To Our Shareholders
To Our Shareholders
   

 

 

Agilent’s first year as an independent, public company was a great success.

• We completed our separation from Hewlett-Packard (HP) — probably the most complex such split ever done — on a very aggressive schedule.

• We achieved outstanding financial and business results, including excellent growth and profitability and the introduction of many innovative products.

• We are faster and more customer-driven than ever before.

 

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None of this could have happened without the heroic efforts of 47,000 talented and energetic Agilent people around the world. They launched our company, delivered strong results and built a foundation for reaching the ambitious goals we share for Agilent.

Prior to Agilent’s initial public offering (IPO) of stock, we expected to achieve net profit for 2000 of between 5 and 6 percent of revenue. At midyear we revised that guidance to a little bit above 6 percent net profit. For the full year, our net profit margin was 7.0 percent. This translates into net earnings of $757 million, or $1.66 per share. I’m very pleased that we met the commitments we made on financial performance.

At the start of the year, we set four goals: complete the separation from HP, accelerate growth, launch operational initiatives and transform the Agilent culture. In this letter I’ll review our progress in each of these areas, and I’ll spell out our priorities for 2001.

We completed the separation from HP: Thousands of Agilent and HP people worked tirelessly to separate hundreds of information technology (IT) systems and applications, more than 600 physical sites and an extensive portfolio of patents and intellectual property — all of which had become deeply intertwined over 60 years. On June 2, 2000, the two companies became completely independent.

During 2000 we incurred two kinds of costs that we had planned for and that will be lower in 2001. The first was for branding to establish Agilent’s name and identity worldwide. This year we spent about $120 million on branding, and we’re very pleased with the results to date. We will continue this essential work to establish our identity in 2001, but at reduced spending levels.

We also spent approximately $250 million, as anticipated, in costs related to operating as a stand-alone company. On our own, we have systems, processes and governance activities that we previously shared with HP. As we continue to tailor these functions to Agilent’s needs, we expect to start to achieve savings by the end of 2001.

We achieved very strong growth: For the full year, Agilent’s orders rose 35 percent and revenue increased 29 percent. This compares with 1999 order growth of 12 percent and revenue growth of 5 percent.

 

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We achieved strong growth because we provide key enabling products and technologies to customers who are revolutionizing communications and electronics as well as the life sciences. Agilent provides best-in-class products and services to industries that are growing rapidly.

In communications and electronics, our products are on the critical path for companies who are delivering the most advanced optical networking, wireless communications and Internet capabilities. During 2000, orders in our businesses that serve communications and electronics grew 49 percent over 1999 while revenue increased 43 percent.

In life sciences, we provide tools that enable pharmaceutical and biopharmaceutical companies, and other research organizations, to discover the origins of disease and accelerate the development of new drugs based on scientists’ increasing knowledge of genetics. The first-draft mapping of the human genome, completed during 2000, ushered in the next phase of the life sciences revolution in which Agilent products will help customers understand more fundamentally how genes create diseases and how drugs can cure them.

This was a banner year for new products, and our growth was driven by product introductions that won strong market acceptance. This year’s annual report describes a good number of these major introductions. One key to our ability to innovate is Agilent Laboratories, our central research facility, whose goals are to address growth opportunities in our current businesses and to create new businesses. This year we spent $1.3 billion, or 11.7 percent of net revenue, on all our research and development across the company.

We launched operational initiatives: We undertook a number of initiatives designed to align our systems, processes and cost structures to our business requirements. We are tailoring our IT systems, internal processes, manufacturing, sales and customer support programs to make Agilent even faster, easier for customers to work with and more cost-effective.

We began to shape Agilent’s culture: One of our new company’s great strengths is our HP heritage, especially our foundation values: integrity; trust and respect for individuals; teamwork; and the importance of making a real contribution to customers and industries. These values remain crucial to Agilent.

 

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We’re also putting increased emphasis on values that are essential to our success going forward: focus, speed and accountability. During 2000 we took a number of actions designed to strengthen these values and to encourage the behaviors that bring them to life.

We implemented a pay-for-results program for our 800 top managers and supervisors, a portion of whose compensation is now linked to Agilent’s revenue and profit goals. We trained more than 6,000 managers around the world on a new set of leadership expectations based on our values. Finally, we rolled out a new compensation system, stock option program and employee stock purchase plan in order to reward the individual accomplishments that will help Agilent reach its goals.

Challenges We Addressed

We faced real challenges this year as well. Industrywide parts shortages meant that our shipments to many of our customers couldn’t keep pace with demand in the third quarter. We worked very hard with suppliers and took extraordinary measures within the company to address these shortages, and by the end of the year we had made a lot of progress.

In our chemical analysis business, growth in traditional markets — chemical and petrochemical — was sluggish. We have been increasing our focus in this business on exciting opportunities in life sciences, and the response to our life sciences products introduced this year was extremely good. We believe our life sciences business has a bright future as a provider of enabling technologies to researchers who are developing drugs and diagnostic techniques based on genetics.

Our healthcare solutions business had a disappointing year. This business was affected by fundamental changes in the healthcare market, particularly in the United States. Size and scale are essential to winning in healthcare, since customers increasingly want to work with companies that offer a broad product line.

Given this trend, we faced a decision: Should we make the investments necessary to bring our healthcare business to the size needed to succeed? After much analysis and thought, we decided that the best course of action for our customers, shareholders and employees was to divest this business. In November 2000 we announced an agreement under which Philips, a leader in the healthcare market, will acquire our healthcare business, subject to customary regulatory approvals and other closing conditions.

This was a difficult decision that was made easier because Philips is the ideal company to acquire this business. There is a great fit between our healthcare solutions and Philips’ product lines and geographic strengths. Together, our healthcare business and Philips can offer the broad product line that is essential to success in this market.

We overcame challenges in 2000 while making extraordinary progress in creating Agilent as a high-growth, high-performance company.

 

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Priorities for 2001

Since March 2, 1999 — the day HP announced plans to create two new companies from the existing HP — our vision has been to build a high-growth, high-performance company for the long term.

To do that, we have to become even more customer-driven. In today’s fast-moving, intensely competitive markets, we are focused on customers, Agilent and our individual businesses — in that order.

Our priorities for 2001 reflect our determination to meet, and exceed, the commitments we make.

Customer satisfaction: Our goal is to distance ourselves from competitors through superior quality, consistent on-time deliveries and ease of doing business with Agilent.

Operational excellence: We will continue to execute our plans to make Agilent faster, even more responsive and more cost-effective.

 

Ned Barnholt photo

Ned Barnholt

 

Growth: We want to grow faster than our best-in-class competitors as well as enter new markets. To do this, we have ambitious new-product programs in place across the company.

Our people: We will accelerate our work to develop a culture based on focus, speed and accountability, in which people embrace change, lead rather than manage and are rewarded for results.

Agilent’s first year as an independent company was the most exciting and gratifying of my 34 years with HP and Agilent. We benefit enormously from our heritage but are intently focused on the future.

We have extraordinary people, industry-leading customers and a deep technology portfolio that we can apply to address opportunities and create new businesses. We’re determined to build on an outstanding first year in ways that will delight our customers, employees and shareholders.

Ned Barnholt signature


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