Neither Muken nor analyst Douglas consider the electronics measurement group a likely target for acquisition. Douglas said a private equity group likely wouldn't be able to improve the new company's efficiency enough to make a takeover worthwhile. And the new company's mere size would mean that any competitor who tries to purchase it might run afoul of federal antitrust laws.
However, Douglas questioned the amount of debt the new company would be saddled with.
Nersesian revealed last week that the electronics company tentatively is slated to start out with $700 million in cash and $1.1 billion in debt.
Hearing that, Douglas said the electronics measurement group is being used once more to finance the future of the life sciences division.
"It's one last dip in the till," Douglas said.
Nersesian, however, said the debt was divided based upon each division's ability to generate revenue. Within 18 months the new company's earnings should increase its available cash reserves to equal or exceed the debt, he predicted.
Agilent today is "the premier electronics measurement company in the world," Nersesian said, ranking first for the communications, defense and computer/semiconductor markets. Going forward, a key challenge will be to continue to hold that position and to be first to market with significant new features, even in downturns.
One area the new company will target for growth is the wireless communications sector.
"We have investments going on that we will continue so that when up cycles happen, we can emerge with share gains," Nersesian said.
Eduardo Martinez, a senior economist for Moody's Analytics in West Chester, Pa., said the mobile phone and tablet markets have proven a difficult place to compete because the few remaining manufacturers drive hard bargains with their suppliers.
"It's really cutthroat," Martinez said.
Agilent already has gotten a taste of such pressures.
This spring, the company disclosed that sales had dropped because the electronic measurement division lost a large contract with a wireless company. Officials declined to name the company, but Muken wrote in a research report last month that it was iPhone maker Apple.
Agilent CEO Bill Sullivan suggested to analysts that his company declined the business because the proposed contract exposed Agilent "to significant penalties under certain conditions that we were not confident we could prevent without jeopardizing ... our commitments to other customers."
Over the next year, the new company will be developing a new board of directors, new management team and a new name. A company committee will be narrowing the list of possible names from suggestions offered both by employees and an outside consulting business.
Dick Herman, president of 101 MFG, an alliance of manufacturing executives in Northern California, said technology is requiring ever-higher levels of precision in performance, and that will play to the new company's strengths.
As an example, the Santa Rosa facility is investing in a $3.4 million "semi-anechoic chamber" that can measure electromagnetic emissions for testing the reliability and performance of future products.
With talented engineers, a strong management team and $2.9 billion in sales, "that's a world-class leader at the day of its birth," Herman said.
Agilent plays big role in local economy, civic affairs
The new company's future matters to local business and civic leaders, who said the Santa Rosa facility is more than simply the county's biggest tech employer. They maintained that the 1972 arrival of Hewlett-Packard changed the county for the better, creating a highly-trained workforce that was infused with an ethos of giving back to the community.
"To me it's been one of the greatest gifts to Sonoma County, the talent that H-P brought here," said Ben Stone, executive director of the Sonoma County Economic Development Board.
The business here began under the influence of what became known as "the H-P Way" -- core company values that emphasized collaboration, innovation and an aversion to layoffs that set the company apart for its humane treatment of employees.
H-P also became known for community involvement. Its employees repeatedly became the largest group of contributors to the local United Way's fundraising campaigns -- a commitment that Nersesian said his workers continue today. As another example, in the mid-1990s a local H-P official chaired the statewide committee drafting math standards that for years have been used to guide instruction for California's 6 million public school students.
Agilent still employs one of the county's better-paid workforces. The typical employee here receives about $100,000 a year in salary and benefits.
The company remains "at the top of businesses that every community wishes they had," said Santa Rosa Mayor Scott Bartley.
"These are the jobs everybody wants," Bartley said, "but they're the hardest to attract."
(c)2013 The Press Democrat (Santa Rosa, Calif.)
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