Q2FY14 Earnings Report.note

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May 14, 2014

BILL: Today Agilent reported its second-quarter earnings for FY 2014. Agilent’s Q2 revenues were

$1.7 billion for the quarter, unchanged from a year ago. Q2 orders of $1.8 billion were up 7 percent

year-over-year. Overall return on invested capital was 16 percent for the quarter.

Our life sciences, diagnostics and applied chemical markets had Q2 revenues of $988 million, up 2

percent over last year. Q2 orders of $1.03 billion were up 4 percent from a year ago. Some of our

LDA markets were impacted by continued delays in government spending, particularly in the U.S.

and China.

The Life Sciences and Diagnostics Group had revenue growth of 1 percent and order growth of 3

percent in the second quarter. We saw strength in pharma, diagnostics and clinical markets. From a

platform perspective, growth was driven by our solutions in diagnostics, genomics, informatics and

microfluidics. Operating margin was 13 percent.

The Chemical Analysis Group revenues were up 3 percent, with orders up 6 percent from a year ago.

Our applied markets in food, chemical and energy continued to show strength. CAG platform revenue

grew 4 percent year over year, driven by GC/MS, spectroscopy and consumables. Operating margin

was 22 percent.

Q2FY14

Earnings

Report

Bill

Sullivan

and

Ron

Nersesian's

message

to

employees

Despite the softness in government business, we saw LDA’s order growth accelerate as we

progressed through the quarter. Given our strong backlog, new product releases, and an expected

pickup in government spending, LDA is positioned for a stronger performance in the second half.

RON: Agilent’s electronic measurement business delivered Q2 revenues and profit that were both at

the high end of our expectations. Q2 revenues of $743 million were down 2 percent from a year ago.

Q2 orders of $782 million were up 11 percent over last year. Our teams continue to manage the

business well in response to market conditions, delivering a solid operating margin of 20 percent for

the quarter. Thanks to everyone for the outstanding job of recovering from Q1.

As Bill said, our markets were also impacted by delayed government spending, particularly in

aerospace and defense. We saw strength in our industrial and semiconductor markets, driven by

continued investments in next-generation semiconductor technologies. Communications revenues

were down, as financial pressures continue to drive conservative spending in the short-term. But

communications orders were strong, which bodes well for the second half.

In Q2, we expanded our PNA-X family of network analyzers and introduced two new high-

performance portable oscilloscope series, deploying next-generation technologies that set new

industry standards. And we started shipping our new EXM and UXM wireless test sets. The EXM was

just awarded “2013 Product of the Year” by the editors of Electronic Products China.

And in another notable milestone, we announced today that we expect Keysight common stock to

trade on the New York Stock Exchange under the ticker symbol KEYS.

Our incoming order rate continued to improve across the board as the quarter progressed. We are

optimistic that our electronic measurement markets are beginning to turn around, but we will remain

cautious yet determined as we begin the second half of FY14.

BILL: All of the hard work to separate Agilent and Keysight continues to proceed well. I’d especially

like to thank the Global Infrastructure Organization and the Order Fulfillment organizations, as they

continue to serve the businesses and our customers as we establish two great companies.

During the separation process, we continue to be one company. This is reflected in Agilent Variable

Pay, which will continue to be based on Agilent’s overall ROIC for both the first and second half.

Beyond FY14, once Agilent and Keysight become independent companies, each company will

evaluate its variable pay program.

Now to the first-half AVP numbers. I’ve already shared Agilent’s return on invested capital for the

quarter. For the first half, Agilent’s overall ROIC was 15.2 percent. As a result, the Agilent Results

Bonus for the first half is 2.4 percent, for a total payout of $17.2 million.

The second component of variable pay is the Individual Performance Bonus. First-half IPB will be

funded with $7.1 million. Bonuses will be distributed by managers, based on the relative performance

of all eligible employees throughout the organization.

The funding tables for variable pay are available on the beAgilent website. AVP is available to eligible

employees within the company, and payouts will occur in June.

As we enter the second half of FY14, our priorities are very simple. We are all working hard to launch

Keysight and New Agilent, but we must continue to focus on our customers. The competitive

environment has been extremely aggressive, and we must do everything we can to win every

profitable deal.

Everyone at Agilent must continue to support the efforts of our sales force, ensure that our new

product introductions are on schedule, and make sure that our customer service and support are

second to none.

If we stay focused, we are positioned to have an excellent performance in the second half of FY14,

as we launch two great companies.