Spin-off sharpened Agilent’s focus

Article Excerpt

AGILENT TECHNOLOGIES INC. $34 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) completed its spin-off of Verigy Ltd. on October 31, 2006. Stockholders received 0.122435 of a Verigy share for each Agilent share held. Investors are only liable for capital gains taxes when they sell their new shares. For tax purposes, Agilent investors should allocate 94.22% of their total cost to their current Agilent shares, and 5.78% to their new Verigy shares. The company now has $2.3 billion ($5.54 a share) in cash, and $1.5 billion in long-term debt (0.4 times equity). That gives it plenty of flexibility to expand research (13% of its sales of about $11 a share) and buy back stock. It will probably look for small acquisitions that expand its presence in certain fast-growing markets, such as genetic research. Agilent should earn $1.64 a share in fiscal 2007, and its shares now trade at 20.7 times that figure. That’s cheap considering its high…

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