Agilent Technologies (NYSE: A) plunged US$5.23 to $25.39 in morning trading Friday after the company said that orders from major customers had dropped “dramatically” in the last six weeks and warned that it will not meet its second-quarter estimates.
The Palo Alto, California-based network technical equipment maker also announced after the bell on Thursday that it will temporarily slash pay for its 48,000 employees worldwide by 10 percent, in a bid to cut costs.
The across-the-board pay reductions began on April 1st for Agilent’s 200 senior managers, while the rest of the staff will be affected beginning May 1st. Agilent said the pay reductions will save roughly $70 million per quarter and will last at least through the third quarter.
“We’re trying to avoid across-the-board layoffs in response to cyclical market conditions,” said Agilent president and chief executive officer Ned Barnholt. “We view the economic slowdown as a business cycle — even though it’s deepening and broadening.”
Agilent, which already lowered its revenue forecast for the fiscal year in late February, said that the economic downturn and “dramatic change” in customer orders had been more severe than it anticipated in the company’s second quarter ending April 30th.
As a result, the company said revenue for the period will fall below $2.9 billion. Analysts polled by earnings tracker First Call/Thomson Financial had estimated that second quarter revenue would hit $2.85 billion.
“Business conditions have deteriorated substantially in recent weeks,” said Barnholt. “We’re seeing a significant decline in our customers’ spending plans across the entire communications and semiconductor markets.”
Added Barnholt: “Given the uncertainty about the duration and severity of the economic slowdown and its impact on our customers, we are no longer able to provide meaningful guidance for the year.”
Agilent is taking other cost-cutting measures, including a freeze on more external hiring or replacement after attrition, a significant reduction in the use of temporary workers and consultants, a slash in spending on office equipment and other discretionary items and limits on travel to customer-related activities.
Agilent, a spinoff from computer and printer maker Hewlett-Packard, is slated to issue its second quarter results on May 17th.