August 24, 2005

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Palo Alto Online

Agilent to leave Palo Alto

by Jocelyn Dong

Agilent Technologies, the 6-year-old spin-off that carried on Hewlett-Packard Company's original business focus, plans to leave Palo Alto in a little more than a year.

The corporation, which employs about 750 workers in Palo Alto, will relocate its headquarters to Santa Clara, where the company already has manufacturing operations. The campus on Stevens Creek Boulevard used to be occupied by HP.

The news is a major disappointment to the city and comes just after the company announced plans to downsize its operation and staff.

"It's always a little bit of a downer (when businesses leave). It's an indication of things not going as well as people planned," said Mayor Jim Burch. "It's always tough. You have to roll with it. I don't know that there's anything city staff could have done."

He added that it's not unusual for companies to relocate, emphasizing that Palo Alto is not alone in losing businesses.

The plan calls for Agilent to vacate its laboratory site in the Stanford Research Park by March 2006 and to leave its gleaming headquarters on Page Mill Road by October 2006, said Amy Flores, the company's corporate public-relations manager.

A third Agilent building occupying 8.5 acres on California Avenue has been vacant since the end of 2002, Flores said.

The cost savings to the company are expected to total $12 million a year.

The relatively new, 430,000-square-foot Page Mill Road headquarters on 9.5 acres of land will be put up for sale, news that dismayed Susan Arpan, manager of economic development and redevelopment for Palo Alto. The city had worked hard to convince Agilent to locate in Palo Alto when it was initially spun off from HP, she said.

Although the sale of the building will likely bring additional property taxes to the city when the property value is reassessed, Palo Alto could feel a greater overall loss, she said.

"The problem for us has to do with the sales-tax loss. Though not huge, it was substantial," Arpan said.

The city has been wrestling with shaky sales-tax revenues in recent years.

Agilent is also a large user of utilities, and pays a utility-user tax. When the company leaves, taking hundreds of jobs, the spending dollars of workers will go with it, Arpan said. Presumably another corporation would move into the site and bring its employees, though.

The company may sublet its Deer Creek and California Avenue sites, since it has long-term ground leases with Stanford University. The Deer Creek property is 25 acres and its lease terminates in October 2020.

The move is part of an overhaul of the company that was announced last week by Agilent Chief Executive William Sullivan. He was named to the position in March.

To focus on its test-and-measurement business, HP's original niche when it was founded some 67 years ago, Agilent will divest its semiconductor unit for $2.66 billion by October. The new semiconductor company will be headed by a current Agilent vice president and is expected to be located in San Jose.

Agilent's measurement unit produces tools that scientists and engineers use for the development, manufacturing, and operation of electronics equipment and communications networks.

The company will also shrink its 28,000-employee worldwide workforce by 1,300. Flores said that some jobs are expected to be picked up by the new semiconductor business; others will be lost through attrition and still others through layoffs. Flores called the personnel changes "infrastructure-related."

Agilent Chief Financial Officer Adrian Dillon said in a conference call with analysts last week that the company has been performing "more like a sluggish semiconductor company than the world's premier measurement company."

The stock market has greeted the changes positively, with stocks rising 16 percent to $30.66 by Monday morning, up from $26.41 before the announcement.

To Palo Altans, Agilent's departure may be a business move, but it is also a symbolic loss.

Hewlett-Packard has called Palo Alto home for nearly seven decades, ever since William Hewlett and David Packard founded it in an Addison Street garage. When Agilent split off from HP in 1999, many felt Agilent was the "true HP," by virtue of its focus on the Hewlett's and Packard's initial engineering projects.

Burch was circumspect. "When HP spun off Agilent, that gave it the right to do what it wanted to do more or less," he said. "It's an up and down world. .... We have to take the proactive stance wherever we can, and also acknowledge what we can't control."

Flores said that Agilent employees were not surprised to hear of the move to Santa Clara.

"I don't think anyone's in shock about it. Everybody's had business at the Santa Clara site," said Flores, who emphasized that the move will not only save the company money but also help collaboration and communications within the company. "There's energy on the site. It's a pretty setting."

Senior Staff Writer Jocelyn Dong can be reached at jdong@paweekly.com.

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