Agilent Chip Group Goes Solo

By Jeff Chappell -- Electronic News, 12/1/2005

It's official: Agilent Technologies Inc.'s chip business has became Avago Technologies, as Agilent completed the sale to two private equity firms this morning.

Kohlberg Kravis Roberts & Co. (KKR) and Silver Lake Partners acquired the former Agilent Semiconductor Products Group in a $2.66 billion transaction, originally announced Aug. 15. The move created the largest privately held chip company in the world, and one of the largest fabless companies, with revenues approaching $1.6 billion this year and 6,500 employees scattered around the globe.

Avago, incorporated in Singapore, says it is splitting its headquarters between there – much of its business is in Asia – and San Jose, where its president and CEO, Dick Chang, and some of its other senior management will be based.

The company is essentially the same company that it was within Agilent, and prior to that, Hewlett-Packard, according to its senior management, only now it is acting autonomously. The company traces its roots back to Hewlett-Packard Co. in the 1960s, when that company decided it needed component technology and production in-house. It was included in the spinout of Agilent from HP in 1999.

Today the company specializes in optoelectronics, RF and enterprise applications. The company serves nine different target markets; some of its biggest products are FBAR filters and power modules for wireless handsets, and high-speed ASICs for Serdes applications for the likes of Cisco, and of course, HP.

Anyone that has ever used an optical mouse has consequently used Agilent – and now Avago – technology.

Avago claims to serve some 40,000 customers, 200 of those directly, the remainder through distributors.

The company chose to incorporate in Singapore because much of its business is in Asia; it has had a presence there for 35 years, almost since its beginnings within HP. About 59 percent of its revenue is split more or less evenly across China, Japan and South Korea. Three-quarters of the company's employees reside in Asia; the majority of the company division general managers reside in Asia as well.

While an initial pubic offering would seem a natural next step for the company – and an obvious exit strategy for its private equity partners – the company is in no hurry to go public, said Chang. "It's not something we're contemplating for the immediate future," he said. Rather, first the company must finish establishing itself as a corporate entity separate from Agilent and create a more cost effective corporate infrastructure, he added.

Down the road the company will look for ways to generate value; that could mean a future IPO, but that will of course depend on market conditions and the company's own operations, Chang said.