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Agilent Technologies (NYSE:A)

Q1 2013 Earnings Call

February 14, 2013 4:30 pm ET

Executives

Alicia Rodriguez

William P. Sullivan - Chief Executive Officer, Executive Director and Member of Executive Committee

Didier Hirsch - Chief Financial Officer and Senior Vice President

Guy Sene - Senior Vice President and President Electronic Measurement Group

Michael R. McMullen - Senior Vice President and President of The Chemical Analysis Group

Ronald S. Nersesian - President and Chief Operating Officer

Lars Holmkvist - Senior Vice President and President of Diagnostics & Genomics Group

Analysts

Jonathan P. Groberg - Macquarie Research

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Amit Bhalla - Citigroup Inc, Research Division

Vijay Kumar - ISI Group Inc., Research Division

Daniel Arias - UBS Investment Bank, Research Division

Daniel Brennan - Morgan Stanley, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Timothy C. Evans - Wells Fargo Securities, LLC, Research Division

Mark Douglass - Longbow Research LLC

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Agilent Technologies Inc. Earnings Conference Call. My name is Regina, and I'll be your conference coordinator for today. [Operator Instructions] As a reminder, today's event is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Alicia Rodriguez, Vice President of Investor Relations. Please go ahead, Alicia.

Alicia Rodriguez

Thank you, Regina, and welcome, everyone, to Agilent's first quarter conference call for fiscal year 2013. With me are Agilent's CEO, Bill Sullivan; as well as Senior Vice President and CFO, Didier Hirsch. Joining in the Q&A after Didier's comments will be Agilent's President and Chief Operating Officer, Ron Nersesian. Also joining are the Presidents of our Electronic Measurement Group, Chemical Analysis and Diagnostics and Genomics groups, Guy Séné, Mike McMullen and Lars Holmkvist. You can find the press release and information to supplement today's discussion on our website at www.investor.agilent.com. While there, please click on the link for financial results, where you will find revenue breakouts, business segment results and historical financials for Agilent's operations. We will also post a copy of the prepared remarks following this call.

Bill and Didier's comments today will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. We will make forward-looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors.

Before turning the call over to Bill, I would like to remind you that Agilent will host its annual Analyst Meeting in New York City on March 7. Details about the meeting and webcast will be available on the Agilent Investor website 2 weeks prior to that date.

And now, I'd like to turn the call over to Bill.

William P. Sullivan

Thanks, Alicia, and hello, everyone. For Agilent's fiscal first quarter, orders were $1.7 billion, up 5% year-over-year, inclusive of the benefits in the Dako acquisition. Revenue of $1.68 billion were up 3%, again with the benefit of the Dako acquisition, but in the low-end of our guidance. Earnings per share of $0.63 were $0.02 below the low-end of our guidance due entirely to some unexpected onetime expenses.

The company has struggled with the predictability of revenue and EPS performance over the past 4 quarters. While we have delivered EPS above the midpoint guidance in aggregate, we have missed our EPS guidance in 2 of the last 4 sequential quarters and have exceeded EPS guidance in the other 2 quarters. The problem is the volatility of revenue and orders in the last month of the quarter. Last year's third quarter EPS shortfall was due to the unexpected push out of deliveries. This quarter, we again experienced an unexpected last-minute push out of deliveries, mostly in the communication market.

In addition, while we were pleased with our strong January orders, over half of January's orders were received in the last 5 days of the month. Our order fulfillment team did an outstanding job of meeting the low-end of our revenue guidance, but we missed our internal revenue forecast by $35 million, which decreased our earnings per share by $0.05. With the lower revenue, we were not able to absorb the unexpected expenses. We ask for patience from our shareholders as our customers continue to face challenging delivery need. Agilent maintains a flexible delivery policy, and we are committed to be the best measurement partner for our customers as they meet their own business challenges.

Moving forward, we are widening our quarterly guidance range to set better expectations for our investors. We now anticipate likely cutbacks in defense spending, which accounts for about 10% of Agilent's business, and continued softness in the Communications market. As a result, we're lowering our revenue guidance for the year, as well as our EPS range.

We continue to control expenses well. We are driving down our variable spending as to reduce our flex force and we are aggressively implementing our manufacturing consolidation plan. As we continue to manage through end market and customer uncertainties, we are encouraged by the strong January orders, the breadth of new product launches and the benefits of the expense reductions we expect to see for the remaining part of the year.

Within the businesses, our newly formed Diagnostics and Genomics groups revenue grew 145%, up 4% organically. The integration of Dako continues to proceed well. We saw a mid-single-digit year-over-year growth in pathology standing market and high-growth in expanding our Pharma partnership as evidenced by the recently announced partnerships with Eli Lilly and Pfizer. We are also pleased with our strong, high-single digit sequential growth in revenue as we continue to expand our sales team in Asia and launch new products.

For example, our HER2 IQ FISH was approved by the FDA. Datalink was upgraded as the market's leading software tool, linking all of Dako's instruments together for optimal lab control and workflow optimization and the launch of our new automated stainer remains on track for commercial release. Our overall Genomics business grew in low-single digits with a continued strength in CGH arrays for clinical market. SureFISH sales continue to see high renewal rate.

Our Life Science business grew 2% year-over-year. Academic and government markets were flat, with modest growth in Pharma markets and mid-single-digit sequential growth. We continue to see solid growth in our Consumables and Service business and modest growth in our LC instrument platform. While we saw a decrease in our LC/MS business due to difficult year-over-year compares, orders grew in the low double-digits. We also introduced several new products in the quarter to improve LC detection and increase workflow productivity.

Chemical Analysis revenues were down slightly year-over-year, due entirely to the decline in our environmental market. This is the second quarter in a row of weak environmental sales. The fundamental cause is lower government spending. We continue to see strong growth in the forensics market and flat to modest growth in food and petrochemical. At the beginning of February, we announced the introduction of our new 7890B gas chromatograph, and the 5977A series single quad Mass Spec. These next generation products offer industry-leading productivity, sensitivity and reliability.

Electronic Measurement revenues were down 7% over last year. This was mostly due to a decrease in the wireless handset market after a period of strong investment, but compounded by push outs of delivery. Base Station investment remained soft, as we await the rollout of LTE in other major regions around the world. Orders did strengthen in January as we ended the quarter with a book-to-bill greater than one. And even as we manage through the current market volatility, we continue to ensure that we have market-leading product.

We introduced the InfiniiVision 4000 X-series oscilloscope, the only upgradable family of 5-in-1 oscilloscopes in the industry. And on February 8, we introduced the industry's highest performing real time Spectrum Analyzer for our PXA signal analyzers.

As a reminder, in January we announced the 20% increase in our quarterly dividend to $0.12 per share, as well as stock repurchase program up to $500 million during fiscal year 2013. These moves reflect our confidence in our ability to manage the present business volatility, our ability to generate cash and our commitment to return capital to our shareholders.

Thank you for being on the call. Now I'll turn it over to Didier.

Didier Hirsch

Thank you, Bill, and hello, everyone. As Bill stated, it has become more challenging to predict the short-term outcomes. 70% of our revenue is related to capital expenditures, where customers' buying decisions are heavily dependent on overall demand and business confidence, both at low levels in today's world of uncertainty. Because of customers' delays in placing orders, shipments were also delayed. As a result, we achieved only the low end of our revenue guidance. However, we missed the low-end of our EPS guidance by $0.02 due to unexpected and onetime items. Three items made up most of the $0.02. They relate to customs duties in a foreign jurisdiction, unclaimed property claims in the U.S. and a balance sheet hedging loss. For a company of our size and complexity, such items, both positive and negative, are not unusual. However, this is the first time that they all were unfavorable.

To recap the quarter, core orders were flat year-over-year, while core revenue decreased 2% and our operating margin, always the lowest of the year in Q1, was slightly over 17%. By segment, EMG core revenue decreased 7% year-over-year. CAG was up 1%, LSG 3% and DGG 6%. By region, Americas was down 1%, Europe, 2%; Japan, 6%; and the rest of Asia Pacific, 2%, all on a core revenue basis.

Now turning to cash. We generated $245 million in operating cash flow. By far, the largest Q1 cash flow generation since Q1 of 2000. We bought back 2 million shares for $79 million and are back to a net cash position of over $150 million.

Now turning to the guidance for the full year. As Bill stated, the low-end of our guidance now assumes sequestration will take place, while the high-end reflects a slower economic recovery, lower government spending and softer communication markets than previously assumed. Also, currency is expected to have a negative revenue impact of about $35 million for the year, versus the November guidance.

Fiscal year '13 revenue is expected to range from $6.9 billion to $7.1 billion, or 2% reported growth at midpoint, which translates into 1% core revenue decrease. As you compare those projections with those of our peers, please note the different product and customer mix. We generally have a higher mix of instruments versus recurring revenues, and are more exposed to the industrial and defense market, as well as to Japan. On an apple-to-apple basis, we are gaining ground in many of our businesses, but current results and short-term projections are skewed by our mix.

On the cost front, our global order fulfillment organization is on track to generate about $50 million of savings, and our control of discretionary expenses is nearly of the same magnitude as during the 2009 downturn. Those actions, coupled with the benefit of the incremental stock buyback program, will partially offset the impact of lower revenue projections and currency headwinds on our EPS, which is expected to range from $2.70 to $3.

Finally, moving to the guidance for our second quarter. As Bill stated, we are widening our guidance range for the quarter for both revenue and EPS. We expect Q2 revenue of $1.74 billion to $1.77 billion and EPS of $0.64 to $0.70.

With that, I'll turn it over to Alicia for the Q&A.

Alicia Rodriguez

Thank you, Didier. Regina, will you please give the instructions for the Q&A. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question today, folks, comes from the line of Jon Groberg with Macquarie.

Jonathan P. Groberg - Macquarie Research

So obviously, a lot of questions to go through here. So I'll let others hop in. But I guess, very big picture on some of your last comments, Didier, around cost control. Can you maybe just, given the fact that things seem to be a little bit slower, and I guess you're not anticipating them getting much better, even though some macro indicators actually suggest like things could get better in the second half, can you maybe just walk us through exactly what you're doing on the cost side? And maybe why you're not being a little bit more aggressive?

William P. Sullivan

Let me make that comment, John, if you don't mind, for Didier, the details. Fundamentally, I'm actually more optimistic than I was last quarter. As you know, I've tended to be somewhat pessimistic. If you look at where some of our growth opportunities are, the introduction of our new products, there's actually signs that things are going to get better. So I believe that not continuing to expand in emerging markets, not continuing our R&D investments, not continuing our reach, is just a bad strategy moving forward right now. As a result of that, Ron and Didier have put together a detailed plan of ensuring not only are we going to drive $40 million of manufacturing cost out, and this is the first time we've announced the quantity of that, that we are in the process of eliminating our temporary workforce, managing all non-customer, non-new product introductions. And if you go back to the 2009 downturn, which is quite severe where we, in fact, weren't making 17% operating profit, we were able to take substantial amount of money out of the system. So we are aggressively implementing that moving forward. Our guidance policy has been the same at this point in time. The forecast for the rest of the year is $7.1 billion of revenue and $3 a share, that's our outlook. But we are widening the downside because of the continued volatility that we are seeing at -- over, that we've seen over the last 4 quarters.

Jonathan P. Groberg - Macquarie Research

Okay. So just maybe on those cost savings that you just announced, maybe just give us a little better sense of kind of how long it will take for the -- and when we'll start to see those in the numbers? I mean those are immediate the eliminating the temporary workforce, I guess, but maybe some of the manufacturing cost out and some of the other savings initiatives. When should those start to -- when should we start to see the full impact of those?

William P. Sullivan

We will see the full impact of this as we go through quarter for quarter. And Jon, quite frankly, and for the other analysts, we have had to stop the volatility of our announcement. We are going to take a broader range to set fair expectations moving forward, and we are going to do everything possible as a management team to ensure that we become more predictable in this slow growth environment moving forward. And so we have built into the $3 upper end range, the manufacturing cost reduction, and if we're successful getting more variable cost, that will become a hedge against any volatility in the topline.

Jonathan P. Groberg - Macquarie Research

Okay, and then if I can, just one more, on just the guidance itself. I mean it looks like your revenue outlook is slightly -- we're saying the midpoint, before it was flat, now you're kind of minus 1%. And if I just -- if I do the quick math, you get to the $0.10 that you're talking about. I mean, it just seems like you're letting that flow-through 100% of that. Am I missing anything else? Are there any other things going on for that $0.10 that you're lowering the guidance for, for the year?

Didier Hirsch

Just $100 million of lower revenue, that would translate into $0.14, just to be precise. So there's some offset to that, and that's why we're only -- and I mentioned those offsets in my scripts and that's why we are reducing the EPS by $0.10 and not by $0.14.

Operator

Your next question is from the line of Jon Wood with Jefferies.

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Didier, did you mention how much buyback you've put into your numbers at this point, for the rest of '13 and then I'd love to hear Bill's perspective if anything has changed on the political front, on the tax repatriation issue. I mean, do you see any resolution to that dynamic in 2013? Anything you're willing to offer there would be great.

Didier Hirsch

Yes, I'll answer the first question. So the forecast assumes we utilize all of the $500 million before the end of the fiscal year. And that we finish the year with 347 million -- on the last quarter, 347 million shares versus the 352 million we had in the Q1.

William P. Sullivan

And in terms of, regards the likelihood of a change of tax policy this year, I remain skeptical that anything will be accomplished.

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Okay. If you look at the remainder of the year, Bill, can you just talk about, it seems like with a surge in orders in the last month. It just seems like you sound more positive, yet the numbers are coming down. Help us reconcile what incremental caution you've baked in from here, I guess it's not clear to me. If orders are improving, why you're not a little bit more bullish about the top line?

William P. Sullivan

Well, as I said, I think that, first of all, there is a likelihood of defense cutbacks. Again, we'll know on March 1, as we have said. And there is evidence out there that the cell phone market after a huge investment may, in fact, be slowing down. And again, there've been some other independent articles written on that. So you couple those 2, the outlook and again, when we give guidance, it's very clear, the top line is what our forecast is, and then we decrement for there for the volatility, and unfortunately, we've been too narrow in this environment. And so if you combine the likely outhood in U.S. Defense spending, coupled with any sort of slowing in the communication markets, that is why we took the top line number of last quarter's $7.2 billion and lowered it to $7.1 billion.

Didier Hirsch

Yes, the third factor I have mentioned is that, in the last 3 months, the yen has weakened 20% versus the dollar. And overall the currency impact is a reduction in revenue for the whole year at the present actions rate, about $35 million. So that's also a component of the $100 million. It's just pure currency.

William P. Sullivan

That's a good point, though. $65 million is business, $35 million is just the currency exchange.

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Understood. Last thing, are you likely to know what form the defense cuts will take on March 1? And what I mean by that is, are you just assuming a ubiquitous cut in your defense business? Or do you actually have clarity on specific programs that you're in, that may receive funding reductions or the mix, basically the mix of the cuts?

William P. Sullivan

There's preliminary work was done by Guy's team, and again I don't know if Guy has any additional color, but right now, if you assume they muddle through with a moderate cut, the impact, we believe, would be 10% on our U.S. Defense. Worst-case scenario would be 20%. So they -- so they've modeled that to the best that they -- they can.

Guy Sene

Yes, this is Guy. I just second what Bill said, that clearly this is what we have modeled in, a 10% decrease.

William P. Sullivan

But in the low end of the guidance assumes a 20%.

Operator

Your next question is from the line of Amit Bhalla With Citi.

Amit Bhalla - Citigroup Inc, Research Division

Bill, so I understand that widening your guidance range will allow you to end up in ranges going forward, but I'm curious what programs you're implementing internally to improve your order book visibility and decrease the final week of the month loading that happens with the company?

William P. Sullivan

Besides praying, let me just share with you, the situation. So we deal with thousands of customers every quarter. The top 25 customers purchased in Q1 $275 million, that's an average of $11 million a customer. 80% of the delivery changes came from these 25 customers. And again, Agilent historically has had very liberal delivery policies moving forward, we work with our customers, they have their own set of issues, and so you can see -- and again, we had this quarter nailed on January 16 when I spoke to the Board of Directors. And all of a sudden, someone says, "Hey, look, I can't take the delivery for X, Y or Z reason," and you're sort of stuck. And you can't invoice and so you can't recognize revenue. Even the late orders, our manufacturing team did a great job turning the orders, got them in the pipeline, but we just couldn't recognize revenue based on, as you know, very, very tight revenue recognition rules. So I wish I could say something magical, I think it would be a bad mistake not to work with our customers, I mean they have their own set of issues. But in this environment, which is a slower growth environment, any change out of one of these big customers can become a surprise. And it's happened 2 out of the last 4, and the flip side of it is, to the other 2 quarters, we've been over guidance as you know, quite substantially. So I think as long as that we're in a slower growth environment, around flat, we're going to have more volatility. The answer, of course is, is to get back into our operating model of 4% -- low-end of our operating model of 4% organic growth rate, and I think that the signal noise ratio will just become lower. But I -- right now, unfortunately, there is not a magic answer right now, just given how concentrated the surprise has been in 2 of the last 4 quarters. The good news is, these orders aren't getting canceled. I mean, this is not a 2001, 2009 where all heck broke out and people are canceling orders. This is just strictly the issue of your assumptions to the end of the quarter. Didier said we are a highly capitalized capital equipment company. A lot of the revenue goes out the last month of the quarter, and over the years, it's been predictable. The last 4 quarters, is not, we have not done a good job predicting.

Amit Bhalla - Citigroup Inc, Research Division

And Bill, a follow-up on CAG and softness in Environmental. We haven't heard that, kind of heard the opposite at some of the other companies. So can you tell me where, globally, some of the softness is coming from? And any other specifics you can give on the Environmental side?

Michael R. McMullen

Bill, you want me to take that?

William P. Sullivan

Yes, I'll do that. A couple of comments. I have been at some companies that they have mentioned this, and again we sort of have a unique position in environmental test labs, so Mike, why don't you go ahead and respond to that.

Michael R. McMullen

Yes, sure Bill. First of all, just reminder, I would say that Agilent probably has the strongest position in the Environmental Testing market, with the breadth of our portfolio. So movements there are really amplified in terms of our total result. But to the specific question, where we've seen it is -- been in the U.S. marketplace, both at the federal, and state and local level, as well as Europe. Japan also is weak, so the story is, U.S., Europe and Japan. The emerging markets, Brazil, India and China continue to vest in these areas, but it's not enough to offset the challenge we've seen in some of the more mature geographies. I would say there is a bright note, if you will, that's emerging on the U.S. side, which is the push in the area of frac-ing, which actually is starting to increase the sample sizes [ph] coming into the private contract lab, the Environmental side. So but the, again, not enough to overwhelm the downside on the government's spending side. And again, I would just point out that we're particularly leveraged here, given our strength in this marketplace.

Operator

Your next question is from the line of Ross Muken with ISI Group.

Vijay Kumar - ISI Group Inc., Research Division

Hi, this is Vijay in for Ross. My first one was in the communications market, Berlin [ph]. I know that you sort of alluded to the fact that the communications, I mean, we might be peaking in the smartphone market. That's been a large part of the growth story here. Could you lay out sort of what the base case is for action, what's the house view? What are you guys thinking on the cell phone markets? And how we'd sort of look at that market on a 2 to 3-year time frame?

William P. Sullivan

Go ahead, Guy, why don't you give, latest perspective and again, you have to remember, we have an infrastructure, we have a leading position. We have the components and chipset and then we've got the handhelds. So Guy, why don't you give a overview of what the latest thinking is.

Guy Sene

Yes, your question was on the long-term. And clearly on the long-term, we still believe that the overall smartphone growth is solid. And most especially all the data that these smartphones are using among also all the other devices, the mobile devices like tablet. So that's clearly the major growth engine for the industry. And then, obviously, for our Test & Measurement solution, as we address not only the R&D and manufacturing for the devices, but as Bill was just mentioning, we have a very strong position in the infrastructure. And here, I must say that we start having more, or at least better news as you probably heard, the U.S. operators are planning to add more CapEx in infrastructure. There's been movement in China around the 4G allocation, that is for China mobile. No firm date yet, and that's a little bit, the uncertainty that we have short term. But the overall infrastructure market is something that we should start seeing coming up later in the year. So that's clearly what I would add for now.

Vijay Kumar - ISI Group Inc., Research Division

Got it. And maybe my next question, for Didier, and I know that, Didier, you mentioned on the last call, a lot of folks asked on restructuring. And sort of the way you laid out the case was depending on the environment, and the environment at that time did not warrant for a restructuring. And I guess one quarter in, you're looking at sort of fluctuation order flows, and volatility in some of the markets. We're also looking at maybe a potential sequestration, maybe a little bit of softening on the Com side. What would sort of prompt you to take a more -- want to take more, I guess, significant restructuring activities and get the earnings up?

Didier Hirsch

Okay, now let me start answering, then probably Bill would want to also say a word. The first thing is that it is not that we're not doing any restructuring. We are doing restructuring. It is very circumscribed. It is very well defined as we are reorganizing our manufacturing footprint and really going after the cost synergies that we're already committed to on the Varian side and the further cost synergies on the other front. So there is a lot of restructuring that is going on, but it is not broad-based and it is not indiscriminate. It is very, very well defined. And then for the rest, I think Bill already addressed the question. We do still -- we don't see any change to the secular growth rate of the company, and we do see opportunities in the midterm. Which means that we are not ready to do something that is more indiscriminate and similar to what we have seen in 2009. Bill, do you want to add to it?

William P. Sullivan

I just agree. I think that, given where we are now, putting the company in some sort of oscillation with taking out some of our core, given the opportunities we have, the products that we have in pipeline, to be able to move the EPS by a few cents. We know what to do. We have a great track record to make that happen. And right now, we are going to continue to invest and continue to be a leader in the Measurement market.

Operator

Your next question comes from the line Dan Arias of UBS.

Daniel Arias - UBS Investment Bank, Research Division

I was just wondering if Mike or Nick can maybe break out the instrument declines or growth in the LSG and CHG (sic) [CGH] segments for, versus Consumables?

William P. Sullivan

Yes, Mike, do you want to do that? And again, I apologize, Nick is overseas right now. He's not on this call, but Mike, could you give a flavor at least on the GCs and LCs and Mass Spec and...

Michael R. McMullen

Yes, sure. I think the overall answer would be is, we've seen continued, really solid growth, both in our Consumables business and Services business. The growth, as Didier mentioned, are relative to the instruments, and are tied to the capital expenditures of our customers, is actually more depressed. But with some bright spots in certain places where we've got our Spectroscopy business growing, and I think Bill earlier in this call pointed to the growth in LC/MS and LC. I would say on our gas-based business, which is the franchise business for the Chemical Analysis group, we continue to be challenged there a bit, given the weakness in the Industrial segment and the Environmental marketing we talked about earlier but actually down slightly and the situation is stabilized. And I must say we're actually fairly optimistic, moving forward, because as of the 1st of February, we launched 2 major new products, which replace our franchise -- I mean our flagship products in that core business. So the long and short of it is the aftermarket, our Service and Consumables business continues to do quite well, growing faster right now that our Instrument business and then the, as I said earlier, some parts of the portfolio are growing faster than others on the instrument side.

Daniel Arias - UBS Investment Bank, Research Division

Okay, appreciate that. And I realize that the competitive dynamic is pretty stiff in several of your markets, so I guess any thoughts on whether or not you think there's a share change dynamic that may be impacting growth anywhere in the business?

William P. Sullivan

As Didier alluded to, we don't believe there's any substantive change in terms of share. Clearly, some of our markets where we're really strong, become weaker and by defect there's a shift. But in terms of anything fundamental, competitor to competitor in a specific market, we don't believe there's anything fundamentally that's changed.

Daniel Arias - UBS Investment Bank, Research Division

Okay. And if I could just maybe sneak in a last one. Your perspective on Europe at this point, just given the outlook that you gave and the last time around, that you -- the expectations were not much in the way of improvement, but also not deterioration. Could you just sort of give us a way that you are looking at Europe?

William P. Sullivan

Yes, I think Europe and the U.S., it's muddled forward. The last quarter we had before, we faced lots of issues in the U.S. As I said last quarter, the Europeans' appeared to stabilized, the situation in the U.S. has actually a bit stabilized. And so overall, it's more positive. But I think that the opportunities in U.S., Europe and Japan are -- it's going to be a tough environment. That's why we need to continue to invest in new products and continue to invest in emerging markets.

Operator

Your next question is from the line of Dan Brennan with Morgan Stanley.

Daniel Brennan - Morgan Stanley, Research Division

At least a question on -- so from some sequestration, can you just quantify that $65 million operating revenue decline that you built in there. How much of that dollar amount is due to the impact of the sequestration?

Didier Hirsch

On the top line, the -- we, there's $200 million delta between the high-end and the low end of the range. And clearly, the low-end incorporates sequestration scenario. On the high-end, it is not a full figure sequester. It is really, really tight budget spending. But not a complete sequester of the sort that we have baked into the low-end of the range. So it's not -- sequestration is not the scenario for the high-end, or at least a permanent sequester is not a scenario for the high end of the range.

William P. Sullivan

And again it's that model is that 10% of our business is with the Department of Defense and -- or excuse me, in the defense market, of which 65% is U.S. only. So that's the range of the exposure that we have.

Daniel Brennan - Morgan Stanley, Research Division

Okay. And then maybe, within the Communications segment, can you just fill in a little deeper, like specifically you call out handset weakness, you call out Base-Station weakness. Was it -- could you give us a little color, was it a particular, one large vendor that you basically -- I know the second quarter you have a tougher comp from that production order that you captured last year. But could you give a little more color, just on what's going on within the headset market? Is it a pause ahead of maybe, some of the impact the buildout of some of these systems that we're going to see an uptick, or -- because, I guess, when we looked at -- when you listen to some of the competitors, while things aren't good, at least I've seem to be signaling things are pointing in the right direction right now. So I'm just trying to figure out what's going on there.

William P. Sullivan

Right now, in Q1, we said we expected the business to roll off because of the investment leading into the new year. So -- and I think that has been universal across the market. So we knew that the Q1s, particularly our Q1 is going to be lighter moving forward. Then the guess is, what's going to happen. Really easy to say, everything is going to be great. There are lots of external articles as Guy alluded to, that are suggesting that the growth of smartphones, even though it's the hottest part of the market, may in fact be slowing. The total cell phone market growth for the year is only targeted at 1%. And so, again, we are a conservative company, laying out exactly what we see. If the other guys are right, we'll do better. But right now we don't hope for things, we just try to look at the best data that we have available to us at what's going to happen. And again, we've been doing cell phone tests for over 10 years. And before that under HP I used to run the RF microwave group, inside of Hewlett-Packard, finding components. This stuff is highly volatile, in -- as people build up for capacity and then, of course, utilize that capacity as the markets slow down. And of course, there's huge changes from vendor to vendor and who wins, which also has a second order effect on investment.

Daniel Brennan - Morgan Stanley, Research Division

And then maybe one final, just related to that, Bill. But so does that portend any real scenes in the way you're operating your Comm business, I mean it sounds kind of negative. If the smartphone market's really kind of slowing, is there a point going forward that -- an earlier question alluded to. I think Guy mentioned China, we have 4G licenses somewhat coming in this country [ph] but how long could this pause, in this smartphone market occur and kind of what are you doing internally to deal with it?

William P. Sullivan

I'll let Guy respond to that.

Guy Sene

Well, I would say it's a -- I wouldn't see it as a pause, first. There is ongoing investment happening. And as you know, most of the overall manufacturing investment that are aligned the new product introductions is usually happening more into Q2, Q3. So I would not say there's a pause. But in the same time, the fact that some of the smartphones are really aligned with 2 major companies, it has an efficiency play in the manufacturing that we have to take into account when we forecast our business with them. The wildcard is to see if there are other companies, the Chinese companies and some smaller player, and understand when they will come up with some of the devices around LTE, for instance. And that's still in the cards, and we've not seen it yet, but obviously, it will happen at one moment.

Operator

Your next question is from the line of Isaac Ro with Goldman Sachs.

Isaac Ro - Goldman Sachs Group Inc., Research Division

Didier, just want to get back to an earlier point on, just sort of the forecasting in the visibility in the quarter, and what you're going to do to work on that. Would you be able to share some of the specific actions that you're taking to improve your forecasting methods, because it does seem to me that widening the guidance range is helpful, but not necessarily something that specifically addresses the key issues there when it comes to forecasting going forward.

Didier Hirsch

Yes, and Bill addressed that in saying that a lot of the issues just come from customers that we -- and we're absolutely determined to give them the flexibility that they need in order to operate in a very volatile environment for them, too. So it is not so much -- look at it as customer satisfaction kind of issue also. That we are not going to fight the customers if they want to have a little bit more flexibility within the last minute to serve their need. I don't know, Bill?

William P. Sullivan

I can't say it any clearer than that. $20 million of revenues, $0.03 a share. And we are not going to change our policy towards our customers in working with them on delivery. A lot of these deliveries, they can have installations and all the rest. We're in a slower growth environment. We know the pluses and minuses of how people run their business. We're shipping capital equipment, and it is just very easy to have, for example, a $20 million change at the last minute and that's $0.03. And there's just no way you can recover it at the end of the quarter. And so that's where we are. Yes, will we do a better job of second-guessing our customers? Sure. What the net result is, that you end up lowering your guidance, right? And because you're surely not going to bet on anybody accelerating receipt in this environment, unless the economy turns around. And just in a big catch-22, and we're just being as transparent as we can and again, hopefully, given the actions that we're taking to minimize on the downside and again, continue to focus on increasing our organic growth rate that the volatility that we've seen in the last 4 quarters will dissipate in time.

Isaac Ro - Goldman Sachs Group Inc., Research Division

Okay, and then just to be -- that's helpful. And then just maybe to follow-up on the comment on the $20 million and $0.03. Just to be clear -- that entirely is tied to timing of orders, not -- and to be specific, not tied to anything related to market share. And I think there was a question asked earlier about sort of how you guys map up versus your competitors. Just trying to be clear that, there wasn't anything in the quarter, in your opinion, that had to do with market share or large contracts switching hands?

William P. Sullivan

Again, all that happened was, and again, as I said on January 16, we were highly confident that we were going to have another $0.05 of EPS, highly confident. End of the quarter, phone calls up, "Hey, sorry, can you delay this thing a week, and the delivery a week?" And, that's it. You're done. Secondly, with the late orders, the team did a great job of actually turning the orders, get them out the door, but you can't recognize the revenue because you haven't gotten the invoice. And it is as simple as that, I mean we are incredibly disappointed. And the team did a great job in the last week trying to scramble around, but I mean, unfortunately things happen. In the course of history, in the last 4 quarters, that $35 million rolled into Q2, right? $0.05 rolls into Q2. So again, if you look at the last 4 quarters, aggregate, we have been above the midpoint and have executed fine. Unfortunately, right now we are seeing the highest volatility, quite frankly, that I've seen since we created Agilent, outside of the 2001, 2009 downturn.

Operator

Your next question is from the line of Paul Knight with CLSA.

Unknown Analyst

This is Bryan Kip [ph] on behalf of Paul. You guys alluded to some cost synergies that are still going on at Varian. Can you, just jump into that a little bit further? Are you still seeing margin improvement or benefits from the Varian acquisition?

Didier Hirsch

Absolutely. Bill mentioned that -- or I did, also in my script. There's -- we're going to deliver $50 million of incremental cost synergies and Varian is a chunk of that. I would say about half of that is the from the Varian, and we have another year to go before we accomplish our goal in terms of delivering $100 million of cost synergies for Varian. And the rest are other cost synergies that will be delivered by the new Agilent or the fulfillment organization, and which will cover both logistics, manufacturing rationalization and material savings.

Unknown Analyst

And just one more follow-up. You guys mentioned some headwinds on the currency side in Asia, specifically in Japan. But how is that region helping or hurting total margins?

Didier Hirsch

Well, all the region, you mean from a currency standpoint?

Unknown Analyst

No, sorry, not on the currency standpoint. Just on top line working through for expenses.

Didier Hirsch

Well in -- well certainly, in general, I mean, our margins -- our prices are about the same in whatever regions where we operate. So you could say that the margins on the regions where operating expenses might be -- are lower, is better, obviously, operating margin level. If that answer your question, I'm not sure exactly. If that addresses your question or not, with the...?

Unknown Analyst

Yes, I guess just -- are your margins in your Asia Pacific region, are they above the company average, the 17, slightly north of 17 this quarter. Are you guys seeing some headwinds there, or...?

Didier Hirsch

Gross margins are about the same, and usually, as you can imagine, the CL selling [ph] costs are lower in some of those regions, than they are in the high-cost [indiscernible] and Ron would like to add.

Ronald S. Nersesian

The biggest issue that affects our margins is our mix. So when we look at some of the products that are sent to China for manufacturing, that has a different margin structure than some other project -- other products. But for the exact same products, our margins hold up very well.

Operator

Your next question is from the line of Tycho Peterson with JPMorgan.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Did you ever, Bill, say what was embedded in guidance for the growth in the core business? I know, previously you'd said minus 1.5% to 1.5%. Can you just be clear on what's embedded for core growth?

William P. Sullivan

I'll let Didier do it. I think it's roughly the same.

Didier Hirsch

So by business, if I look at the high-end of the guidance where the core growth is about flat for Agilent, it will be in your 4% to 5% reduction in the EMG; 3% to 4% increase in CAG; 4% to 5% increase in LSG; and DGG -- and again, we're talking organic growth, and currency adjusted DGG would be at 10%. So that's with the whole thing, that gets us to the 0 percent, which is, corresponds to the high-end of our guidance at $7.1 billion on the currency-adjusted and organic basis.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

And then are you able to comment at all on the China book-to-bill and just kind of latest trends there. I know you talk qualitatively about it a minute ago, but...?

William P. Sullivan

Well, the China business, again, clearly compounded with the projected slowdown in Communications, plus the push out of deliveries, overall China was relatively flat just because the result of that. The Chemical Analysis business essentially was in the very low-single digits. The Life Science business though, had a substantial growth in the quarter, exceeding 20%.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Okay. And then are you able to talk on pricing, I know you had a couple of comments on competitive dynamics earlier, but can you talk about whether pricing trends may have impacted margins?

William P. Sullivan

We had said that at the beginning of the year that we had -- we're going to target our manufacturing cost savings to offset pricing. This quarter, Didier did say the number that we thought that we could get $40 million of gross margins out, and actually make a contribution. So to date, even though there's obviously, point deals where there's margin pressure, the fundamental discounts have not -- have gotten a little bit weaker, but have not changed substantially.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

And I guess on that margin comment, I mean margins are always back-end loaded in the year. But if we look at the guidance you've laid out, I mean you need to average I think about $0.77 in the back half of the year to hit guidance of $0.67 next quarter. That's a little bit of a bigger step up than we've seen before, and is that just the function of the additional cost workouts?

William P. Sullivan

Actually the slope isn't much different than '12, given how we started off so slowly in Q1. It's actually, the seasonality is not that different than '12.

Didier Hirsch

Part of it is the top line. It's operating leverage, because we are seeing what we're hearing what you guys are hearing also, which is the, that the economy will slowly, slowly grow again. And so that is embedded in our guidance. And part of it is just the cost synergies. But the cost synergies, I would say, I mean, are fairly well balanced throughout the remainder of the year.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

And last one, if the communications market is really kind of slowing here, does this change the secular growth rate of the company across the cycle?

William P. Sullivan

Don't read anything more than what we said. Q1 was slower, as anticipated. Given the volatility that we have in the push outs, we are saying that we are planning for a -- the potential for slower Communication. That's it. And it's one view of many. You will have some people saying it's going to be up in the right forever. Some people will say hey it's going to be slowing down because of the investment at this point in time. All what we're saying is that is what our plan is, built into our guidance. And that's our view at this point in time. And if we're wrong, we will capitalize on the upside and if, in fact, it's worse than that, then we'll make the corresponding adjustments.

Operator

Your next question is from the line of Derik De Bruin of Bank of America.

Derik De Bruin - BofA Merrill Lynch, Research Division

Can you just talk a little bit, the Genomics and Diagnostics business was up 6% on the core growth. The number -- a little bigger number than we were thinking before. It's like, what's sort of driving then? Can you also give us like an update on Dako and where you're starting the product portfolio launch, and how you're seeing -- are you getting -- what's your traction getting right now from SureFISH?

William P. Sullivan

All right, I will -- I'm going to turn this over to Lars in a second, but I could not be more pleased with the progress that we have been making with Dako, in terms of the integration into a large company without distracting them. And again, hopefully Lars can validate -- or verify that. And then secondly, as you know, Lars has taken over responsibility for all of our Genomics business, as well as our Pathology business to really drive leverage and the -- that integration, on top of that, is going well. So Lars, why don't you go ahead and talk about a little bit about how you see the -- your core Dako business and the opportunity in the new group?

Lars Holmkvist

Sure. Let me -- take a crack at that. No, I basically agree with that. It's a -- it's been a great journey so far, coming into the Agilent family and we are allowed to do the right things here, which I think is very important. I think we are holding the line with Dako pretty nicely here. So if you look back the last couple of quarters, we've been able to stabilize our business at the core Pathology level at around 5% organic growth rate. And then -- and relative to the market, Dako is doing better. But it's fair to state, still, that we are not yet up to the speed of the market. We hope that, that traction will change in the course of the next, probably 2 quarters as we will be moving in an unprecedented number on new products that is right now hitting. That's anything from new chemistries to new instrumentation. So basically, we're going to go to market in the next few months with a very broad and diverse portfolio. More specifically, what we believe is going to drive the uptake here on the core Dako business is fundamentally a new, fully automated instrument. And I've said before that we foresee a long summer in the midst of 2013, and to characterize that even further, I can say that we are into customer sites right now. And we have run a fairly significant number of both immunities to chemistry at these slides, and the results so far as measured by a group of pathologists is really spectacular. We haven't released the spec of what we're going come with, at this point in time. We will be doing so in the course of the next 4 weeks. But the internal benchmarking that we have would indicate that is going to be a very, very high performing instrument. So stay tuned. There's going to be more information coming out of that. We will be expanding our clinical sites towards the, call it, the second calendar quarter of the year, and I expect us to be into a full swing launch somewhere in the third calendar quarter. So we see this as a terrific upside to build on the strength that we have been able to stabilize with the Dako business. So things are looking good. To break it down per geography, if we look at our core Dako performance, we are probably growing the last quarter in the North American or the U.S., so the Americas business, by around 6%. We are pretty flat in Europe. And the Asia Pacific business, inclusive of Japan, is up around 15%. To breakout the few of the things where we see major traction would be China, where we are growing more than 100%, as an example. So the things are picking up and we are able to leverage the infrastructure from Agilent, and also the incremental investments in field resources that we have put in place. In terms of the Genomics business, I'm pleased to say that we've been able to substantially improve the profitability of the business during the last 12 months. The team has done a great job, actually reducing cost, and actually improving the margins here. We see a good traction with the CGH microarray business getting into the clinic, and we expect that, that penetration will continue, and we're going to benefit from that. That's a very important line for us. So a number of the other Consumables and instrumentations are doing very well and we are pleased to see the progress. And compared to the industry benchmark, I'm pleased to say that we are at the level where the industry has been performing in the last 2 quarters. Specifically around the SureFISH, we are having a customer base of, I would characterize that around 150, 270 customers a day actively reordering. The reordering rate is not at the level where I would be pleased right now. So we have made a footprint, but we haven't penetrated to the ability or the potential of the company right now. A few things that we are finding out is the time to validate the new probes get into the accounts takes about a longer time, and we also need to ensure that the we optimize the SureFISH on FFPE on the tissue, all right? And we're going to automate that on top of it. So there are 3 things that's going to happen here the next few months. We're going to have more probes out. Addressing some of the solid tumors. We're going to optimize this on tissue so it can be carried by the Dako sales force and we're also going to automate that on the new instrument that's going to hit in the next, call it, couple of months here. So we are making good progress. We are gaining incremental business, competitive reinstall [ph] business, but not yet up to the potential. And I promise you that's going to be a very important area and a significant growth opportunity for us.

Operator

Your next question is from the line of Doug Schenkel with Cowen & Company.

Doug Schenkel - Cowen and Company, LLC, Research Division

Could you walk us through the components of the revenue guidance reduction? You missed the midpoint of revenue guidance by $10 million. You said you would have been, I think, $10 million to $20 million higher if weren't the delays. Recognizing FX has become less of a headwind, you obviously lowered full year revenue guidance by a lot more, $100 million, I believe, at the midpoint. How much of this is Defense? How much of it is Communications, and how much of this is largely other things or maybe just giving yourself a little bit more wiggle room, given the choppy execution over the last several quarters?

William P. Sullivan

$100 million for the year, from $7.2 billion to $7.1 billion, $35 million currency, and just split the difference on Defense versus Communication, moving forward. And I think that your comment of trying not have another quarter like this is legitimate.

Doug Schenkel - Cowen and Company, LLC, Research Division

Okay. And I guess I'm a little -- it's a little surprising, at least to me, that a key component you're highlighting of having to reduce your revenue guidance is attributable to sequestration, given I think you'd agree, how pessimistic you've been regarding developments or lack thereof in Washington. What exactly were you expecting before for Defense? And how did Defense hold up in January? We've seen some data, such as the fact that DoD contract awards declined, I think, 42% year-over-year in the month. So is that was something that you called out as being an incremental headwind in the quarter. I'm just wondering if you saw anything over the last few weeks?

William P. Sullivan

Well, it's interesting. I'll let Guy talk about the U.S. Our Defense business in the quarter was actually up 9%, all driven by non-U.S. purchases. But I'll have -- so again, an anomaly now, but the -- I'll have Guy comment about exactly what they're seeing between the government and the primes.

Guy Sene

Well, yes, as you heard from Bill, our business really grew because of the international part. In the U.S., we were flat in Q1. And mostly because of the backlog we got in Q4 in orders, and also the year-end money. The budget spending for most of the defense and contractor. So flat in the U.S. and the growth comes from outside of the U.S. with a number of very interesting programs. Russia, for instance, was very strong, but also China in this regard. Going forward, I would say that the one thing that I would just add to the sequestration is the overall continuing resolution that is set up. And that has a, in fact, a more interesting lever as we really would expect that the government gets to an agreed upon budget. As soon as the budget is set up, this will allow, then, everybody to start investing and making plans going forward. So it's mostly the fact that nobody knows what's happening, rather than the decision of yes or no for sequestration, are we looking for final decision.

Doug Schenkel - Cowen and Company, LLC, Research Division

But if you see award activity actually slowing down, recognizing that, that would not have translated into immediate revenue anyway, but if you're seeing award revenue -- I'm sorry, award activity slow down recently, wouldn't that suggest that if there is going to be anything that, is in line with the dynamic you just described, moving past the continuing resolution and having some certainty that it's going to take a little while for that revenue to flow through?

Guy Sene

Well, that's the big question. It's going to take a while and we just don't know how long. So, so far in the -- what we have in the guidance is we assume there is going to be a budget, and that we are, in the high-end of our guidance, that we will see some orders coming in, mostly at the end of the year.

Doug Schenkel - Cowen and Company, LLC, Research Division

Okay. And last question, could you just talk about the impact of the Lunar New Year being a little bit later than it was last year? How did that play out in January, and how is that being reflected in Q2 guidance?

William P. Sullivan

Lunar New Year, again, because of our quarter from October to January, every 4 years, Lunar New Year is in the same as Christmas holidays, which is always a problem for us. Because the Lunar New Year, this year, in fact, is going on right now, at the very beginning of the quarter, there's, we don't imagine any material impact to the Lunar New Year to Q2 whatsoever.

Operator

The next question is from the line of Timothy Evans with Wells Fargo Securities.

Timothy C. Evans - Wells Fargo Securities, LLC, Research Division

Could you comment a little bit on more the general-purpose end market, and just what's your outlook there, given that we are seeing some improving macro variables? And maybe also just what are your -- what do your customers tell you when they decide to push out an order? Is this just based on, we need to make our own numbers, or is there something else going on there?

William P. Sullivan

Well, again, we can't make a comment on push out of orders. As I alluded to, we have huge customers. And which I think adds more volatility than if we had thousands of thousands of small, $10,000, $50,000 customers. The top 25 customers average $11 million a quarter. So it doesn't take much at the end. And there's just a variety of reasons why they want something later or not, so I'll just leave it at that, and again we never comment on an individual customer. But Guy, why don't you just go ahead and give an update on what you're seeing in the terms of the overall general-purpose market, and you can put a plug in the continued success of oscilloscopes.

Guy Sene

Yes, maybe I should start with this, we -- our oscilloscope program keeps our hitting very well our expectations and had another positive growth rate this quarter. And very pleased to this, probably we'll give you more details when we meet in March at our meeting there. The general-purpose market is, I would say, very mixed beside the high-speed digital discussion that I just shared with you on the oscilloscope side. The rest of the market, the cost of the world was down, as you've seen our industrials for EMG, we're 13% down. And it is based on the macroeconomic concerns still. The PMI is a little bit better than last quarter. But the trend is still too slow for people, really to invest, until the -- unless they have clear production needs so, and this, obviously, is not very clear in the marketplace yet.

Operator

Your next question is from the line of Mark Douglass of Longbow Research.

Mark Douglass - Longbow Research LLC

Well, a lot of my questions have already been asked and answered. But Bill, you talked about order visibility, as it's been very problematic. Is it pretty much just confined to EM? Or have you also seen more volatile order patterns in the Life Science and Chemical businesses as well?

William P. Sullivan

The -- it's still predominantly EM, given how big it is, and just the size of the customers are so large. But this quarter, we also -- and again, Mike can comment, we actually saw some unusual push outs, delays in the Chemical Analysis side as well. And so that's new. But it's still predominantly the Electronic Measurement part of the business. I don't know, Mike you have any comments? You've got a little bit of it, too.

Michael R. McMullen

Yes, there was actually a silver lining in that story. So Bill is exactly right, that we saw some unexpected volatility at the end of our quarter. As Bill said, he thought we had it nailed on January 16 when we talked with the board. But the good news, the silver lining is what we saw was, a lot of interest in our new launch of our franchise products, and so what we saw at the end of the quarter was, a number of our customers asked us to convert their orders and they were interested in the new products, so that was not part of the -- it occurred at a higher level than we had anticipated, and that's why I said earlier, there's a silver lining there. So that's what we saw the end of the year quarter from the Chemical Analysis side.

Mark Douglass - Longbow Research LLC

And the new products were all GCs? Can you just explain what --

Michael R. McMullen

Yes, these are the 2 highest volume, gas-based products. It's a replacement for our 70, 90 gas chromatograph, and then also our single quad DC mass spec product.

Mark Douglass - Longbow Research LLC

Okay. And then a final question, just to confirm, so it looks like you're still expecting the kind of flat to low, or maybe mid-single-digit growth in Chemical Life Sciences for the year?

William P. Sullivan

Correct.

Operator

Your next question comes from the line of Richard Eastman with Robert W. Baird.

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Just one quick question. Didier, when you look at the decremental margin in the EMG business, whether you look at it year-over-year, or you look at it sequentially from fourth to first, is there any mix impact in that decremental? Is that all volume? And should we kind of expect that going forward? Or is there, again, some of the cost take out that you alluded to, is it weighted towards EMG?

Didier Hirsch

EMG has, since Q1 of 2012, engaged in a very, very strict hiring freeze and cost controls and things like that. So they are in the process of accelerating those, this clamp down on expenses. But the -- really all of the -- I mean, that helps, but the impact of the loss of operating leverage, the impact of the lower revenue is really what explains all of the decremental. It is all top line because they've done a really, really good job at managing the expenses. They've really achieved the goals that we had set for them in terms of, again, incremental, decremental. And in the old days, we would not have seen EMG at that kind of revenue at over 17% operating margin. So it is certainly -- and they are in the process of doing more in terms of discretionary expenses.

William P. Sullivan

But as you know, they have the highest gross margins in the company, and so they're --

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

And Didier, could you also, I'm sorry, you whipped through this a little fast, but could you just repeat. Did you suggest that the EMG business now for the year, with sequestration at the midpoint, in the estimate and then also with the comps slowdown, did you suggest, maybe down mid-single-digits is a better...

Didier Hirsch

Yes, but that was in line with the high-end of our guidance of $7.1 billion, that EMG core revenue growth currency adjusted would be between minus 4% and minus 5%.

Operator

Your final question is follow-up question from the line of Derik De Bruin with Bank of America.

Derik De Bruin - BofA Merrill Lynch, Research Division

I just want a little bit more clarity on some things. So, I'm -- as a molecular biologist, and life science analyst, so I'm a little more familiar with the other side of the business, the EM business. I appreciate some of the comments you've made on not thinking that you're seeing share shifts in this business. But I'm just curious, it's like, what other evidence out there, where -- how can we gain better confidence that you guys aren't seeing some pressure, particularly in the areas like the wireless testing business. Particularly since some of your competitors like LitePoint are now part of Teradyne? It's -- I'm just looking for some better clarity -- metrics in terms of the market share shifts in this areas, like, what can we do to get a comfort level that it, that's just a slowdown in the market and not share loss?

William P. Sullivan

Well it's very, very difficult, with the biggest competitor that we have is Rohde & Schwarz, it's a German company and it's private. The battle right now for the wireless handset market in R&D is between Anritsu, Rohde & Schwarz and ourselves. That is by far, the biggest players. Anritsu, of course, had a great run last year, and you can look at their numbers for the last quarter, where they had slowed down, but that's the ballgame. The biggest issue is one of the largest competitors in the space is private. You can clearly get their tax returns when they file backward looking, that's really where the battle is. And it's no disrespect because some of the smaller companies that are playing in the space. But the communication market is $4 billion or $5 billion. You know how big we are, and that's really where the action is, and our biggest competitor, point for point, is Rohde & Schwarz.

Operator

Ladies and gentlemen this does conclude the question-and-answer portion of today's broadcast. I'd like to turn the call back over to management for any closing remarks they'd like to make.

Alicia Rodriguez

Yes, thank you, Regina. This is Alicia. I just wanted to thank everybody for joining us today on the call. And we look forward to seeing you at our Analyst Day on the 7th of March. Thank you.

Operator

And with that, ladies and gentlemen, we'll go ahead and close out. Thank you so much for your participation today. This concludes our presentation, and you may now disconnect. Have a great day.

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