Agilent Technologies' CEO Hosts 2013 Annual Shareholders Meeting (Transcript)

Mar.20.13 | About: Agilent Technologies (A)

Agilent Technologies Inc. (NYSE:A)

2013 Annual Shareholders Meeting

March 20, 2013 11:00 am ET

Executives

James G. Cullen - Non Executive Chairman, Chairman of Nominating/Corporate Governance Committee and Chairman of Executive Committee

Marie Oh Huber - Senior Vice President, General Counsel and Secretary

Lisa Brenten

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

Unknown Executive

Ladies and gentlemen, please welcome Agilent's Non-Executive Chairman of the Board, Jim Cullen.

James G. Cullen

Good morning, everyone. Very happy to have you here on this semi-dreary day to attend Agilent's 2013 Annual Meeting of Shareowners. My name is Jim Cullen, and I'm the Non-Executive Chair of the Board and will be Chairman of today's meeting.

So as you've seen in the agenda, there are 2 parts to today's meeting: first, we will cover the official business of the annual meeting with 4 items that shareowners have already been asked to vote on; and then Bill Sullivan, here to my left, who I'm sure you all know, will offer his thoughts on the current state of the company. After Bill's comments, we will be very happy to take your questions on the company and company issues.

So let's get started by my calling Agilent's annual shareowners meeting to order. We are conducting the meeting in accordance with the company's bylaws. We have 4 business items on the agenda, and they are: To elect 3 Directors to 3-year terms; to ratify the Audit & Finance Committee's recommendation of the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm for the 2013 fiscal year; third, to approve on an advisory basis compensation of Agilent's named executive officers for fiscal year 2012; and finally, to consider a shareowner proposal if properly presented this morning regarding board declassification.

So before we get to the official business of this meeting, as always, I'd like to just take a few minutes to introduce members of the Agilent Board of Directors who are here with us today. I'd appreciate it if each of them would call -- would stand as I call your name.

First, Bill Sullivan, who I've already mentioned, who in addition to serving as the company's CEO has also served as a Director of our company since 2005; Paul Clark, who has served since 2006; Heidi Fields, who has served since 2000; Bob Herbold, who has served since 2000; Koh Boon Hwee, who has served since 2003; Dr. David Lawrence, who has served since 1999 from day 1; Barry Rand, who has served from 2000; and Dr. Tachi Yamada, who has served since 2011. Here on stage helping to conduct the meeting today is Marie Oh Huber, our Senior Vice President, General Counsel and Secretary.

Let me also introduce several members of the senior management team at Agilent. First, Ron Nersesian is President and Chief Operating Officer; Mike McMullen is Senior Vice President, Agilent and President, Chemical Analysis Group; Nick Roelofs is Senior Vice President, Agilent and President, Life Sciences Group; Guy Séné is Senior Vice President, Agilent and President of the Electronics Measurement Group; Lars Holmkvist is Senior Vice President, Agilent and President of Diagnostics & Genomics Group; Didier Hirsch is Senior Vice President, Chief Financial Officer; Jean Halloran, Senior Vice President, Human Resources; Rick Burdsall, Senior Vice President, Chief Infrastructure Officer; Darlene Solomon, Senior Vice President, Chief Technology Officer; Shiela Barr Robertson, Senior Vice President, Corporate Development and Strategy; Solange Glaize, Vice President, Corporate Controllership and Chief Accounting Officer; Dominique Grau, Vice President, Global Compensation, Benefits and HR Services; Mark Orton, Vice President, Internal Audit; Alicia Rodriguez is Vice President, Investor Relations; Neil Dougherty, Vice President and Treasurer; and finally, last but certainly not least, Steve Williams, Vice President and Assistant Secretary.

Before we start the agenda, I'd just like to briefly review the rules of our meeting here today. They are on the flip side of the agenda that you've each been given. Shareowners who would like to speak are welcomed to do so in accordance with these rules, which apply to both the shareowner meeting and the company presentation by Bill after the meeting. There's a limit of 3 minutes per speaker, 10 minutes for all speakers per topic. If you'd like to speak during the meeting, please go to 1 of the 2 numbered microphones we have on either side of the room. Either I or Bill will recognize each speaker by microphone number. Please wait until you are recognized before you begin to speak.

Questions and comments relating specifically and directly to matters being voted on at this meeting may be presented after the proposals have been introduced. A general question-and-answer session will be held after Bill's presentation. [Operator Instructions]

Okay. So let's get started. Agilent's Board of Directors has appointed Lisa Brenten of Computershare Limited to service our inspector of elections for this year's meeting. Lisa has taken and signed an oath as Inspector of Election. This document will be filed with the minutes of today's meeting.

Computershare has certified that starting on February 6, 2013, the proxy materials or a notice of the availability of proxy materials were mailed to all shareowners of record as of January 22, 2013. Copies of these proxy materials and related certificates will be attached to minutes of today's meeting. Marie Oh Huber, Secretary of the company, has in her possession a list of shareowners of record as of January 22.

Marie, will you please report on the number of shares entitled to vote at today's meeting.

Marie Oh Huber

The Inspector of Election has informed me that as of January 22, 2013, there were 346,967,900 shares of common stock outstanding, each entitled to 1 vote. January 22, 2013, was the record date set by the board for the determination of eligibility to vote at today's meeting.

James G. Cullen

Thank you, Marie. Please include the record of the number of shares entitled to vote in the minutes of today's meeting.

Lisa, would you next please report on the shares represented at this meeting.

Lisa Brenten

My examination of the proxies on file shows that there are present by proxy 298,757,097 shares of common stock, all of which are represented by Mr. Sullivan and Ms. Huber. The shares present by a proxy represent approximately 86% of this year's common stock outstanding and entitled to vote.

James G. Cullen

Thank you, Lisa. Please prepare and file with the Secretary's written report on the final count of shares in attendance at the meeting. Secretary will file this report along with proxy materials and the records of the company.

Since we do have a majority of outstanding shares represented at this meeting, I declare that there is a quorum present and that we may proceed with the business of the meeting.

We would ask each shareowner who has not previously submitted a proxy and who wishes to vote at today's meeting to please complete and submit a proxy at this time. The polls are now open for any voting.

I will review and take questions on each one of the items that shareowners have been asked to vote on, then I'll ask Lisa to report on the preliminary voting results.

The first item is the election of directors. Agilent's Board is divided into 3 classes of directors, with each class serving a staggered 3-year term. This year, you've been asked to vote on the reelection of 3 of our Directors: Paul Clark; Dr. Tachi Yamada; and me, Jim Cullen. The biographical information on all 3 nominees and their qualifications to serve Agilent as Directors are contained in your proxy materials.

Second item of business is to ratify the Audit & Finance Committee's appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm for the 2013 fiscal year. At this time, I'd like to introduce Michael MacLachlan from PricewaterhouseCoopers, who is responsible for the Agilent account.

Mike, would you please stand for a minute?

Represented -- Mike and representatives from PricewaterhouseCoopers will be available following the meeting to respond to any questions you may have.

The third item of business is an advisory vote of the shareowners to approve the compensation of Agilent's named executive officers for fiscal year 2012. This compensation is described in the proxy materials distributed by the company in anticipation of the meeting. This advisory vote is nonbinding on the company, however, the Board of Directors values your opinions and will consider the outcome of the vote in establishing compensation philosophy and making future compensation decisions.

The final item for business is a shareowner proposal regarding board declassification. This proposal was submitted by the Illinois State Board of Investment.

Is the representative of the Illinois State Board of Investment present? Apparently not. So this proposal then has not been properly presented at our meeting.

So as set forth in the proxy statement, the board recommends that you vote your shares for each of the nominees for our board; for the ratification of the Audit & Finance Committee's appointment of PricewaterhouseCoopers as our independent public accounting firm; and finally, for the approval of compensation of Agilent's named executive officers; and against the proposal on board declassification.

Having outlined 3 proposals that we're asking -- that have been legitimately presented and that we're asking shareowners to vote on, I would like to open the floor to any shareowners who would like to ask a question regarding these 3 proposals.

As a reminder, there will be time at the end of the meeting to ask more general questions about the company. Again, if you have any questions or comments on the 3 specific proposals being voted on, please proceed to 1 of the 2 microphones. If not -- yes, ma'am?

Question-and-Answer Session

Unknown Attendee

My name is Stephanie Mañejos [ph]. The -- on question -- the proposition 3, advisory vote on executive compensation. It doesn't say what the executive compensation is. And it also doesn't say how the executive compensation relates to the reserve set that the company must keep in case there's some problem in the economy or whatever that might need those reserves, nor does it say if the executive compensation is given in such a way that the executive -- the earnings that the executive, obviously, legitimately takes from this company are tied to the success of the company. We read in other places that from Pearson [ph], the company failed and Pearson went away with a golden parachute. So we don't have that information before us.

James G. Cullen

Yes. Thank you very much. Those are all good questions.

Unknown Attendee

What is the compensation?

James G. Cullen

The best quick answer I can give you to the primary question is that the proxy itself contains a very thorough and very detailed review in the section called Compensation Disclosure and Analysis, provides lots of details about specific compensation not just for this year, but for past years, compensation philosophy. And maybe most importantly, getting to the sense of your questions, it clearly outlines that the Compensation Committee, with the oversight of the full board, is very careful, very thoughtful in linking compensation results to the performance of the company. And so in, basically, in 3 pieces: In the salary of executive officers, that's linked to the level of responsibility for each of these executive officers; for the annual incentive program, it's essentially linked to current annual results, in our case, 2012; and then finally, in the long-term compensation program, it is linked to the long-term performance of Agilent, including stock options which are directly linked to the creation of shareowner value and the interest of shareowners. All of this with strong input from an independent outside consultant who has no other links to Agilent. So I would encourage you to take a look at that. I think you'll find responses to most of your questions in that section.

Are there other questions or comments on any of the 3 proposals?

James G. Cullen

Are there any ballots remaining to be submitted?

Okay, yes, ma'am -- yes, sir? A ballot. Please deliver that to Lisa.

And we have one over here to the left. I'm sorry. Would you please hold up your ballot? Is that a ballot, ma'am?

Okay. Okay. So we will make arrangements to get you a ballot. We'll close the polls with the single exception of your ballot, and we'll tally preliminary results.

So I will, with this one exception, declare the polls to be closed and would ask Lisa to give us the preliminary results on these votes.

Lisa Brenten

For the election of Directors, there were 247,236,273 shares voted for the company's slate of Directors. This is 95% of the shares voted at the meeting.

James G. Cullen

Thank you, Lisa. Based on these preliminary results, since each Director has received at least the majority of shares voted at the meeting, I declare that the 3 nominees have been elected to each serve a new 3-year term.

Now I would ask Lisa to report on the results for the vote to ratify the Audit & Finance Committee's appointment of PricewaterhouseCoopers as Agilent's independent registered public accounting firm.

Lisa Brenten

There were 295,249,830 shares voted in favor of the ratification of the Audit & Finance Committee's appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm. This is 99% of the shares present at the meeting entitled to vote on this proposal.

James G. Cullen

Thank you, Lisa. Again, based on these preliminary results, since the proposal received at least a majority of the shares presented at the meeting -- present at the meeting, I declare that the Audit & Finance Committee's appointment of PricewaterhouseCoopers has been ratified.

Now I'll ask Lisa to report on the results of the advisory vote to approve the compensation of Agilent's named executive officers.

Lisa Brenten

There were 251,665,629 shares voted in favor of the approval of the compensation of Agilent's named executive officers for the fiscal year 2012 as described in the company's proxy statement. This is 97% of the shares present at the meeting and entitled to vote on this proposal.

James G. Cullen

Thank you, Lisa. Based on these preliminary results, since the proposal has received at least a majority of the votes of the shares present at the meeting, I declare that the compensation of Agilent's named executive officers for fiscal year 2012 has been approved.

So in the next few days, Agilent will publicly report the final official results of today's votes. If you are interested, you can review these results through our public SEC filings, which can be found through the Investor Relations page on the Agilent website.

So that does conclude the official business of today's shareowner meeting. I declare that the formal part of today's meeting is hereby adjourned. We certainly hope that you will all stay with us for Bill Sullivan's discussion of the company's strategies, opportunities and status. And we will leave adequate time after Bill's presentation for any and all questions that you may have.

So Bill Sullivan?

William P. Sullivan

Thank you, Jim. It's a real pleasure for me today to talk about the company, how we did last year in 2012, what our priorities are for this year and then, as Jim said, open up the floor to any questions that you may have.

Before I start, though, this is the customary Safe Harbor. I may say something in the future, about the future, the company has no obligation to update my comments. If, in fact, that you're interested in exactly what the SEC filings are, please go to the Agilent website, agilent.com, for all of the regulatory documents that we have filed.

If there's one message I want to share with you in 2012 is that it was the best financial performance in our history. Revenue grew 4% even though the economy itself, as you know, has slowed down, particularly in the U.S. and Europe and Japan. Our operating margin was 20%, and our operating cash flow was $1.2 billion. Again, a record earnings and a record earnings per share performance over the course of the year. So again, a slower environment, but the management team here continue to do a very good job managing expenses, continue to focus on the customer and continue to drive value for our shareholders.

In addition to that, and we're really quite excited, is that we expanded our overall measurement market to $54 billion with the acquisition of Dako. Dako is the leading company in pathology, again, essentially measurement of cancer. And again, I'll talk about that in a moment. But it was the largest acquisition in our history and more on that, again, continues to expand the footprint for Agilent to continue to be the premier measurement company in the world.

And again, finally, for all of you, we increased our dividend by 20% to $0.12 a share. And the board had authorized a stock repurchase up to $500 million for the remainder of FY '13. So overall, a very, very strong financial performance.

Right now, what I'd like to do is go through each of the groups, talk a little bit about them and just give a highlight of what happened in 2012.

We recently formed our Diagnostics & Genomics Group. Again, with Dako and our previous genomics activity that had been part of Agilent. Last year, we did about $400 million in this area. This year, we'll be close to $700 million. The overall market opportunity for us in anatomical pathology, molecular diagnostics is about $7 billion. This is growing in a 8% to 10% range and you'll see it's the fastest growth opportunity that we have in the company moving forward. And you can see that we're very Americas, Europe biased. And given that Dako is a Danish company, you would see a very large market share in Europe.

With the combination of Dako with Agilent, we're quite confident that we can continue to expand our business into Asia, particularly as they make investments in pathology labs, continue to be able to bring advanced care for cancer victims. So again, very, very excited about this opportunity.

Just to give you a flavor of exactly what Dako does, if any of us ever have a biopsy for suspected tumor that may be cancerous, that specimen goes into a pathology lab. That specimen is encapsulated in a plastic-like paraffin, plastic-like material, and it's sliced very thinly and then stained to see if, in fact, that you do have cancer.

After that primary -- preliminary staining, there's advanced staining that is done to try to determine the genetic makeup of the cancer, to be able to understand what type of cancer you have so that you can, in fact, get the proper treatment to be able to deal with the disease.

In the circles of the area where Dako, both in the specimen and data entry, primary staining, advanced staining and again reviewing the slide, that is where the focus of Dako has been. So again, very, very, very exciting moving forward.

We continue to also work with the large pharmaceutical companies of what's called companion diagnostics. Again, how do you get the right drug for the right individual to focus on their specific cancer. And we have recently announced 2 collaborations, one with Pfizer and the other one with Lilly. Again, very, very large opportunity for us moving forward and to really leverage. Again, Dako, in fact, sees 1/3 of all of the cancer tissues in the world. So again, very, very excited about this. And just a great match with the genomic effort that we're doing, which is particularly focused on what's called array CGH, which is, again, looking at chromosomes and defects in chromosomes. We're a leader in microarray technology and gene expression. And this combination, I think, is really going to help propel the growth of the company moving forward.

In terms of our life science effort. And as many of you know, our life science effort started in the middle of the decade. We have the strong chemical analysis vent, had a position in life science, and we have aggressively made investment in this area to go after the largest market segment the company has, $21 billion of measurement tools in the life science market. This market is split between pharmaceutical and research, as well as in academic and government.

The -- our market share, again, is respectable. We made enormous progress, that we built this $1.6 billion market. But we see this as enormous opportunity for us to continue to grow, given our market share is small in this area moving forward. We have a strong position in liquid chromatography, and we have made dramatic improvements in the mass spectrometer area.

Let me just show you one example. Mass spectrometer is the largest market for any measurement tool. It's well over $2 billion. It's twice as big as the oscilloscope market that many of you are familiar with from our Electronic Measurement business. And this is an area where we wanted to go after mass spectrometer market, the high-end market, and we really leveraged the company.

Over the last 8 years, this product line has grown faster than any of our other product lines. We are able to leverage electronics capability in our electronics group. We are able to leverage the work in our central research labs and of course, with a strong position in what is called mid-range mass spec. And you can see that the growth rate that we have seen has just been really dramatic.

Again, this instrument is really used in the area of proteomics, in terms of metabolomics, again, to really be able to take molecules, be able to ionize them and to be able to separate them to really be able to calculate what the mass is and what is in that element moving forward. It's a great story. It's a great story of organic growth rate. And it's really propelled our Life Science business moving forward.

In terms of Chemical Analysis, and many of you in this room know that Hewlett-Packard, themselves, made the decision to move from electronic measurement into chemical analysis almost 50 years ago. If we can measure photons and electrons, why not be able to measure molecules. This group has been the most consistent and strongest performing group in the company's history. And right now, that market is about $13 billion. You can see that we're #1 in food testing, #1 in environmental testing, #2 in forensics testing and #1 in chemical and energy. So a very, very strong position.

And again, for all of you that watch any of those CSI shows and then you see the mass spec or the GC in the background there, if you look carefully, once in a while, you can see the star of the Agilent innovation in the background of those TV shows. But again, it's been around for a long time. And the team really continues to do a great job. And that's indicative of the rewards that we won last year in this space.

Again, not to go into each of the technical details of each of these products, but the top product is Atomic Absorption. And again, the team, again, this was through the acquisition of Varian, figured out a way to use a microwave to be able to -- essentially to be able to excite what is going to be measured. That product was the first in the world and, in fact, has done extremely well.

Secondly, in terms of very, very high-end gas chromatography, and it's called TOF, means time-of-flight, that basically you just make the flight path longer for the molecules to get higher resolution. We're the first ones to be able to introduce that. And we were the first ones to not only do a very, very high-end sophisticated ICP-MS, which is really focusing on -- on really looking on a lot of the fundamental elements. And so even this business has been with us for 50 years, we continue to be a leader and to be -- continue to bring in -- bring to products -- new products that are that -- that first to market to be able to sustain our position moving forward.

And finally, but not least, is our Electronic Measurement Group. This is the part of the business that has been with us since 1939. There aren't very many businesses that you can say have been #1 in the world for so many decades moving forward. We're #1 in communications; #1 in industrial and computations, semiconductors; and #1 in aerospace and defense. Overall, it's about a $13 billion market. The market growth, itself, is a little bit less than chemical analysis or life science, but again, a very large market opportunity and one that has really been the foundation for the company. We not only continue to be a leader in electronic measurement, many of that technology we can leverage into the life science and the chemical analysis market moving forward. And you can see here, again, it's a very, very profitable business as well.

I know many of you in this room have known our electronic measurement for a lot of years and you recognize the 4 boxes up in the upper left-hand corner. Again, these are the workhorses of this industry, you have the oscilloscope and time domain, network analyzers, signal analyzers and source in the whole frequency domain. And the big effort here has been to maintain our position in very sophisticated electronics, but to be able to migrate into simpler instrumentation, in modulant's mutation, as well as out-of-labs measurement or portable measurements in handhelds. And today, on the mobility side, we have the most sophisticated network analyzers and spectrum analyzers, all in the palm of your hand. And I must admit, it weighs a little bit more than 1 pound, but again, we've been able to take the technology in our feature-rich instruments and to be able to drive them into that.

And finally, we have always been in the module business, for many, many years. But we have a full-court press to ensure that we have competitive offerings for customers who only want to have a transducer to do a narrower range of testing versus the feature-rich instruments that you see above. Again, overall message, we are well-positioned in every one of our markets, and it's roughly $7 billion. We have enormous growth opportunity in this $54 billion market.

One thing that we did when Ron Nersesian was made COO, we consolidated all of our manufacturing over the last 15 months under one organization under Gooi Soon Chai. And the attempt was to continue to get the scale and breadth of the company under one organization. This picture here is our facility in Penang, Malaysia. It's 1 million square feet. It's the largest test and measurement factory in the world. But in addition to that, you can see that we have manufacturing hubs around the world, between Shanghai, Singapore, Waldbronn is in Germany, Colorado Springs, Little Falls and Santa Rosa here in the United States. We continue to have a diversified manufacturing strategy that actually helped us in terms of the currency fluctuations around the world. The company is, essentially, naturally hedged against the change in currency from Europe to the U.S. to Japan. And we've really been able to leverage our expertise around the world.

The focus of this organization is obviously on operational excellence, continue to drive costs, value engineering, to be able to leverage the best technology we have across the company, continue to focus on leveraging our technology building blocks. At the end of the day, even though the outside world of what we measure, being photons, electrons and molecules look different, once that data or that signal is captured, it has to be converted into a digital format. It has to be presented to an engineer and a scientist as information analysis. And we can do a lot of that to leverage that capability, the tools that make that happen, the technology across the company and, of course, ensure that we have the best customer satisfaction.

We continue to monitor our customer satisfaction against the competition with outside surveys. And we continue to be #1 in the market. And last year was a very, very good year as we were able to save $56 million in manufacturing as a result of really leveraging this almost $7 billion of manufacturing footprint. Again, a much different strategy than other companies. We have chosen not to outsource the manufacturing. We own all our manufacturing and it really allows us to be able to drive technology across the company and to really to control the whole supply chain.

In terms of our priorities for this year, they are very, very straightforward. We are managing through a slow economic time. There's a lot of evidence that may suggest that the second half of this year, the overall macro economy will continue to get better. We hope so. But all of us know the issues in Europe, the issues here in the United States and again, some of the struggles that Japan has. Fortunately, China, Russia, Brazil, the BRIC countries are doing better, but nevertheless, it is still a relatively slow economic growth.

We have made a strategic decision that we are going to continue to aggressively invest in organic growth. We're going to continue to invest in developing markets. And we are going to continue to invest in research and development.

Our earnings per share this year will be down slightly, based on the forecast that we see today. And again, we're hoping for a second-half recovery. But we believe that investing for the future is absolutely key and that we're well-positioned and not taking the foot off the gas, I think, is a bad decision. In 2009, as many of you know, we continued to invest in R&D. And as a result of that, when we came out of the recession 2009, we were a much stronger company.

However, given that, we are continuing to focus on our manufacturing. We have a plan in place to reduce our manufacturing costs by $180 million over the next 3 to 4 years. We're about 1/3 of that complete. And again, you can just see the leverage that we're getting is acting as one company to really to be able to leverage the capability that we have around the world in owning our manufacturing capability.

And finally, we need to make sure that Dako is successful. We spent $2.1 billion buying Dako. It's a very expensive acquisition. It was the largest, as I said, in our history, but it really does open up this brand new opportunity for us to move forward.

They have recently -- the Dako organization has recently announced the world's best autostainer in Baltimore 2 weeks ago. Essentially, this is a big machine that all of these slides that come in with your cancer tissues on them automatically get processed and then, of course, after that, get read. The initial reaction to our new autostainer has been very, very favorable moving forward.

In addition to that, we're trying to combine our genomic capability, particularly in our o FISH technology, which is another way to illuminate cancer cells for better diagnosis and really bring that together in the organization moving forward. I've been very pleased with the progress that we have made with the integration of Dako. And I really believe that this will not only be a growth driver for the company, but one that will be able to drive earnings for our shareholders moving forward.

Again, the message is 2012 was our best financial performance in our history even in a slow-growth environment. And we're well-positioned as we move into 2013.

So with that, what I'd like to do is stop and then open it up to any questions anyone may have. And please, just go to microphone 1 or 2.

William P. Sullivan

Folks are being very kind. I always joke up here, I've always joked in the past how excited I am about our advances in life science. And the older I get, and every year you see me I'm older, I get particularly excited about the advances in understanding disease and improving the quality of life. Yes?

Unknown Attendee

Yes. My name is Stephanie Mañejos. And that was a fantastic presentation reflecting a fantastic performance. And of course, I'm particularly pleased about the acquisition of Dako because 2 days ago, I had a basal carcinoma removed a few blocks away from here, down at Kaiser. And of course, the reason that was made possible was by the staining and by the biopsy that was done. So very, very pleased with that acquisition and with the performance of the company. My question is, is there somebody in the company besides human resources, itself, that takes a good look at the overall view? Because note in this room, the people that were able to get here at 8:00 in the morning are not traders from Chicago and Des Moines, Iowa. They're people that live around here and that have had an interest in the economic prosperity of Silicon Valley. Everybody has somebody that works in the electronics industry. My husband worked at NASA. My brother-in-law's nephew works at Solyndra. It just goes on and on. And I'd like to ask if somebody has a real concern for the employment contribution that Agilent makes to the prosperity of this economy. Because ultimately, that's what our prosperity depends on. We all buy from each other. Nobody here has his entire sustenance dependent on Agilent's dividends, however great they be. We all have other assets and these assets depend on employment, often of lower-paid employees. If, for instance, you're a landlord or a doctor or something, you -- so I'm hoping that there's somebody in there -- is there something somebody else I wanted to know? Yes, something in there that would -- somebody in there that would like to really look at that in terms of keeping employment here. And also, if there's time, I'd like to say that the company should really consider a health insurance on a much broader base. Because as things stand, we have health insurance divided into the good -- healthy employees with the good jobs that are insured by these private insurance companies such as Peak. They don't do anything for you. They just take a piece of the action and then the unemployed or the previously employed, who are sick, and they're insured by the taxpayers, are not too well. And if you want people to be buying the technology that makes these carcinoma operable quickly, even if you have bad employment, if you have a good health insurance system, then you'll be assured of payers, buyers, customers for this product. And I'd like you very seriously to consider that if you would.

William P. Sullivan

All right. Well, thank you very much for the question. So first question is related to employment here in the Bay Area and I will broaden it to California. We are a very large employer in California. This is, in Silicon Valley, is still the technology capital of the world. Counting the facility here and the facility we have up in Santa Rosa, we have almost 5,000 employees. The center of our central research is here in Santa Clara. We actually manufacture here our microarray technology. And so we are very good at attracting people into this community moving forward. And I'll tell you an anecdotal story about California because people always talk about, "Well, California is getting expensive and, Bill, what type of investments are you going to make here?" You can start in Folsom, up in the Gold Country, where we have a factory making gas chromatography columns. You could drive to Santa Rosa and not only see our facility, but you can see the vineyards. You can, obviously, come to Santa Clara. Then you can get back on the freeway and go to Santa Barbara, where there's a big research facility through the acquisition of Dako, and you could end your day in La Jolla, down in San Diego, and you'll see another facility that is also doing research in the whole area of life science. And so we have a very large presence not only the Bay Area, but also in the State of California. Because at the end of the day, it's about attracting the very best people to be able to make the contributions that we are making. In terms of health care, and again, I won't make any comments on the political environment because I think your questions on health care for all Americans is a very big issue that you read about in the paper all the time. Agilent Technologies is self-insured for all of our employees. We use an outside firm to be able to administer that, but we provide health insurance for all of our employees. There's a co-pay in their side. In addition to that, we are one of the few companies that also continue to provide support for our retirees in terms of their Medicare supplemental. So again, we've taken a different approach than other companies moving forward. But again, as you know, health care is our #1 non-salary cost in the company and a real issue in America that has to be dealt with. But thank you for your question.

Unknown Attendee

Tom Golding [ph]. What's your plans for South America and the developments there?

William P. Sullivan

Yes, that's a great question. And again, the question about South America, we have 2 very large organizations supporting Latin America, one in Mexico and the other one in Brazil. With the Varian acquisition and now, the Dako acquisition, we actually have a large position in Brazil and we are expanding that rapidly moving forward. Because it really is one of the BRIC companies and one that we have a lot of opportunity. The other parts of Latin America, we do through representatives. And again, we do a fair amount of business, but the real focus has been in South America, Brazil and then, of course, continued focus on Mexico as part of North America. So again, we are very excited about the opportunities that we have in Brazil. We are hiring, we are putting facilities in place. Again, the whole trick of this is how do you look as local as you can. Many of you know that Hewlett-Packard, himself, had the first joint venture in China in 1983. And we have a long history to be able to expand in new countries very, very rapidly and really provide the Agilent skill set locally for their needs. And I've been there quite a few times. And it's really quite interesting to see the opportunity we have in Brazil into food science, the sand oils that they have off the shore, the investment that they're making, particularly in a lot of the electronics manufacturing done by multi-internationals. So we're well-positioned in Brazil and I think we'll continue to see that growth.

Unknown Attendee

My name is Frank Evans [ph], and I have 2 questions. One is, could you give us an overview of the Varian acquisition? I wasn't aware that you had purchased Varian. And second, do you see any potential market for electron microscopes within your product spectrum?

William P. Sullivan

Yes, those are 2 great questions. Second question is easy. We actually have a scanning electron microscope that we can sell. You can buy one. It goes right on your desktop that works -- we're trying to get it down to 2 nanometers, but we actually did that through a small acquisition. And so we actually not only have a scanning microscope, we also have atomic force microscopes that can image down to the -- almost to the molecular level. So again, so we actually have one of those and be more than happy to send you any information on that. I know it will go good in your garage if you have that moving forward. We purchased Varian in 2010. Many of you know, the Varian brothers came out of Stanford 2 years after Hewlett and Packard. Varian in 1999, the same year we spun off from Hewlett-Packard, Varian split into 3 companies: one semi-conductor, one medical and one analytical instrument. What is happening in the measurement market is that the market is consolidating. Companies like Danaher industrial company have moved into our space. Thermo Fisher has combined. And you're seeing a lot of companies being acquired by larger companies. And so we knew Varian for a long time. They had a strong position in spectroscopy. As I said, they had a strong position in Brazil. And so we acquired that company. And as result of that, we can compete in analytical instrumentation across the full spectrum against any company in the world. And so we've been very excited with the Varian acquisition, brought in about $800 million of revenue into the company, and the integration is going well. There's only one product line left that we continue to focus on, which is the Innomar [ph]. It's kind of a sad story. Varian invented Innomar. That's the big magnet that you see. In fact, you can peek out the window, you can see them in the display room right outside of this room, where you can put in a whole specimen. And I always joke, it's like the spectrum analyzer, but essentially, it's an electromagnetic resin, you basically image. So any of you that get put underneath that scanner -- magnet, scanner, it's basically the same thing, MRI for humans. And so that's the one product line that we're spending a lot of time trying to fix. We have an enormous amount of electronic capability in Santa Rosa to help that out. But outside of that, the Varian acquisition has really allowed us to compete against anybody across the whole spectrum of instrumentation. So again, very, very excited. We brought in 3,500 employees. We did move them all down here, which most of them liked. And so, so far, so good.

All right. Well, thank you, all, very much, for your attention and your questions. Really appreciate it. And see you next year.

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