Good day, ladies and gentlemen, and welcome to the third quarter 2013 Agilent Technologies Earnings Conference Call. My name is Philip, and I will be your operator for today. At this time, all participants are now in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder to all participants, this conference 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 proceed.

Thank you, Patrick and welcome everyone to Agilent's third 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, Chemical Analysis, Life Sciences and Diagnostics and Genomics Group, Guy Séné, Mike McMullen, Nick Roelofs 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 under the Financial Information tab. There you will find an Investor Presentation along with revenue breakups, 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. Now, I would like to turn the call over to Bill.

Thanks, Alicia, and hello everyone. Today Agilent reported third quarter revenues of $1.65 billion, a decline of 4% year-over-year including the Dako acquisition. Adjusted net income was $233 million or $0.68 per share. We exceeded EPS guidance despite continued challenges in many of our markets and the economic environment in general. Agilent's strong three earnings reflect our ongoing commitment to actively manage costs and expenses in response to macroeconomic uncertainty. Consistent with the commitment we made in the second quarter, we successfully decreased operating expenses sequentially and we continued to benefit from our focus on reducing manufacturing costs. Before turning to the business highlights, I want to remind you, with the acquisition of Dako, we will no longer refer to our life science and chemical analysis businesses as bio-analytical measurement or BAM. Instead we will focus on LDA for life science, diagnostics and applied markets. As I mentioned last quarter, this is not an organizational change we will continue to report life science, diagnostics and genomics and chemical analysis as separate segments. LDA revenues in Q3 were $951 million up 8% year-over-year including Dako. LDA's operating margin was 18%. In LDA markets, we saw a good growth in pharmaceutical, up 7% on technology upgrades, food and energy also had solid growth up 11% and 6% respectively on strong demand from China. Clinical and diagnostics grew 114% including Dako and 16% organically on good demand for our array CGH and Target Enrichment Solutions. The continued outperformance of these segments was slightly offset by expected year-over-year declines in environmental and forensics and in academic and government, down 11% and 7% respectively. Both declines are a result of the ongoing sequestration in the United States. Our focus on emerging markets continues to pay off. BriC country revenues were up double digits across almost…

To recap the quarter, Q3 revenues adjusted for $10 million of currency headwinds were slightly above the high end of our guidance and EPS was $0.04 above the high end of our guidance as we continue to drive higher efficiency and manufacturing and SG&A as well as enforced strict expense controls. Core orders, which exclude the impact of currency and acquisitions, were down 5% year-over-year, while core revenues decreased 6%. Core orders at EMG were down 15% year-over-year, or down 8% excluding the non-recurring wireless manufacturing test deal of a key account discussed at last quarter's conference call while LDA core orders were up 4%. Within LDA, LSG core orders were up 2%, CAG's up 6% and DGG's up 6%. Core revenues at the EMG were down 16% year-over-year or down 7% excluding the key accounts wireless manufacturing test deal, while LDA core revenues were up 4%. Within LDA, LSG core revenues were up 4%, CAG's up 3% and DGG's, up 7%. By region, core revenues were down in the Americas by 17% and Europe by 3%, but were up in Japan by 9% and the rest of Asia Pacific by 3%. LDA core revenues grew in all regions where EMG's were down in all except Japan. To note, LDA revenues in China were up 21% after 16% growth in Q1 and 14% growth in Q2. Both, EMG and LDA delivered a strong operating margin of over 18% with more potential for margin expansion and increasing operating leverage as the economy picks up steam. Regarding cash, we generated $215 million in operating cash flow. We issued debt of $600 million during the quarter and paid off $250 million notes maturing that quarter. We also spent $681 million on share repurchases. We also spend $681 million on share repurchases. At the…

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

Of course. (Operator Instructions) Your first question comes from the line of Richard Eastman from Robert W. Baird.

Yes. Just have a couple of questions on the EMG business Bill, could you just layout your expectations for the aerospace defense business? Maybe over the next 12 months to 24 months, when you just think about how sequester plays into the U.S. piece, and is there any visibility offset rest of world there? I mean do you feel comfortable that that can continue to offset most of the sequester decline in U.S.?

It is a great question. I am going to have [Gee] make a comment as well. As you know, in the aerospace and defense, the team is really focused on satellite, guiding systems, operational, surveillance, we have been very pleased with our success outside the U.S. I think every quarter is always a nail biter to know exactly where the U.S. is going to end up, so Guy maybe you can make a couple of comments in terms of what you are seeing in the short-term in the U.S. defense spending? Guy Séné: Sure. Thank you, Bill. Definitely, as you have seen our revenue was up 1% in this quarter, mostly because of very strong orders from the international business and places like Europe and Japan for some very exciting business I must say around satellites, mostly. Going forward, our Q4 is seasonally usually one of the strongest and highest quarters better for the U.S. DoD and aerospace defense and that is really going to be the key focus. We have seen a number of engagements, so we must say we get a lot of people asking for quotes going forward but the real issue is how much authority and how much budget will these people have in Q4 so that's going to be the big unknown that we have to work through in Q4 now.

Okay. Just one follow-up on the life sciences piece of the business, the book-to-bill is seasonally softer than normal. Is there a read into that?

Yes. Overall, our orders were just slightly a little bit below what we like going in Q4. I don't think there is any particularly alarm, but I have Nick make a couple of comments in terms of what he is seeing in the life science from order perspective.

Yes. Just consistent with Bill's comments. Not exactly where we would have loved it to be but no real alarms, the pharma guys are still very strong and the academic sector is as we said soft with a lot of concern and confusion, so at this point we flushed a lot of backlog, which is a good thing and we are working to recharge that this quarter.

Your next question comes from the line of Jon Groberg from Macquarie. Please proceed.

Congratulations on being able to get a good quarter under the belt despite the challenges that everyone knows that are out there. I guess, Bill, on the electronic measurement side of the business again, you mentioned obviously there is Apple that you can do the math on the impact that, I am sorry, the big wireless customer deal we can do the math on. You mentioned some new products that you are going to be launching in electronic in handsets manufacturing as well as in R&D. I guess sitting here today, and I know you probably won't give an outlook for 2014, but how are you feeling about where you are positioned from a product standpoint and all the different moving pieces and the comps? What your first take on where do you think that business is going to be doing over the next 12 months all-in?

Then again, I will have Didier make a comment as well but overall, I think the communication mobility is going to continue to be a driver for the electronic measurement business going forward regardless of the one customer deal. We have a very strong product position and I am very, very excited about the products that we have in the pipeline. We are not backing away from this market. We are going to continue to invest market share changes overtime but the underlying essentials of the communications market, particularly in this whole area of mobility, radios and every mobile device, I still think is a great opportunity for the company.

Yes, and this is Didier. I can add, definitely there is a lot of innovation going into this sector. As you know, there is new challenges because of the spectrometer use and now standards like LT advanced and carrier aggregation and in the wireless networking a lot of new things happening that provides quite some opportunity in R&D and in manufacturing. Our new products portfolio is doing well. We just introduced the wireless connectivity test set that is very focused on testing wireless standards like 802.11ac and now we have received our first orders and now a very strong permanent thing for the future. Then as Peter was saying, we will work obviously at the next generation of platform that you will hear more about later.

In closing, even though we have some difficult compares due to one issue, we are absolutely committed to this market and we will continue to be a leader in this market and we will continue to invest heavily to ensure that we provide leadership products in the communication market.

Just to be clear, as you have lapped that one issue obviously, I know you are not giving guidance again, but we have one quarter left, so the street will be obviously putting targets out there for next year. Are you willing to quantify at all, what you think is a reasonable assumption for EMG in 2014?

You are going to have to wait until the next quarter's earnings call. As you know that's when we currently give our guidance for 2014.

Okay, that's fair, and then if I can, just wanted to follow up on the Dako business. I don't know if there is any kind of commentary for Roche and for Leica. It was kind of a weak business, well particularly in the U.S., but it seems like relative to where you would hoped that business would come in, it's a little bit softer. So can you maybe talk about where you think the main drivers of that are and what you think can get that business growing at a rate that you needed to given the acquisition that you did?

I am going to make a comment and turn it over to Lars but we are very excited where we are going. The markets slowing down, as you said. The good news is that means that we are really close to where the market is, lower number but we are highly competitive. As I said in my notes, we are going to be launching Autostainer which has been the biggest impediment to their growth but what I am also particularly excited about is the Agilent products that are being sold in the clinic and diagnostics. We are a small number, but still a very solid growth in the clinic with the Agilent products. I have just been very pleased with Lars' ability to put the two organizations together and really focus on what I think is going to be an exciting growth opportunity for the company. Lars, why don't you give us some of the details of where you are and obviously comments about the growth rate that Didier noted for our next quarter.

Yes. That's a bit of an kind of exciting time we are in right now. Let me address the market perspectives that we see here. I think fundamentally the volume growth of the market are there in the vast majority of the geographies. Obviously, we have seen some guideline changes in the U.S. market that, in my book and also in the view of the industry, is going to be there temporarily and we will see that impact probably for another quarter or two until that flushes out and that becomes annualized but the overall volume growth in Europe as well as in APAC is very robust and very strong. So, I don't think that there is any panic in terms of, will this market still continue to be an attractive market and will it be copied? In my book, it will be. Again, its going to take maybe a quarter or two. Now Dako performance, relative to the market, well it's fair to say that we have improved our relative position maybe not to the extent that we had hoped at this point in time because obviously we want to drive growth and we are right now, I would say, holding the market growth. We probably growing at 2%, 3% with core Dako. It varies between the product lines and the overall market characterizes somewhere around 4% growth rate right now. So we are flattish with the market but we are right now in a real crossroads situation where we are switching between the old platform and now about to launch full speed new Dako Omnis that we are still controlling in feed sites. We have the fairly large amount of systems out there. The feedback from the customers is really stellar at this point in time and you…

Your next question comes from the line Daniel Brennan from Morgan Stanley. Please proceed.

Bill, I was hoping maybe you can start off by just highlighting maybe your top down view? How you feel maybe if you look back last quarter this time versus today? I know you are still highlighting a lot of challenging things going on but you are executing through that. Is it kind of fair to say there is no difference or are you seeing any pockets of improvement? Certainly some results have improved, certainly in U.S. and Europe, while China continued to tread. I am just wondering, overall, how you feel about the globe?

Right now, in terms of our LDA business, as we had indicated both in our core growth rate and forecast for Q4, we are clearly gaining momentum on our LDA business. We had some great momentum, hit the slowdown, our growth rate was at or slightly below market and I think our momentum is going to go back to at or greater than market and again a lot of that, as Lars just described, moving forward and our chemical analysis and life science business, I believe, will have a momentum going forward. As I noted in my notes are progress in the BriC countries and the investment we have made continues to payoff. On the electronic measurement side, as the forecast, as until we get through the tough compares, I think it's an industry that's under a lot of pressure, both from the change in technologies to mobility, the change of who the winners are versus the losers, it is a highly competitive market. As a result of that it's still a tough environment. If you take any sort of macroeconomic improvement sorting out exactly who the winner is going to be on the technology side, the Electronic Measurement of course comes roaring back, so I think that's still a wait and see, LDA is clearly we are gaining momentum as we go into Q4.

Okay. Great. Maybe just sticking with some of the prior questions on EMG, as we think about Q4, can you just remind us does that, I know you may be mentioned this in the prepared remarks, but maybe I missed it. Does the loss of that one customer is that impacting your Q4 guidance? I mean if you strip out that loss is there a better rate of growth that you will be achieving? And within communications particularly there has been a lot of rhetoric about this China mobile business. I am just kind of wondering how do you guys think about the build out of LTE in China if that possibly will have an impact on whether it be your fourth quarter or we have to look in the fiscal 2014 for that.

Dan, this is Didier. I will take the first part of the question. Yes. Last year, our revenues with that account were about 25% in Q2, 50% Q3 and 25% in Q4. When I provided the guidance for Q4, that EMG would be down 11% on the core basis excluding that account, EMG would be down 6%.

Now the second part of the question for you.

Yes. I may take at least the question on the China mobile discussion that this is obviously something that is very visible. You know that China mobile is in the middle of selecting their supplier, so you have opened a bit of. It is our understanding there is at least nine companies bidding for this and they will decide by end of August to early September who is going to be the winners of that. Obviously, we are very well positioned with all of them. We follow and track this business very closely, but then I still would like to make sure that everybody understands that the size of the opportunity is in my mind more in the $30 million plus or minus $10 million. Again when you think about August, China Mobile has planned to announce to spend about $6.7 billion on this deal. This is before bidding, so we don't know what's the real deal is going to be out of and only half of this volume is going to be really electronics so the rest is going to be buildings and a lot of other supplies and this means when you look at the test side especially with the capacity that is in already in the system and depending who is going to win the opportunity is what I said. So, we are tracking this very closely. On the other side, I think it will also provide us real gross vector for the overall 4G especially in China as we go into 2014 and 2015 and as China developed the 4G network going forward.

Great. Thank you. Maybe one quick Didier, just on the buyback. You certainly utilized a fair amount of this quarter. Is there any possible signaling with that buyback maybe until rest of this quarter versus leaving a little in the fourth like in terms your view on the stock price where it was throughout the quarter versus your expectation going forward? Thanks a lot.

We were opportunistic. Obviously, we did raise $600 million in debt. We had initially I mean we said we would count on more than $300 million that will come in November, but because we had that not available and we felt the time was right which was jumped in we still have the $300 million that comes in November as a tax effective cash repatriation similar to last year's $550 million.

Your next question comes from the line of Tycho Peterson from JPMorgan. Please proceed.

Maybe one for Nick just on the pharma comments earlier. You talked about technology upgrades. Can you maybe just talk about how much of that some from the LC side versus mass spec? Maybe talk about any sheer dynamics there and are you actually getting traction for the new product launches yet or how do you think about there?

Tycho. So, let me break that down for you. We are doing pretty well in LC. The new product launches they aren't having much of an effect yet. We are getting orders but not revenue, pharma guys are doing well in terms of buying. We are at the end of their upgrade cycle in terms of replacement, but we are still seeing a technology buy up cycle, so there is a good secular growth and that has been strong in pharma. Mass spec for us has been a little bit softer in pharma. We see pharma still buying technology, but right now they are looking heavily at Triple Quad. There has been a lot of new product in the market and so there is a lot of valuation phase and so orders are kind of in the slower spot there.

Okay. Then maybe Bill, your comments on EMG earlier, as we think about kind of the outlook there and I know you didn't really want to talk about 2014 that much, but as we think about kind of the next 12 to 18 months for EMG. Is it fair to take kind of your fourth quarter number and use that as a starting point for a recovery or how do you think about the lumpiness of recovery for EMG ?

Well. The issue that you have in EMG, if you look at historically is that there is a recovery in macro and continued investment in communication and the new product launches we are going to make us successful they tend to do incredibly well and so I think that's what we have to see. Do we see continued strengthening in the world economy, EMG themselves come out with an next round of competitive products and we are able to capitalize on that and you can get a lot of movement of revenue correspondently. I always talk about this business. We always try to forecast and all we know it's wrong going to be higher or lower. Again, if you look at their history, they historically have always kind of roaring back with some economic tailwinds and of course a great set of new products.

Okay. Then the last one on environmental, you said it's weak government spending. Any hope that business may turnaround kind of given the backdrop?

Mike, what's your view on the environmental market?

Great question. So, let's chase the source of the downturn we see in this. It really all is tied to weak government spending, primarily U.S. and in Europe and bit in Japan, so that really has impacted the business both, at the federal and state level for example in United States. I think the glimmer of hope in this segment and I still think there's going to be for a while as the strength in emerging markets. As Bill mentioned early, across the board double-digit growth and we are seeing some increase volume in environmental side on a private sector related to fracking, where in the U.S. there a lot more samples running through our private contract customer labs as a result of the checking samples in the local environment. So, I think the story is all about the government spending in a lot of the key large geographies and your crystal ball in terms of what will happen in terms of their spend outlook is far better than mine.

Your next question comes from line of Tony Butler from Barclays Capital. Please proceed.

Thanks very much. We can stick with LSG just for a minute. Nick, I wanted to ask you about the operating margins which were strong in the quarter and you mentioned that the backlog you were able as I seem to recall you were able to extinguish it. The question really is can those operating margins continue through Q4. Then second if I may Bill or Didier on EMG if we take up a large customer concerned. Could we suggest that EMG business literally has troughed and that also reflects a trough margin of where we are today. Is that possible? Thank you very much.

Our operating margins are work in progress and that's the good news to your question. We saw some real mileage to go particularly in NMR, which has some weak margins in there, so I think we are making progress and I think it's a work in progress. I am pretty optimistic on where those go, sequentially.

Okay. Why don't Guy make a comment at least in terms of the trough? Also have Ron talk about the progress we are making at manufacturing. Again, yes, we talk about the macro environments, but we are attempting control what we should control and that is our manufacturing efficiency and obviously our expense structure. Guy Séné: Well, I would say it is a perhaps the order rates growth of EMG over the quarter. You could say that order rates is picking up and we have had the bottom is behind us. Now, obviously, it's all about Q4 and how this is going to shape up the new products as Bill was mentioning.

Our manufacturing consolidation programs continue to be on track and we are doing a real effective job of taking millions of dollars out of this system. We saw over $50 million worth of cost reductions last year. Roughly that same amount this year, then more coming after that, so we are very, very pleased with the manufacturing consolidation and we look forward to delivering more to the bottom-line.

Your next question comes from the line of Brandon Couillard from Jefferies. Please proceed.

Bill, I appreciate your enthusiasm on EMG but is the absolute level of EMG bookings not concerning here? I mean I am not speaking about comps or one customer but just the fact that ENG's run rate is some 15% trough levels back in FY09, it just doesn't feel like nearly that bad as a macro backdrop. Can you offer some context into that

I guess from my perspective again, what Guy said, the group in itself, regardless of the one customer opportunity, it continues to go the transformation. We continue to invest in communications in a very tough competitive environment. We continue to make investments in module instrumentation that we must win in module instrumentation. It is going to be a multi-year effort. We have another quarter of very, very solid double-digit growth moving forward. So EMG, in a sense, is how do I protect the bottom-line for Agilent? How do I ensure that I take the best communication business that I can? And then how do I invest in the future? Again, always the question is, as we go to modular business, how much of that is substitution versus winning the broader market and getting do you have a comment, but we are making the investment in EMG to ensure that they have the portfolio of products and the only one that has portfolio of products to have low cost transducers just enough test to having these very feature rich instruments that we have been noted for, for the last 75 years. So again we got a lot of moving parts inside of EMG, but from my perspective, I have watched the business for many, many decades, I am absolutely positive that we are focusing on the right things. Didier?

I will just add that for all product categories that we have in our portfolio, we have a very strong leading position and I am glad to see that again we keep taking share, in oscilloscopes, for instance as we go forward and the modular program as Bill was mentioning, is going extremely fast and on new applications that really we are into it. So ongoing focus on the core markets where we see growth going forward makes a difference and we will make a difference.

The last comment I would have, and again this goes back, and not to be an excuse, is we have always had a very strong position in manufacturing. We have always had a strong position in computers and semiconductor. As you know, the computer and semiconductor market are not great. So we have had some bad breaks on the mix and again we choose that business. So again I am making an excuse but nonetheless I can't state strongly enough that we are making the right investment and we are focusing on the right products for the long haul.

Thanks, and then just one follow-up for Nick. Can you speak to any Japan stimulus impact that you may have experienced? Is that more of an order phenomena or was there any contribution in terms of revenue in the period?

Yes, Brandon, right now it is order noise, primarily. There is probably a little bit of revenue leakage but we are pretty optimistic in what our base is doing there and trying to drive enthusiasm and we are seeing some monies come out of the private sector just because of the enthusiasm of growth. Obviously it's not government money but right now the stimulus in Japan is more noise and order optimism than it is revenue.

Your next question comes from the line of Patrick Newton from Stifel. Please proceed.

I guess, for Bill or Didier. I wanted to drill down on wireless manufacturing, post some of the share shift over the last year. Can you help us understand the revenue contribution that wireless manufacturing is currently within, either communications or EMG ? Then I think earlier you replied to a question that you expect to be a leader in the communication segment but if we dig specifically in the communications and focus on wireless manufacturing, given the entry of two very disruptive competitors, would you expect wireless manufacturing to be a driver of growth over the next few years.

Didier?

Well, let me start with the second question then on the first. The wireless manufacturing business, as we said, has always been very lumpy and depends on a few set of players. We are a player in this environment. We have a platform that is currently winning and now, as we mentioned earlier, we are working on a new generation of platforms that will allow us to compete even stronger in this marketplace. So clearly we keep focusing there. The core element are still an interest of our future going product line is in the R&D sector. We have an extremely strong set of portfolios from software simulations that goes into R&D up to design validation and conformance testing. We will keep timing of upgrading and updating and adding more solutions into this portfolio to really keep playing our role in wireless full ecosystem from R&D to manufacturing.

And on the revenue contribution?

The revenue contribution of wireless manufacturing in Q3 was $92 million of the $701 million.

Perfect, and then I guess Bill, you discussed strength in modular instrumentation in the quarter and you stated that you have to win in modular instrumentation. Can you help us understand just so we can get a sense of what level this strength is coming out of? What is the revenue contribution of modular instrumentation currently taking EMG segment? I guess my perception is that it's very low single-digit percentage contribution. Is that a fair approximation?

You mean margin contribution?

No, revenue.

Well I think we mentioned it in the last earnings call. I mean it's still a small percent but last year it threw $100 million, not counting the software part of it and we mentioned that in the Analyst Day. We continue to grow double-digits and we are spending $70 million a year to win. So we are absolutely committed and Ron has mentioned this many times, we have been in the module business for years but if you put our software efforts together with our module instrumentation, my guess is Ron is getting faster close to 10% of the overall EMG. We are making real progress.

Perfect, and perhaps I guess for Bill or Didier, I maybe reading too much into this but your fourth quarter revenue and earnings guidance range appeared a little bit narrower than the range you provided in past quarters. I assume you interpret for us to mean perhaps you are little bit more comfortable of the stability of the business or conversely could this mean that the tightening of your delivery policy has led to fewer vacillations and deliveries towards the end of the quarter that's given you a little bit more comfort.

Just a lot easier to give guidance when there is only 13 weeks left in the year.

Even on a quarterly basis, that was narrower. I am not talking about the annual guidance.

No, I understand that but we are comfortable with the guidance that we have given, given the backlog and expected ship of board.

Your next question comes from the line of Dan Leonard from Leerink Swann. Please proceed.

Maybe a question for Lars. Lars, I am trying to reconcile over this very positive commentary on Dako with some of the proposed reimbursement cuts here in the U.S. in segments it looks like it might effect to you, like station, special scanning and what have you. Could you address how you are thinking about potential cuts with your mix of the business and the opportunity going forward?

Yes, well I see that. Obviously, we are very well aware about guideline changes and potentially reimbursement changes that might be impact our businesses overall. I think if I step back, it will get, our overall position in the U.S. market in terms of kind of (inaudible) industry and the FISH business. We are starting from a fairly low position. So, if I were sitting on a market share with just 65%, 70% for FISH or ISH or IC, I will probably have couple of sleepless nights but then we start literally from a low single digit market share position in the FISH business and a relatively low on IC, I still feel this is incremental upside for us going forward, given the fact that we are now going to penetrate this segment. So, it depends on who you talk to here. If you talk to some of our competitors, I think they have a considerable different exposure then the Dako organization has.

Got it, that's helpful, thank you. Then my follow-up question for whoever wants to take it. We are nearly six months now since you shined a brighter light on your efforts to improve NMR. I am wondering if you could offer more color on the progress in those efforts?

Thanks for the question, Dan. We continue to slog through NMR. If you recall, the challenge here is really to reformat the business. We have done quite a bit of that then to reframe the manufacturing, that process is pretty much complete. Then to launch new technologies and we are in that cycle now, so we have got technologies flowing out now that utilize our electronics capabilities in the core platform. We continue to evolve and we are going to disseminate that further and further across the product line and we have also refocused the business away from the academic sector and more heavily towards the industrial sector and that's just a reflection of macroeconomic, so work in progress and we continue to slog through. It's not a pretty picture, but we are on track to what we showed you when we were in New York.

Your next question comes from the line of Isaac Ro from Goldman Sachs. Please proceed.

Thanks, guys. Good afternoon. First one was on China. You guys didn't touch on it a bit in your prepared comments, but I was wondering if you would give us a sense of the bigger in terms of how orders trended throughout the quarter and then maybe put that in context with what we saw in China regarding credit conditions and just general capital spending. Clearly long-term secular growth opportunity, but still little choppy in China for the back half of this calendar year, so any color there would be helpful. Thank you.

In terms of China, I mean, the story for China for us is LDA. Mike, why don't you talk a little bit about I mean, a lot of it was on the applied side and so course if Nick has any comments moving forward. On electronic side, of course is dominated by depending on who the big players are that we want and what not, but really the story in China is on the LDA side, so Mike why don't you give some color on your China business last quarter?

Sure, Bill. I think this is more than just a quarter story, in fact you may recall some of our previous conversation in prior analyst call where we talked about there been a positive business latter of part of last year with the reformation of the new government and their emphasis on improving the quality of life and China dream that we are very bullish on the prospects for our business in China. In fact, we are now seeing that come into real orders into the business and I think that consistent with that philosophy in terms of the focus on improving the quality of life we are seeing continue to see very significant investments in the food segment as well as environmental testing segment, but also a strong growth in chemical energy as they continue to build out their industrial infrastructure, so we can point to other segments in the applied side being up in China and I think indicative of long-term secular trends that you referred to earlier question. Another question comes up about the impact on possible credit tightening. We have not yet seen that in our business.

This is Nick. Same comments as Mike, the pharma industry pretty strong building out infrastructure. We are pretty insulated. If you look at the macro credit challenges, that's in the housing industry, it's in the consumer products and it's in the factory infrastructure. Pharma factories are getting built up by multinationals as well as government, so that hasn't being impacted. So, we are very bullish on what's going on in China.

Got it. Then just maybe for either Nick or Lars, question on diagnostics. If I put your comments on Dako and then your other genomics tool sort of in context here, can you give us a sense of how much work you think you need to do to build up the franchise going forward? You obviously have a lot of stuff in the pipeline already organically, but just to sort of get that business in critical mass relative to the competition and relative to your other divisions, can you give us a sense of how much work do you think you have to do there?

Lars?

Yes. Let me take that one. It's a good question. Actually I came out of the breakout meeting my team yesterday where you addressed that situation. It's a [great] to be part of Agilent, but all of you can see that we are a small part of Agilent. I think we have the prospects for us, because the market opportunity is certainly there. Obviously, the organic growth play that you see can be either high single-digit up to maybe mid-single-digit, depends on how look at the business. How aggressive you fund it and so forth. This is going to be a transformation of industry and our book and we believe that we have to think big to participate here, because it will continue to consolidate then the fewer is going to get bigger and it's a choice that we make on how we are going to think about that business. Obviously, organic growth rate is going to get us a bit, but in my book we had to look big here and see the opportunities that are ahead. Obviously no commitment on time or any significance of that, but there's a great number of opportunities that we are looking at right now.

Your next question comes from the line of Ross Muken from ISI Group. Please proceed.

Good afternoon, guys. Maybe talk a bit about how the organization responded to some of the cost measure you did. Obviously, it's always tough to adjust workforce et cetera, and so it looks like on the OpEx line and even on the gross margin line, you guys did a really nice job on execution, so maybe just give some comments in and out on how do you feel like the organization responded?

I will give my perspective, because I didn't have to do the work and then I will turn it over to Ron. He did, did the work with the team. Our organization response to task, adversity, reaction to market conditions incredibly well. We know how to do this, we have a very robust management system to ensure that we can execute on a strategy even if it's a tactical one in terms of reducing cost. As Didier alluded to, we are right on track and the team has executed and we have done it in such a way that the employees impacted were treated fairly respectfully. Again, we continue to ensure that they can hopefully do everything we can that they can land on their feet. But, from my view point, I think the execution has been excellent. Ron?

We have a very smart, well educated work force and they understand how their job is to provide shareholder value. So, as we have seen this economic situation, they understood what we were doing and we have seen great support. All of the functions that we are involved managed to go through this and it's going very smooth. It's very difficult to see some of the reductions, but on the other hand everybody get it and I am very pleased with the progress.

Your next question comes from the line of Doug Schenkel from Cowen & Company. Please proceed. Doug Schenkel - Cowen & Company: Good afternoon. Really just I think three quick clean up questions. First, Didier, could you provide assumptions for fiscal Q4 operating margin by segment, at least what you have incorporated into guidance? Second, I guess for either Guy or Didier. I just want to confirm that there is no tail to the large, I guess, $230 million order loss beyond fiscal Q4. This was obviously a multi-quarter headwind for EMG this year and I just want to confirm that. This was attributable to only one account loss and that this is essentially a discrete one-time dynamic that will be behind you after this quarter. Then third, Nick, earlier you spoke about the book-to-bill in LSG coming up a bit light of your expectations, yet it just seems like that you guided LSG revenue growth in Q4 to levels that are least in line if not maybe above Street expectation, so I was just curious if you would talk about whether not you saw some strength in ordering patterns maybe early in the quarter? Thank you.

Hi, Doug, I will take the first question regarding operating margin in line with the guidance for Q4 for EMG and LDA. It's about the same, both of them slightly North of 19% for the both EMG and LDA. Obviously slightly above 19% for Agilent, overall at mid-point.

The question on tail of the order, we got some orders in Q1 that we shipped in shipped in Q2, so there's is going to be tail, but far smaller than what we had as compared so far Doug Schenkel - Cowen & Company: So the analyst should assume that after Q4, there will be a normal order shipment pattern?

Yes.

Then Doug to your question, we did have a rising trend of orders across the quarter, so that's the first part of your question. Then in Q4, we have got a little bit of an easy compare as well, so that's why you see the kind of guidance we get so we think we are pretty sound there.

Your next question comes from line of Amit Bhalla from Citigroup. Please proceed.

Hi. This is actually (Inaudible) for Amit today. Nick, I had one to start for you. In the pharma business, can you make any comments on what you saw in the early stage discovery business there?

Not sure I understand the question. You mean in terms of what they are ordering or what the pattern is?

Yes, I mean just how did they fare during the quarter? What did you see coming from that side of the business?

Yes, so what we are seeing in early stage discovery, that's where we see most of the technology stuff. So most of the technology upgrade because what they are doing in early stages discovery across the whole therapeutic sector is biologic. So that's a big driver from mass spec and it's a big driver for our biologically compatible LC, not to mention our general UHPLC product. So that has been a pretty strong sector. That was probably the leading piece of the pharma portfolio.

Okay, and then just overall on Europe, was there anything there that set out? I know it was weak in the quarter but any end markets in particular that were stronger than expected

Certainly, within LDA, as I mentioned Europe grew on a core growth basis whereas EMG was down. So that gives you an indication of what markets are and which ones are down.

Okay, and then were there any overall trends in the quarter on the revenue side as far as pacing goes in July and maybe early into August?

In terms of revenue?

Yes. In terms of revenue.

Given that we still have a very high percentage of capital equipment, our revenue always tends to be back-end loaded in the quarter and that's why we continue to report orders because they really are good indication of future business. But we typically ship more in the last month of the quarter than the first. Then of course once we started doing that it lasts for decades.

Your next question comes from line of Tim Evans from Wells Fargo Securities. Please proceed.

Bill, I wanted to ask a question about the overall business mix from the high level from the standpoint of cyclicality versus non-cyclicality. Notwithstanding the work you have done over the past few years to try to reduce the cyclicality of the business, it is still fairly cyclical. So would you anticipate wanting to make any changes, whether it be additions to the portfolio or subtractions from the portfolio to change that going forward or are you happy where it is at this point.

The strategy that we embarked on in 2005 after we spun off our semiconductor business has proved very effective. We will soon have a $4 billion LDA business, not to give a forecast for next year but we are very, very close to that, and the investment we made both organically and inorganically has been exactly what we wanted to do, bring our engineering expertise to be able to expand from our engineering, chemical engineering foundation, the life science and diagnostics moving forward that would be a continued investment that we have. The volatility we have, of course, is in electronic measurement. They have done a superb job of managing the operating margins through what is just inherently a very volatile business. So I believe that we have executed on our strategy and we will continue to focus on growing our LDA business and continue to be a leader in electronic measurement with what is really the highest profits in the industry.

Okay, thanks, and a real quick one for Lars. On the cytogenetics market, you talked about some strength in the array business there. Do you anticipate that that might cannibalize some of the opportunities in the FISH market? I know that was part of the thesis for the Dako acquisition. I am just wondered how this idea of growth in the cytogenetics arrays kind of plays into that outlook?

Well, no. I don't think that there is going to be a large degree of cannibalization, honestly. I think the CDH or arrays plays its role. The FISH is going to be there for preliminary [ph] testing and so far there is still a lot of room for growth for a company like Agilent in the FISH business there nor through an intense competitor. I think it's fair to say that we are making good progress as an organizational developing kind of universal type of probe that's going to fit both, say, around the cyto space as well as the pathology business. So I don't think that that is a trend at all. It's just a great opportunity for a company like Agilent.

Your next question comes from line of Derik de Bruin from Bank of America. Please proceed.

I just wanted to ask a little questions about the academic and government. You have about 7% of the revenues in the quarter from academic and government and that's not the aerospace and defense portion of it. Yet you said you were down about 7% in that market. I am just curious what was that excluding currencies? The reason why I am asking is that you have, relative to you peers, a lot less exposure to some of the academic markets out there. I am just curious as why your business maybe a little bit weaker than maybe some of your peers are reporting? Is there something going on that I am missing.

Derek I will answer the question obviously from life sciences perspective. I don't think there is anything missing. We have a big CapEx in the academic and government. So as we are getting towards the end of fiscal year for the U.S., that's where the big stall and the sequestration is coming. Our exposure is certainly less in aggregate than others but I am not sure that our response was significantly different, if you cut just to the CapEx piece.

I think that's just the report. Many of our competitors have lots of consumables, lots through reagents. They are down but they all never be as down typically as much as we do given the bias towards capital investment.

Well. I was just sort of more comparing to like Waters, for example. I mean their number is were a little bit there. But I will take it is more CapEx and more in that sense. On the diagnostic and genomics business, the gross margin in that business has been down year-over-year on all three quarters despite the fact the organic revenue growth has been a lot better than expected in that segment, at least to my model. I guess is that due to product launches, FX? Could you just talk a little bit more about what's going on. Then I guess ultimately where does the gross margin in that business sort of go to?

I will Lars talk about it. We obviously make an huge investments in the business and the mix but as I said very clearly there is full expectations that Lars' business will get to the 20% operating model of the company or higher, moving forward. But Lars, why don't you talk a little bit about the short term investments and what's going on.

Yes, I will still kind of address the root cause to the question. What you have to realize is when Dako comes in basically through a new kind of accounting standard, there is a reclassification from what is the expense lines to the COGS line and COGS line to the expense line and so forth. So there is a one-off distorts that pick to some extent in combination with the genomic basically that's kind of an ongoing operation and it has been there for years. So that's kind of the one-ff phenomenon that's being washed out and fixed out right now. I think what you will see now is fundamentally a quarter or two where we have been sort of weak in terms of a product mix which has been unfavorable. It's been skewed towards a bit more instrumentation than consumables. As you know, we are sourcing our instrumentation literally from OEM providers out there and pay a margin on getting the boxes done for us and so forth. So, as we get more of the Dako on the solution boxes out there, it will drive much more reagents on top of it, we feel that our gross margins are going to creep up north. We don't see a tremendous amount of cost pressure or price pressure in our accounts and our business right now. It's a bit here and there but basically this is still a well behaving industry, the (inaudible) trends comparison and so forth. So I see that gross margins are going to stabilize and even increase with the onset of more FISH business coming on stream for us, which is typically a higher business. So to Bill's point, what he has alluded to, the operating margin today for a group which is 15%, which is a little bit higher on genomics, a little on Dako, I expect it's going to climb pretty high here. We would be onset to more volume of all consumables. So I think it's a long answer, but that's the facts that I see here.

That's very helpful.

Okay. This is Didier. I was going to update, the gross margin for DGG really has stayed fairly constant at 60%. It was 60.8% last year in Q3 and Q3, 59.4% so plus 1% point reduction and Lars really explained why the mix played that and basically it withdrew about 1% from the margins, but it's about the same thing of the opening profits, plus 16.2% last year, 14.6% this year. So again a lot of the mix issues that have been raised by Lars.

And ladies and gentlemen, this will conclude the question-and-answer portion of today's conference. I would now like to turn the call over to Alicia Rodriguez for closing remarks.

Well, we would like to thank everybody for joining us today and certainly if you have any calls, please feel free to call myself or Elena, and have a good day. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation and you may now disconnect. Have a wonderful day.