Good day, ladies and gentlemen, and welcome to the Agilent Technologies Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded. 1’d like to hand the conference over to Alicia Rodriguez, Vice President of Investor Relations. Ma’am, please go ahead.

Thank you, Karen, and welcome everyone to Agilent’s fourth quarter conference call for fiscal year 2013. With me are Bill Sullivan, as well as President and CEO; Ron Nersesian, CEO-Designate of the Electronic Measurement Company and Didier Hirsch, Agilent Senior Vice President and CFO. Joining in the Q&A after Didier's comments will be the President of our Chemical Analysis, and Life Sciences and Diagnostics group, Mike McMullen and Lars Holmkvist. Also joining from the Electronic Measurement Business will be Neil Dougherty, CFO-Designate and Guy Séné, Senior Vice President of R&D, Sales and Marketing. I’d like to remind you that starting this quarter, we’ve reporting three segments; Electronic Measurement, Chemical Analysis and Life Sciences and diagnostics. The formation of the Life Sciences and Diagnostics segment was announced September 19th and represents the combination of Agilent former Life Sciences and Diagnostics and Genomics Group. 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. Today’s comments by Bill, Ron, and Didier 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. And now, I’d like to turn the call over to Bill.

Thanks, Alicia, and hello everyone. Today Agilent reported fourth quarter orders of $1.83 billion, an increase of 4% over last year.Q4 revenues of $1.72 billion were down 3%. Adjusted net income was $271 million or $0.81 per share. We exceeded EPS guidance, despite challenges itself for our markets due to an ongoing period of economic uncertainty. We continue to benefit from the commitment to manage expenses and reduce manufacturing costs. On September 19th, we announced our intention to separate Agilent into two publicly traded standalone companies. The electronic measurement business will be spun-off to form a new company under the leadership of Ron Nersesian. The life sciences and diagnostics and applied market businesses will continue as Agilent under my leadership. Didier Hirsch, will continue as Agilent’s CFO. As we noted at the time of the announcement, Agilent has evolved into two distinct investment and business opportunities. We believe this separation will unlock value for our shareholders in both the short and long-term. We are creating two separate and strategically focused enterprises, each one better able to concentrate on the opportunities in its perspective markets and industries. We continue to make excellent progress in preparing for the split of the Company. Later in the first fiscal quarter, we plan to announce the name of the new Electronic Measurement Company. By August of 2014, the new Electronic Measurement Company is expected to operate independently as a fully owned subsidiary of Agilent. The separation is expected to occur to a tax-free pro-rata, spin-off of the new Electronic Measurement Company to Agilent shareholders. We expect the separation to be completed in early November 2014, at which time the shares of the new Electronic Measurement Company will be distributed pro-rata to Agilent shareholders of record. Throughout the separation process, both companies will continue to focus…

Thank you, Bill, and hello everyone. For the fourth quarter, the Electronic Measurement Group reported orders of $742 million, down 2% year-over-year. EMG revenues declined 14% in the quarter, to $705 million. This represents a book-to-bill of 1.05 driven by relative order strength in Europe and early positive signals from semiconductor test markets. EMG also had its highest ever orders for real-time oscilloscopes in the fourth quarter. While revenues were down, EMG delivered 19% operating margins for Q4 reflecting excellent gross margin management, tight expense controls and an increasing flexible operating model aligned with the requirements of changing global market conditions. For the full year, EM revenues were $2.9 billion with an operating margin of 19%. Taking a closer look at EM markets for the quarter, industrial, computers and semiconductor revenues declined 10% year-over-year but as I have already mentioned, our orders reflected positive signals from the semiconductor test markets. Aerospace and defense revenues declined 11% year-over-year versus a tough compare in Q4 '12 which included a surge in U.S. demand in advance of sequestration budget reductions. Q4 '13 aerospace and defense revenues were lower year-over-year in the U.S. and Asia and were partially offset by strength in Europe. Communication revenues were down 19% in the fourth quarter and down 5% adjusting for nonrecurring business from the wireless manufacturing customer that we discussed in our Q2 earnings call. EMG continues to make a significant investment in modular instrumentation and recently introduced two new modular communication test solutions. In Q4 we introduced a PXI vector signal analyzer aimed at wireless validation and testing. And earlier this week, we launched our next-generation wireless manufacturing test solution offering our fastest and most accurate parallel device testing capability for a leading-edge wireless LAN and cellular technologies such as 802.11ac and LTE-Advanced. Sales of our…

Thank you, Ron. Hello, everyone. Bill and Ron have already reported on this quarter's better than expected results in terms of orders, revenues and profits. Please note that Q4 core revenue growth by segment and by geography is reported in the slide deck posted in our website. This quarter, currency subtracted about 1.5 percentage point from our revenue growth and acquisitions had no material impact. I'll turn directly to the guidance for fiscal year 2014. Our fiscal year '14 revenue guidance of $6.95 billion to $7.15 billion assumes the economy will pick up moderately in the first half of our fiscal year and gain more steam in the second half. At midpoint, our year-over-year growth will be 4% both as reported and on a core basis. The midpoint of our $0.03 to $3.33 EPS guidance translates into a 10% year-over-year gain. As you update your models for fiscal year '14, please consider the following. Annual salary increases will be effective December 1, 2013. Stock-based compensation will be about $99 million for the full year compared to $85 million in fiscal year '13. And as we frontload the recognition of stock-based compensation, the Q1 expense will be about $38 million. Depreciation is projected to be $200 million for the fiscal year. Net interest expense is forecasted at $109 million and other income at $7 million. The non-GAAP effective tax rate is assumed to remain at 16% and the diluted share count at 336 million shares. We expect operating cash flow of $1.2 billion and capital expenditures of $250 million. Both numbers reflect one-time and pre-separation expenses of $100 million and separation-related capital expenditures of $50 million. And the one-time and pre-separation expenses of $100 million will be in pro forma. We will start recording cost dissynergies only after the planned separation, i.e. in fiscal year '15. Finally, moving to the guidance for our first quarter. We expect Q1 revenues of $1.68 billion to $1.70 billion and EPS of $0.65 to $0.67. At midpoint revenue will grow 1% year-over-year and grow 2% on a core basis. As a reminder, we typically see EPS decline materially from Q4 to Q1 because of the impact of the December salary increase, frontloading of stock-based compensation and the increase in payroll taxes due to the disbursement of the variable incentive pay of the previous semester. Also, I want to note that this year's Chinese New Year begins on January 31, 2014 and therefore we expect little activity in Asia in the last week of our first quarter. With that, I'll turn it over to Alicia for the Q&A.

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

Certainly. (Operator Instructions). Our first question comes from the line of Tycho Peterson from JPMorgan.

Hi, guys. Thanks for taking the question. First one for Didier, any updated thoughts on the tax rate for the new companies as we think about the spin?

No. I mean just that as we stated last time directionally, EM will have a lower tax rate than average and the LDA will have – the new Agilent will have a higher tax rate. But we will provide that information when we file the Form 10.

Okay. And then you guys didn't specifically call it to shutdown. Can you just talk to whether that impacted aerospace and defense in the quarter?

I'm sorry. Tycho, could you repeat the question please?

Just whether there was any impact from the shutdown on the aerospace and defense this quarter?

No, there wasn't. We had a lot of scrambling to do in October but we actually recovered fine.

Okay.

Most of the issues were send around, of course, export licensings out of Department of Commerce. Fortunately we had two and a half weeks to get that done.

Okay. And then just last one, on the Omnis platform, can you just talk to some of the early trends? You talked about some of the initial placements, but how should we think about the ramp there for the next couple of quarters and any thoughts on the reimbursement landscape given some of the changes?

Before I turn it over to Lars to answer the question, I do want to put another plug in that the Dako performance in the quarter was outstanding; the first quarter that is 100% organic growth and we are very, very pleased with the overall performance across the board in Dako. So with that, I will turn it over to Lars to answer your questions specifically.

All right. Thanks Tycho for the question. Well, it's a good day at Agilent and Dako obviously. It's a quarter that we have been waiting for, for a long time and working very hard for. So, I am exceedingly pleased to report out the 16% year-on-year growth of the business, and if I break it down basically core pathology grew double digit growth rate. We had growth of our, creating partnership in Companion Diagnostic businesses, basically at the high double digit growth rates both of them. So, we are making good progress. And relative to the market, I would say, it is fair to say that Dako is gaining momentum and also taking share. With regards to comment around Omnis; number one, traction for Omnis from an order perspective is exceedingly strong and we see a strong balance between large accounts from Europe as well as the U.S. now picking up steam. We have still a fairly small amount of commercial placements, but obviously we are ramping them up very quickly. Performance from the customer and the feedback from the customer site is very, very strong. As we all know, this is a workhorse with an unmatched capacity, obviously fully automated and over time it's going to transfer, also processing a large number of FISH slides. This is still to come. So, what we see right now is obviously a system with the first wave of antibodies which comprises the normal immunohistochemistry stems that we are out with. As we move forward into '14 and also '15, it's going to pick up even more steam in terms of the each component of it. So, feedback is good. I would say from an impact point of view, Tycho, this quarter, it's a fairly marginal impact, obviously, a couple of cash deals. I would expect that as we move into '14, the second more, I think more profoundly in the third and the fourth quarter you will see the impact of more of the placement and the impact of the reagents that will, obviously, get up to speed. In terms of the reimbursement, while we still have to see the impact of the reimbursement and the vote will come down on that. I think compared to our competitors out there, I think Dako is going to fare pretty well, because, obviously the penetration that Dako has in the U.S. market is on the low side. So for Dako, I think it's going to be more of an opportunity to really make sure that as consolidation picks up, which we believe will be one of the impact of reimbursement changes and to larger accounts, I think the Dako Omnis as a workhorse is actually going to play very, very nicely in that regard.

Great. Thank you, and congrats on the quarter.

Thank you.

Thanks.

Thank you. And our next question comes from the line of Brandon Couillard from Jefferies.

Thanks. Good afternoon.

Hello.

Didier, could you quantify the incremental restructuring in order fulfillment/supply chain savings that’s baked into the guidance for next year?

Well in terms of the restructuring we are still a little bit over $50 million in an annualized basis knowing that this year will have seen about $10 million on that mostly in Q4. In terms of the order fulfillment benefit, no chance to our previous overall guidance that net-net we should -- the organization should deliver about $40 million to $50 million of incremental savings.

Thanks and then, Bill or Didier the 1Q revenue guidance looks pretty conservative relative to the 4Q order experience being north of $1.8 billion. Is there anything unusual happening in there in terms of a timing dynamic that we should be aware of?

I think as many of you know, and it followed us for a long time. Any time Chinese New Year ends in January or it's in January, the predictability of revenue recognition at the end of the quarter is, it can be quite volatile. As Didier said in the call, because Chinese New Year is right at the very end that lot of Asia will be shutdown in the last week of the month. In addition to that, a lot of customers in preparation for the shutdown won't take acceptance. And so we as some of you know have had difficulty in these January Lunar New Year years, and so we want to make sure that we give a guidance at this point in time we believe that we can meet without having the end of the quarter rush to get the capital equipment installed and in place given the situation in Asia and given how large our Asia business is. So that’s the big delta is the movement of Chinese New Year from Q2 into Q1.

Understood. Thank you.

Thank you. And our next question comes from the line of Daniel Brennan from Morgan Stanley.

Hi, thanks for taking the question and congrats on the quarter. Maybe a few questions on EMG, could just remind us for fiscal ’14 is there any lingering effects from that loss wireless contract?

We still sell some products to that wireless company, but the actual effects as we go into next year become more negligible.

Okay, and then in terms of the 3% growth for EMG in fiscal ’14 certainly an easy comp down ’12, but still noticeable improvement even if you factor out that contracts. So maybe can you let us know kind of how you’re thinking about that 3% maybe give us the build up by segment and what type of, what kind of growth you’re assuming to hit the 3%?

Sure. Well, I can give it to you in a couple of different ways. If you’re looking it from the segment perspective we expect communications to be up 3%, industrial computers and semi to be up 5% and aerospace, defense to be flat. If you take a look at what is some of the reasons for the sign of the turn, one we’re seeing the global economic indicators are up whether you look at PMI for new orders or global manufacturing’s really improved in the last quarter. We have seen our orders from Greater China stabilize in the last quarter. Our European orders were up 14% in Q4 and another leading indicator is the computer and semiconductor orders were up 22% in Q4. Now again now quarter does not make a trend but when you put all of these things together we feel confident with the 3%.

Great. And then maybe I could sneak one more in, I know you mentioned NMR I think you mentioned the new product launch on the call, maybe any early color some of the actions that you are taking there and the kind of profitability improvement you expect to drive there, can you just give us an update on that. Thank you.

Yeah, I can take that question. Well I think it's a little early to say the impact for the new ProPulse as we just unleashed it basically at the beginning of the week. But basically the early customer feedback from the ones that I have seen it is obviously very positive. It's more a footprint and actually lower costs. So theoretically we’re looking at that higher profitability and a shift from the pure Academia-Governmental customers to move pharma and the applied market. But I think the verdict is still out there. We remain very enthusiastic and positive and we obviously expect that we’re going to have an incremental impact revenue and profit wise as we move into ’14 and beyond. Beyond that we also obviously announced that we’re exiting the preclinical MRI business and that’s going to help us to combat some of the profitability issues. As part of that restructuring we will stop taking order and we believe that we have a backlog to ship out which is in the next six months. We are working hard to see how we can advance any shipments of the OEM large scale profitable backlog here to make sure that we actually swing back to profitability a littler earlier than before. I think it's fair to say that back to the overall comment that we made perhaps a year ago that we hope that the NMR is going to be profitable by the exit of ’14. I think we're perhaps a little light on that target a little late. We're working hard to get it fixed. We're going to come back with more precise dates and timings for when we think we’re going to reach the point of profitability. But for the time being we’re not giving any forecast on the timing for that.

Great. Thanks again.

Thank you. And our next question comes from the line of Ross Muken from the ISI Group.

Hi, good afternoon guys and congrats.

Thanks.

So maybe just digging a little more on LDA just in terms of the assumption’s for next year. Could you give a little bit more color on sort of segment core growth and maybe to just touch on the one or two sub-segments within that piece where you feel like there is the greatest sensitivity to the forecast positive or negative.

It's a good question to have, because as you know our performance this quarter was very, very good versus the overall market. And again I have a couple of comment and then turn it over to Mike and Lars to have their own comments moving forward. But if you still, if you look at the overall market that’s growing to 4% to 6% range, there’s no indications from our view point that that’s going to be different. We continue to be excited in the opportunities obviously in the diagnostics area, pharmaceutical we’re doing exceedingly well and we continue to do very, very well in food and energy. Coupled with that is our commitment to have technology leadership across the laboratory. We continue to make huge investments in leadership in products. We have made huge investments to dramatically improve our overall infrastructure of software and data collection. And so as I said in my comments, we're actually quite pleased and comfortable with the outlook moving forward. And I believe we continued the momentum, simplified the company, the combination of our old LSG business with Lars' previous group, the coordination between Mike and Lars I feel very, very good as we move in 2014. But let me turn it over to Mike to give us some commentary in applied side and then have Lars comment on the Life Sciences and Diagnostics side.

Yes. Thanks, Bill. And building on your commentary we're also very pleased on the results on the Chemical Analysis side of the business. And as we look forward to FY '14, we're expecting continued strength in areas such as the food market we've talked about in the past, a gradually improving energy market and you saw some of the numbers we put up for this past quarter. Geographically, China remains an area of strength along with the other emerging economies and we were quite pleased with our performance in Europe as well where we clearly outperformed the competition in terms of our growth rates. In the new product that we've been talking to you about over the last several quarters have an impact on our growth and a major reason why we were able to outgrow the competition this quarter and we see continuation of that trend happening in FY '14. However, we have a level of caution when we think about FY '14 because there are still signs out in the marketplace particularly in the United States where the government spending remains quite weak. And to your question about the sensitivity for the forecast really is – really started to see that steam movement in the replacement market in some of our more mature geographies, but really quite optimistic about our ability to grow above market, independent of what the market conditions look like in FY '14. And with that I think I'll turn it over to Lars.

All right. Thank you, Mike. Just a few comments around some of the end market segments for us. I mean we saw from LDA robust growth in the pharma up to the tune of 10% year-on-year and that's obviously a strong rebound versus what they had reported out before. I think it's fair to say that the pharma R&D spend is still under pressure or down versus prior years, I mean to the tune of somewhere between 1% and 2% in '13. According to forecast we expect to see a rebound of pharma spend in the coming years, in four, five years going forward not to a drastic level but certainly turning the needle and that's going to be obviously accretive, we believe, to our business. So the impact we have seen so far on basically two quarters of strong pharma performance from Agilent that would indicate that we are probably gaining share here from competition. Obviously other drivers at more of a positive outlook going forward for pharma is the off-shoring and the retooling that comes out of that as well as the investment in the biologic entities that we are seeing right there. In terms of academic and government segment, we had a good performance. We grew our business 6%. The market is still very tough. I mean the sequestration impacted in our business in the U.S. market is palpable, basically funding is down. We don't think that that's going to ease upon us going forward. Perhaps there will be pockets of opportunities as we move through '14. But certainly in our forecast we have basically said that the impact of the sequestration is going to be there, not year-over-year getting worst but basically it's not going to pick up any time soon. So that's one of the forecast that we have gone in. Diagnostic is rebounding and this is after a good four to five quarters of fairly depressed markets driven from some of the, call it slide recommendation changes in the U.S. with no negative control slides, pricing pressure and so forth. We are now annualizing out of that and coming out of it and then I think the indication of the next – last couple of months will tell us that the market is rebounding for what's a good solid organic growth rate somewhere between 8% to 10% and that's our forecast going into it. We know the unknown is obviously the impact of the potential change of reimbursement in the U.S. and that's something we have to factor in when it comes, but fundamentally the business is recovering and we believe that's going to continue to be fairly strong going forward.

Great. Thanks, guys. That's was tremendous color. And maybe quickly just on EMG, where are we can you just remind us on sort of China base station and with the tail there in terms of handsets, just from a timing standpoint?

Sure. With regards to China Mobile they've rolled out their 207,000 base stations for TD-LTE was awarded to eight different companies, about half of it was given to Huawei and ZTE. We had talked about the $30 million or $35 million potential and most of that is in-house right now. What we see for a larger potential in the long term is the 4G build out in China and that affects everything from base stations to chipsets to handsets in R&D and manufacturing. So that's where we will be focusing now that we have captured the base station rollout from China Mobile, at least a 207,000 wave.

All right, thank you very much.

Thank you. Our next question comes from the line of Jon Groberg from Macquarie. Mr. Groberg, your line is open. Please check your mute button.

Can you hear me okay?

Now, Jon. Okay.

Sorry about that. I think I hit the mute but I didn't. So I just figure a picture question for Bill or Ron. Ever since you made the announcement internally about the split up of the company, I know you talked about some additional restructuring and some other costs, but maybe just talk about – you've spoken with employees, what the general reaction is then and how you think this is really going to benefit the firm going forward being the two separate entities?

I will make a comment on the LDA side and then turn it over to Ron from the EMG side. But again, we've done a fair amount of surveying on how the employees have seen this and I believe universally they fully understand it. I think that the LDA team is very much engaged. We took the opportunity to simplify the company, expanding Lars' leadership and again that is going exceedingly well. And of course Mike's business, Chemical Analysis has been rock of the company ever since we separated from HP. So I think from a business orientation, we will not skip a beat. You can see that in this first quarter after the announcement, the performance has been outstanding and people are very, very energized to be focused on what it seen from the outside world is a health care company as part of the S&P 500. So we're very pleased. All of the corporate team of course is engaged in the separation. We're focusing on making this separation as efficiently as we can, as cost effectively as we can and minimize long-term dissynergies as we go forward. And early part of next year, employees will know where their final home is going to be but what's good about the corporate, because we are doing most of the work ourselves, all the employees or most of the employees are going to be able to find homes in either one of the two companies. And so that's going very, very well. But clearly the excitement of Santa Rosa, California have a new huge company up there is lots of excitement on Ron's side. I'll have Ron talk about what the view is for him what was once the original Hewlett-Packard.

We've had the whole management staff go around the globe to all the major sites for EMG and the response has been universally outstanding. People are very, very excited. These are folks that are in the EM group that have spent most of their life to actually working to try to not only maintain the number one position, but to actually go ahead and differentiate us further. The focus on the Electronic Measurement customer and markets and being able to make sure that we deliver solid profitability but we also invest in the business where there's a good return on invested capital has everybody very, very excited. I couldn't be happier.

Okay, great. Thanks. And then just one follow-up for Lars. The 16% growth, it sounds like your forecast is more in the high single digit range. Is there anything in this quarter that we're going to come back and look at that seems a little one-time-ish in nature or you comp from a year ago? I'm just trying to put that in context.

It's a good question. There is always a perfect quarter where everything hits and that was certainly the case for Dako at this point in time. I'd like to draw your attention that one of our businesses, namely the reagent partnership is concentrated around larger events and larger orders that typically accumulate in or around every quarter or if you're not lucky, maybe every second quarter. So from a compare point of view, I think you got to be a little careful with that component. That growth rate for reagent partnership that we have highlighted here is something that won’t repeat during the coming quarter. Back to the core histology, core pathology business, I think that’s a fair one because it’s a run rate business. It wasn’t driven by a lot of new instrumentation placement. It was really more the impact of the teams getting more season and driving more content and consumables on to the platforms. The companion diagnostic business is a business growing rapid for us right now and I believe that’s fair to say that we believe that, that’s going to continue going forward. But the component of the [ph] reagent partnership is something that you got to be a little careful with to analyze.

Thanks.

And our next question comes from the line of Doug Schenkel from Cowen and Company.

Hi. Good afternoon. Can you hear me okay?

Yes, we can.

Okay. Thank you for taking the question. So my first one is you did indicate that you had a strong growth in the quarter within pharma -- within placements and upgrades within the pharmaceutical end market. Could you just be a bit more specific on growth by product class, including specifically Mass Spec and LC in general and also specifically where upgrade activity was most notable?

Yes, go ahead Lars.

Yes, I can take that. I think may be not to give you too much color on it, but its fair to say that the -- obviously top of the line in terms of our revenue growth was on our LC business and in particularly the high-end of the LCs where we saw close to a double-digit growth rate for the quarter and that’s very, very encouraging news given the composition we have and also how we compete in that regard. The good news in the quarter is also that we start to see perhaps a bit of a backswing on the LC/MS. We had a turnaround to quarter where we’ve got back to a positive order growth and that’s basically compared to what we had in Q3, that we had a tough year comparison. So I think there will be some sign saying that as a business we’re probably faring a little bit better. Again, I want to caution you to say that obviously the market is still tough and we don’t expect to see a quick rebound on the R&D spending, but there are indications here that we’re gaining share both from our LCs and LC/MS.

Okay. That is really interesting and helpful. My second question is, I guess, its fair to say as usual that a decent amount of growth is been derived across Life Sciences and Chemical Analysis from emerging markets, that’s not all -- that’s surprising, but it seems possibly notable that others in the group have talked a little bit more about seemingly disproportional pick up and demand from areas of Southeast Asia beyond China and also about a similar pick up in demand from South American markets. Can you talk about whether you’re seeing any of this in your businesses and to the extent that you’re, especially all attributable to maybe a favorable or more expensive commercial reach in some of these markets relative to companies competing in key instrument areas across your business? Thank you.

Yes, again we had a -- Russia was about 22%, China 40%, India 9%, Brazil for us was up about 5%, Europe was actually quite strong and again on the LDA space with 13% growth. So again for us I think we’re experiencing similar activities and again we’ve enormous investment in capitalizing the -- in emerging markets, in BRIC companies and I think we just continue to demonstrate our ability to compete.

Great. Thanks again.

Yes.

Thank you. And our next question comes from the line of Isaac Ro from Goldman Sachs.

Good afternoon, guys. Thanks a bunch. I want to follow-up on the previous question regarding BioPharma strength. I’m just wondering if you could characterize for us why it is you guys are taking share at the high-end. As I recall you don't have a ton in the way of super new product cycle there. I’m wondering maybe if there is something in the chemistry side that’s helping you succeed maybe there is a customer specific dynamic. I know you guys historically [ph] want the CRO industry within the drug companies. I’m just wondering you comment a little bit on the complexion of the share gains you’re having?

Yes, I think we have an indication that we’re gaining share here. Let’s give us another quarter or two to really come back and verify that. But certainly we see it, a turn in the -- of the corner here. And you’re right, I mean, it’s not that we’ve introduced a number of new technologies or programs. They’re going to come, rest assured and obviously we’ve pre-announced something very exciting that’s going to hit early in ’14 and that has obviously rendered a lot of attention. But I think what we have fundamentally done during the last 24 months, we have fixed what has been an odd and unusual thing in the life of Agilent and this is a quality should that we had on some of our Mass specs and I think that we have rapidly now -- obviously improved the performance of our systems and obviously as a consequence of that we have gotten back to a number of customers that now really recognize the old Agilent again. So I think this is a journey of many, many small steps here. But its really attributed to the fact that we have fixed the quality things and I think its also fair to say that in some of the key geographies whereas we’re now back in momentum again in, especially in China where the team now is gaining traction being trained, I mean this is a new team during the last 24 months or 18 months and they’re back in business and I think this just building more credibility for us again. And having this foundation, I think it’s going to be important for us as we move forward and early in ’14 now, we start to introduce some of the new products that the market is eagerly waiting for the 6560 Q-TOF for example.

That’s very helpful. And then just a follow-up on the business with regards to the Asia region. Wondering if you could comment on the extent [ph] to which you saw benefit from similar funds in Japan. I think there has been some mid singles there, as to whether there is a whole lot of that money to come, whether that’s already happened, just wondering about Japan. And then secondly on China, it seems like most companies are doing pretty well this quarter in the academic markets in China, just want to confirm that’s the case and looking to see if you saw any pockets of improvement on the industrial side of your business away from the EMC -- EMG stuff? Thank you.

Mike may comment about Japan, given he used to work there and then I have Lars to talk a little bit on the follow-on question.

Don’t worry, I got that Bill. So in Japan we actually -- we have the question I think in prior calls. I think we actually started to seeing some moment in the order picture in this most recent quarter as a result of stimulus. So we’ve seen an uptick in the orders, but still not yet seeing in the revenue side, the flipside of that it remains a very constrained private sector marketplace. So I wouldn’t want to have a lot euphoria about the overall growth rates as we move forward in FY14 for Japan. Clearly the stimulus is a help -- has helped, but also keep in mind the currency impact as well, which is really quite considerable in Japan. I think Lars I maybe bounce back over to you talk about the activities in China.

Yes, I will -- I would be happy to. Actually China is faring very strong for us and I think that’s probably true for many companies, in academia, in the clinical space as well as in diagnostics. There is a substantial amount of money that goes into still infrastructure investment and tooling up and we see a very very strong robust demand for most of our technologies in life science. If I look at the Mass Spec business, the growth rate than we have now coupled with the new team that is gaining momentum and been warming the shoes now for 18 months is looking very good. Our Dako pathology business is basically growing at very sizable double-digit growth rates. It's fair to say that the genomic portfolio largely into academia and to some extent into clinical is growing at a very very solid double-digit growth rate. So when it comes to academia and governmental funding, in China, I still think that that's a very very robust business.

Got it. That's very helpful guys. Thank you.

Okay.

Thank you. And our next question comes from the line of Tony Butler from Barclays Capital.

Thank you very much. Lars, I may push back a little bit on the Pharma Biotech growth, I recognize 10% is very solid and certainly up from the 7% growth in the previous quarter. But a number of Pharma companies have really announced -- have already announced some cost-cutting measures that does affect R&D to some degree and I just want to know do you feel comfortable with that statement and you're going to say yes, but do you have information, some idea of backlog that is permeating through your thought process and moreover specifically in the MS side of the business are you taking share at the level of PK or ADME Tox where Danaher’s generally been the incumbent, are you taking share there or is this generally in a -- in the proteomics piece where the Q-TOF side has really been your bread-and-butter. My second question, if I may, really revolves around back to Mike in the environmental forensics business and I’d like to understand given it was flat this quarter, but down in the previous quarter quite handsomely. Is this just an undulation, is this going to bounce around quarter-to-quarter, can we see steady-state? And then finally Ron one for you, could you give us an update on where you are interviewing the new Board members and when that might actually -- that announcement actually come to fruition? I appreciate the time.

Thank you. Lars?

Yes, maybe I start, Tony. I think that's a tough question or a pushback. I might not have all the granularity and the answers to give you here right now, but I think it's fair to say that most of the research out there would indicate that pharma should be turning the corner somewhere in '14 and going between '14 and '18, go back to a positive R&D spend. I'm aware of some of the company announcements that we recently have seen basically would go in a different direction and it's a fairly sizable cutback on staffing as well as spending. But I think it's fair to say that time will tell there. And I'm still optimistic that over a longer cycle, pharma is going to be back to spending. Again, I will have to be a little careful in terms of the share gain here and as I said before, I like to get another quarter or two under my belt before I can really claim that we are gaining share and in what area we are gaining share. But the facts would remain we have two quarters now sequentially of a turn of the business where the growth rate is certainly above what the market is and I don't know what you call that but in my book it would smell like that we are perhaps improving our positions there. But I'd like to come back to that perhaps in the next earnings call, Tony, to qualify it even more.

I appreciate it, Lars.

Hi, Tony. This is Mike. To answer the question around environment forensics, so let's kind of first off take a step back and describe really what's been going on here. It's really a tale of two cities which are in the established more mature geographies, United States and Europe, the government spending story here had a huge impact on constrained spending in the environmental sector as well as the forensics sector. Different story in the emerging countries such as China; in fact I was just down in Brazil last week and they're making major investments in the area of homeland security, in forensic analysis up to the major sporting events they have coming in that country, for example. So the problem has been in terms of the overall growth rate in the sectors that the strength in those countries in the geographies that are highlighted, it has not been enough to offset the weakness we've seen in the other more established markets. It is a silver lining here as we move into FY '14 we'll be going off a lower base relative to the impact from constrained government spending, so I think you can see perhaps a more stable kind of outlook as we move into FY '14.

Thank you, Mike.

And the last question, Tony, that you had with regard to Board members, we'd had very good interest from folks throughout industry and throughout the community to participate on the Board. We're working with the top search firms, so I'm working closely with the Chairman of the Board of Agilent and the Board will be in place in plenty of time before we split off.

Thank you.

Thank you. Our next question comes from the line of Paul Knight from Janney Capital Markets.

Hi. Didier, could you talk about this dissynergy, how much is the 2014 guidance and kind of just refresh us there?

Sure. So the way we will report is most of the expenses that we are incurring in 2014 are really one-time separation costs or the kind of expenses we are incurring to be prepared for the separation. So the $100 million that I talked about, there are of that category and they will be pro forma. We will start incurring dissynergy – we'll start facing dissynergy in 2015, let's say early November of 2014 as we start operating as two separate legal entities, publicly traded. And as Bill mentioned last time, there will be to the tune of $50 million in 2015 and another $50 million in the ongoing two years. We talked about $100 million over three years period of time that start at separation. And before separation, the expenses will be pro forma and they are of the type of either one type or just getting ready for the separation.

And as I said in the last call, this is the ballpark for 2015; $50 million of dissynergy, roughly $20 million to Electronic Measurement, $30 million to Agilent.

Okay. And then Ron on the electronic test side, I think you're claiming your taking share and specifically you think you're taking share in PXI?

Well, overall – sorry, my microphone was off. We're smaller in PXI as we were a relatively new entrant to that market, but our PXI growth was over 40%, our PXI and AXIe growth for the entire year. So we are growing rapidly, gaining great momentum, but we also have a long-way to go.

Okay. And I guess lastly, Soon Chai must be executing on the cost structure of the organization?

Well, Soon Chai and certainly Henrik who is working on the LDA side, absolutely both of them are doing wonders.

Yes. So Soon Chai is focusing 100% on the Electronic Measurement now, with Ron took on the responsibilities of CIO as well as procurement, and then Henrik now has taken over all the responsibility for not only instrument manufacturing in Agilent but also for all of the reagent manufacturing. So again, we're really simplifying, trying to leverage expertise across the organization and they will not drop dollar in terms from the handoff from Soon Chai to Henrik to drive the $100 million improvement in manufacturing costs, $40 million of it is again targeted – in part of our 2014 plan.

Okay, thank you.

Thank you. Our next question comes from the line of Dan Arias from UBS.

Good afternoon, guys. Thank you. Mike, I wanted to ask about pricing in the GC/MS market; some new product introduction there, one-time new competitor maybe targeting a lower price points. So is there any ASP change in the market there at all?

Hi, Dan. Thanks for the question. So relative to the GC/MS overall business, I think we've highlighted in previous calls that we had seen a level of pricing pressure and discounting there. So two things have happened that actually put us in a very strong position. First of all, overall we've seen stabilization return to the market. So our pricing and discount levels were very consistent with prior quarters. But as I mentioned, we're really starting to see the impact of the new product introduction. So you may recall we introduced 5977 MSD product which actually won Product of the Year award at a recent Gulf Coast event and we're seeing our ASPs on those products as well as new introduction of our triple-quad really puts us in a strong pricing position. So we've been able to hold our own in these markets. It's a very competitive market. And as an acknowledged leader in this space, we are often the target but as we continue to bring very innovative new products to market coupled with a workflow solutions emphasis, that's really proven to be a strong value proposition to our customers.

Okay. Thanks. And then just Didier, in thinking about next year, can you just clarify or comment, the what if anything is as the potential for having some level of inefficiencies just from the – of close to each other as they want to be there?

We have a really, really tough time hearing you. I don't know if I – could you re-ask the question again please?

Yes, sorry about that. I'm on the cell phone. I was just curious whether you think next year you could actually display – you see some level of inefficiency from the two businesses not being together just given you have talked about there being some benefit from them being next to each other.

So do we see some level of inefficiencies coming from the earlier kind of separation?

Yes.

Well, I wouldn't call it that really inefficiencies there at all. I think we're working extremely effectively to be able to operate the clean separation internally, first, as we all operate under one single roof, which is Agilent as early as August of 2014. But there will be some expenses that we will incur to ensure that we are ready for early November full separation. But so far what we have been able to seize as we are signing employees to either one or the other organization, first they are not moving. They are still keeping the plane flying during all this time. And second, we are saying that we are going to be able to staff both organizations at this point in time without adding additional resources versus what we already have. So, so far it looks very, very good and the incremental resources, if any, will be at much lower level and probably in low cost jurisdictions. So we are comfortable with the guidance we had provided of like $50 million of dissynergies next year, 24 EM and then 34 LDA, and none before.

And again coupled with that is that we are taking the opportunity in the LDA of the new Agilent is to review every business function in the Company. You've already seen the consolidations we've made in groups. The consolidations that we are making in order fulfillment. And so while we may lose some of the leverage that we have with EM we’re also going to make it up by simplifying the structure of the Company as we move forward. And again really reevaluating every tasks that we have in the businesses. So, I am very, very confident that we are going to minimize any disadvantages and I actually think long-term that we will be able to eliminate all the dissynergies that come about after the launch, actually quite quickly.

Okay, thank you. (Indiscernible) here.

Thank you. Our next question comes from the line of Amit Bhalla from Citi Group.

Thanks. Bill, you mentioned in the past about boosting the LDA business through M&A, I was wondering if you could give us an update on what you’re seeing in terms of the pipeline, timing and size.

Regarding M&A?

Correct.

Yes, as I said in my note and I said last quarter, our focus right now is to drive the organic growth rate above market. We have historically been an organic growth company. We made two very large strategic acquisitions to give us breadth, in terms of inside the lab in entry and to the diagnostics market. I am very, very pleased with both acquisitions to what is brought to the company. Outside of the comments I have made in the past is I wish we had a sequencer that we're very well positioned to compete against anybody in the markets that we have targeted going forward. So our focus this year is all about, as I had noted organic growth rate above market and to drive the margin expansion, and we drive the margin expansion and I have been very clear, we should be above 20% operating profit as we go forward and again we’re targeting mid-point-ish year or this year to be at 19.5% and that’s really what's going to drive our return on invested capital. Return on invested capital in the new Agilent moving forward is going to be around 11%, yet good news is our cost of capital of the new company would be lower but we need to be able to drive that up. And if we can drive this margin expansion we will pick up two additional ROIC points per year. So that is where our focus, we continue to look for technology add on but we’re very, very happy with our exiting portfolio products and as we have indicated it's all hands on deck right now to get this company separated and launch Ron’s team to be just an incredibly competitive company in the outside. So again we have no plans for any type of large acquisition as we stand today.

And a quick follow-up on oscilloscopes, I don’t know if I missed it but, you mentioned the highest order quarter in oscilloscopes this time around, can you just talk about the competitive landscape, did you introduce anything new in the product side, why such a big jump in oscilloscopes? Thanks.

Sure. Our oscilloscope orders as I mentioned in the real time oscilloscopes which is the bulk of oscilloscopes outside of fiber record high. We had double digit growth in scopes overall for the quarter for orders. If you look at the high performance part of the market, we believe and again this is hard to determine because everything is not reported publicly, but all of our intelligence shows us as number one in the market in high performance oscilloscopes and number two in the market overall. So we have done a great job at the high end. And as you look at the mid range as well as the lower end we have exciting things that will be coming. So we’re making great progress across the line but we will be coming out with new exciting things during the next year.

Thanks a lot.

Thank you. Our next question comes from the line of Patrick Newton from Stifel Nicolaus.

Yes, good afternoon. Thank you for taking my questions. I guess one around guidance, if we take a look at your initial annual guidance for fiscal ’12 and ’13, you generally had a lower expectation as the year progressed, and clearly there were macro market dynamics that changed throughout the year. But my question is, as the result of the last two years have you changed your guidance methodology or provided a more conservative outlook for fiscal year ’14 or is your methodology relatively unchanged?

The methodology is relatively unchanged. As Didier said in the call that the big issue’s what is the second half of 2014 going to look like? The conventional wisdom is that we’re going to get some economic growth in the second half which really then will drive the electronic measurement business for Ron. But our methodology is the same. We give the range, the top end of that range of course is the commitment the management team has made and then we downgrade that to make sure that we don’t set false expectations. But we have not changed our basic methodology at all.

Thank you, Bill. And I guess, Ron one for you is, you talked a little bit about modular instrumentation and I believe you said 4% year-over-year growth. Can you help us understand where that stands on a revenue basis and also where wireless manufacturing stands on a revenue basis in the current quarter?

Sure, the overall wireless manufacturing numbers we actually report that for the quarter and for instance it was $124 million for EMG. We do not report it for modular or the sub-segments with regard to revenue in that place. But this new solution that I talked about that we announced earlier this week, this new wireless manufacturing test solution is a modular solution and this modular solution can test Bluetooth, any wireless LAN and any cellular devices up to the absolute latest standard. They are very fast. They could test four devices, up to 32 devices. So they’re extremely competitive and our competitive position is dramatically increasing in that space. So we expect our growth to continue very strongly.

And could that lead to perhaps some share gains in wireless manufacturing?

Yes.

Okay. And then just one clarification, I may have heard this incorrectly, but was guidance for EMG operating margin in Q1 for 15.5%?

Yes.

Can you help me understand that, because guidance revenue is only going down about 2.5% at a mid point, you just put up a 19% margin quarter and you even did a 17.3% on lower revenue in Q1, ’13; so if you could kind of walk us through the bridge there, that would be very helpful.

Yes, let me take that one, but first note that this is a significant improvement from where EM used to be. Even after all of the restructuring that EM has done 2009 basically we say that $600 million in revenue we would reach 2.5% operating margin, now we’re talking 15.5% based on a little bit higher revenue but also after three or four years of inflation and things like that. But the comment that I will make apply not just to EM, but to all of Agilent, and I have probably stated those in my script. We're from Q4 to Q1 for example we’re seeing $20 million increase in stock based composition only because the stock based composition is always the recognition is higher in the first quarter of every fiscal year. We’re also seeing about $9 million increase due to two month of salary increase and then the corresponding adjustment to our vacation accrual which is $6 million. We're seeing about $6 million increase in payroll taxes because we pay in Q1 for example all of the variable take corresponding to the second half of 2013. So you have all those elements that don’t just impact EM and impact all of Agilent and explain why year after, year after, year after year Q1 operating margin and Q1 EPS is significantly lower than Q4. And for the year for EM we had forecasted 19.5% operating margin on 3.2% growth.

Thank you for taking my questions. Good luck.

Sure. Thank you.

Thank you. And our next question comes from the line of Derik de Bruin from Bank of America.

Hi, good afternoon. Can you hear me?

Yes, Derik.

Yes, Derik.

So, a few clear questions. So in 2014, do you need to do any additional R&D catch-up spending or can we still look about 3% growth in R&D?

Could you repeat the question, please?

Well, basically I'm just looking at maybe updating the additional spending in R&D in 2014. Have you been conservative on our R&D spend over the last couple of years given the difficulties of market; do you have to do any additional catch-up spending? Are you still going to be just looking at the level of R&D growth year-over-year?

Yes, I think there were -- at least from my perspective is that I think that some of the R&D slowdown was just because our variable pay had gone down, as a result of the lower performance and lower return on invested capital as a result of the Dako acquisition. But overall, we don't see a fundamental change to our R&D portfolio outside of the stock and salary adjustments that Didier outlined.

Great. And you mentioned some strength in your legacy genomics business. I'm just wondering if you could give a little bit more color on that.

Lars?

In terms of the overall growth rate you mean, happening in the market.

Yes.

Okay, got it. Well, thanks for asking the question. I was just waiting for it. Well, actually it's a couple of things that I want to highlight. The clinical segment, which is obviously gaining importance for genomics growth 12% year-on-year, and actually it's led by what we see the – our aCGH, which is actually trending on pretty nicely. You see a continued penetration of the array into PGD and PGS prenatal testing and cancer diagnostics, so that's very, very well. I think the NimbleGen account conversion has actually hit very, very nicely. So in terms of instrumentation and consumables that are following through that, they've actually hit all the targets and actually believe that we are going to have a nice rollout of that also into '14. The Bioanalyzer business and the TapeStation is tucking on a very, very solid growth rate, double-digit growth rate and obviously this is sold into the next generation sequencing market, gene expression labs and so forth, pharma biotech. So that's fairing very well. I think a question that you ought to ask is obviously what happens with the FISH business. And I'm happy to say that the FISH business in the last quarter grew by 23%, so we are starting to see traction on it albeit from a very small base, but I'd like to draw your attention to a few things which is very, very significant here. We just this week announced or actually today or yesterday announced a couple of new breakaway probes; the ALK, ROS1 and RET which are going to be really, really great tool kits for both the cytogenetic sales force as well as the Dako sales force. On top of it, we're going to market as a standalone product also a fast hybridization buffer that brings down the overall test time from test results from two days, 48 hours to down to a couple of hours or half a day. So from an overall diagnostic capability point of view, this is actually looking very nicely. So overall I think we have gained traction in the overall genomic legacy business and we see a continued growth and expansion of the growth rate also going into '14. Target enrichment which is the sequencing play we have today is fairing along very nicely with the growth rate of 30% value-wise, obviously volume even higher and we expect that to continue. But back to Bill's comment if we one day had a full sequencing solution, that will be even better. So we are obviously hard at work at that.

Okay. Thank you very much for the color.

Thank you. Our final question comes from the line of Dan Leonard from Leerink Swann.

Hi. Good afternoon. This is Justin [ph] on for Dan. Thank you for squeezing me in. Just could you comment on the tenure of academic life science and research budgets in Europe, specifically the western markets and maybe compare that to how it fell versus last year?

I'll give it to Lars, but I have a comment about that. As I have noted in the past, our academic and research has been down for so many quarters in a row we finally had to hit the isotope at the bottom and the good news is this quarter may have been the beginning of at least the positive trend. Lars?

We do see and again I'm cautiously optimistic here because obviously Europe in terms of all the austerity measures are not through the funnel yet. But I do see a couple of more brighter clouds in the skies and these are more investment that goes into government and academia and research. So you see pockets of initiatives whether that is in France or in Spain where you, for the first time in many, many years, actually would see a net increase being communicated for spending in the arena in '14 and beyond. So I still think it's fair to say that Europe still will be a tough market and we won't have a lot of help for new funding. But again, in my book it's not going to get worse. And that by itself is a pretty good use.

Great news. And I know this is just a tiny sliver of that overall portfolio, but just kind of your perspective on the microarray market and is that stabilized? Do you think it's growing again? And then lastly, what was the – I missed the overall growth number in China?

Lars, why don't you go ahead and mention about the microarray.

Yes, I can take the microarray business. Well, obviously if I look and add the various players in the field and I have their report out for the last quarter, it would indicate that basically the total arrays are down, the gene expression arrays are down. The good news here is we are seeing growth actually, not a very strong double digit growth rate but we are holding our line and that would indicate that we are actually holding share pretty nicely and even gaining share. If I look at the last companies reporting either Illumina or Affymetrix, they basically had a rough time. But our business is holding up pretty nicely here.

LDA China growth rate was 14%.

All right, great. Thank you.

Thank you.

Thanks you. And that concludes our question-and-answer session for today. I would like to turn the conference back to Alicia Rodriguez for any concluding remarks.

Thank you, Karen. I just would like to thank everybody for joining us on the call today. Definitely if you have any questions, please give us a call in Investor Relations. Have a good day. Bye-bye.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a good evening.