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At the 2014 Mobile World Congress Ron Nersesian, Executive Vice President, Agilent, President and Chief Executive Officer, Keysight Technologies updated Microwave Journal on how the spin-off of the Electronic Test and Measurement business will be financed, its commitment to customers and its long term aims and objectives.
Nersesian began his career in 1982 with Computer Sciences Corporation as a systems engineer for satellite communications systems. In 1984 he joined Hewlett-Packard and from 1987 through 1996 served in various management roles. In 1996 he joined LeCroy Corporation as vice president of worldwide marketing and corporate officer. He subsequently took on other senior management roles. Nersesian re-joined Agilent in 2002 as vice president and general manager of the company’s Design Validation Division. He was previously vice president and general manager of EMG’s Wireless Business Unit, as well as manager of Agilent’s Santa Rosa Site in California, where he is based. Now CEO and President of Keysight, most recently, Nersesian was COO of Agilent.
MWJ –Explain briefly the ethos of the new company – Keysight Technologies.
RN–Our ethos is that fundamentally, we believe in firsts – that has been part of our DNA ever since the early days of Hewlett & Packard. We have generated many, many solutions for customers over seven and a half decades and it has all been about trying to understand customers’ problems and to unlock the measurement insights to provide the absolute best solution. We have 9,500 employees coming from Agilent to the new Keysight company; our focus is now 100 percent on electronic measurement. We believe our customers will win even more with us going forward because of our new 100 percent focus on electronic measurement and our inherent drive to innovate and be first in the market.
MWJ –In November 2014 Keysight will separate from Agilent and its stock will be distributed. Can you offer an insight into the financial structure of the company, both initially and moving forward.
RN–First, in September 2013 we announced that we would spin off the test and measurement company. In January we made the exciting announcement of our name, Keysight Technologies. In August we will start operating as an independent wholly owned subsidiary of Agilent and in November we will operate as a separate public company. At that point we will have a completely different Board of Directors, a different set of shareholders and we will be trading completely independently on one of the stock exchanges in the United States.
So, the financial structure will be 100 percent independent for Agilent and it will be a completely separate company. Under the new financial structure we will provide a dividend of some fraction of Keysight shares to every Agilent shareholder. Therefore, all Agilent shareholders will receive a tax free dividend of a percentage of Keysight shares.
MWJ –For test & measurement companies investment in R&D is critical. Can Keysight commit to the same scale of investment in R&D as was the case for Agilent and will it be setting aside a percentage of revenue for doing so?
RN–Right now we invest about the same percentage – around 11 percent – as the rest of the industry. However, we invest more dollars than other players of a similar size. Our goal is to grow the company to be the number one player in test and measurement, for a very long time, if not forever. Accordingly, we are going to keep our R&D investments high.
In the past when we have invested money as Agilent we would have split investments for Agilent between healthcare and electronic measurement and before that, between computers and printers. This is the first time that the money that we invest back into the company from the profits of electronic measurement will be invested back into electronic measurement entirely. My goal is to keep that R&D investment as strong or stronger than it currently is.
When asked whether that was a commitment to invest 11 percent or more annually in R&D he commented:
I cannot commit forever to what the Board of Directors might say but our intention is to commit the same percentage, and if we can make healthy improvements in our gross margins we will have more flexibility to increase that investment.
MWJ –The choice of the name, Keysight, is said to demonstrate that the new company will be, ‘insightful and forward looking’, while its tagline is: ‘unlocking measurement insights for 75 years”. As far as your customers are concerned how do you plan to square the circle of legacy and innovation and get the balance right?
RN–As wetransition to Keysight we want customers to understand where we came from, what’s in our culture, what’s in our DNA and that although we are a new legal entity our DNA of innovation is still there. We want people to understand that this is the company that has brought innovation and successfully partnered with customers for many years.
And as a new company with a singular focus on electronic measurement, we will deliver new firsts going forward. Customers will benefit from this healthy balance.
MWJ –Test & measurement is at the forefront of innovation in a variety of sectors. Where do you see the greatest growth – technologically and geographically – for Keysight in the first year after the spin-off?
RN–Technologically, we believe that mobile data traffic will continue to grow for a long, long time – accordingly wireless communications is our top priority. In many areas we have the best solutions in the world, and in others we are focusing intensely on bringing new solutions to the market. After that, the modernisation of aerospace defence is a second key market on which we will focus. We will always serve the industrial computers and semiconductor markets.
We will focus on the wireless solutions and other markets, as I have mentioned but we will do that with multiple formats. So, not only will we be providing feature rich boxes as we have done in the past but we will also be introducing more modular solutions and more handheld solutions to the market place. Plus we will continue to invest in software as we see measurement IP continue to migrate heavily into that area.
When asked about EEsof Nersesian commented:
EEsof will continue as will the name. It is one of the divisions that we have and we will continue to offer that electronic design and simulation software. We will work to tie simulation and measurement closer together as we go forward to create closed-loop measurement systems for our customers. Also, we will provide software to control all types of instrumentation.
Geographically we are committed to staying connected to our customers in our end markets wherever they are. In Europe obviously there is a lot of design. In Asia there is some design but a lot of manufacturing and the US is mostly design oriented. We have transitioned now where roughly 45 percent of our business is in Asia, with approximately 55 percent centred in Europe, and the Americas. When specifically asked about China he stated:
China has exhibited very strong growth for us – it makes up nearly 20 percent of our total business, which is in the range of $600 million.
MWJ –Explain briefly Keysight’s key focus of its participation at Mobile World Congress, particularly any examples that offer an insight into the company’s future developments.
RN–The Mobile World Congress is a major event for our biggest market. We are meeting with key customers and discussing primarily three things.
We are also showing solutions such as our brand new wireless manufacturing test set called EXM. The platform tests all cellular formats, wireless LAN formats, Bluetooth formats and GNSS. Plus our newest, the UXM is a highly integrated signaling test set created for functional and RF design validation in the 4G era and beyond. We’ve leveraged our technology to introduce the EXM and UXM platforms that address distinct needs in manufacturing and R&D.
MWJ –What are the main challenges that you personally and Keysight, as a new company, face with regards to establishing a new identity and moving the company forward?
RN–The first challenge is having people understand that Keysight will provide all the electronic test and measurement needs and services that they are used to getting from Agilent. The second is having them understand that our focus is now solely on electronic measurement and we will partner with them to make our solutions even stronger for them.
When asked how now being a separate electronic measurement business would differ to it being a part of Agilent Nersesian answered:
In the past, sometimes there were opportunities that were very good for electronic measurement but were perhaps not the best options when considering the healthcare business. So, we as Agilent did not invest in some electronic measurement opportunities when the healthcare opportunities had higher returns. Now, the best opportunities we find for electronic measurement are the best opportunities for Keysight.
Now, as a team, whatever we identify as the top investments we will commit to quickly. Now the electronic measurement business is our sole priority; we are 100 percent focused on it, and customers will win because of it.
MWJ –The company that began as an innovator in test and measurement 75 years ago as Hewlett Packard has undergone a number of changes over that period. Can you reassure customers that the latest incarnation as Keysight will offer stability and business security for the foreseeable future?
RN–Keysight is financially strong throughout the business cycle. In 2009/10 we spent a lot of time restructuring so that, regardless of fluctuating economic cycles, we would remain healthy and very strong. We are a multi-billion dollar company that I can assure customers has a 100 percent focus on making sure that we are successful. Our shareholders are behind us; our new shareholders will be too, along with our new Board of Directors.
Remaining financially healthy through the business cycle will enable us to reinvest year after year to bring the best solutions to the market. We are intensely focused on that goal and our current and future customers will reap the reward.
MWJ –Finally, what would you say to an RF/microwave engineer who has been buying Agilent and maybe Hewlett Packard products for many years who may be apprehensive about the change?
RN–The same employees that have provided the management solutions for Agilent’s electronic measurement business are coming to Keysight. As has been the case in the past our aim is to provide technology leadership in the future. So, we are going to take the 9,500 employees who are currently working on electronic measurement in Agilent and, as Keysight, intensely focus them on providing the latest technology to help customers.
For that RF/microwave engineer you are referring to, the contacts will be exactly the same, there are no changes in the sales, service and support organisations. Our divisions remain unaltered – it is the exact same people doing the exact same thing but just with a new name . The change is our new company will be 100 percent focused on electronic measurement and the needs of our customers. It’s all about focus on the industry—and on that RF/microwave engineer that you referred to.
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