Keysight Technologies second-quarter orders drop 11%; company to cut expenses by $25M

SANTA ROSA - In its fiscal second quarter as an independent company, Keysight Technologies held revenue steady at $740 million compared to the same quarter last year but saw orders drop by 11 percent from $782 million to $697 million.

Keysight (NYSE: KEYS), which reported second-quarter earnings Tuesday, earned 70 cents a share. The company plans to reduce costs by $25 million over the next two years, in part by offering bonuses to longtime employees as an enticement to retire, and by closing the company’s defined-benefit plan to new entrants.

The $85 million drop in orders year-over-year was due to three factors: currency shifts, Russia and nonrecurring large orders. About $23 million of the order decline was due to currency shifts.

About $15 million was due to a falloff in orders from Russia. Sales there have declined nearly 40 percent, according to Guy Séné, Keysight’s senior vice president of measurement solutions and worldwide sales.

“It’s not zero, compared to last year, but it’s significantly down,” Séné said.

Russia had accounted for about 3 percent of Keysight’s overall revenue. Challenging sales have been sanctions against Russia plus a troubled economy and the decline of the ruble.

“I don’t see it changing,” Séné said.

More than $46 million of the total order drop came from two large deals that were reported in the second quarter of last year that did not recur in this year’s second quarter.

“The drop is significant, but we know clearly where it comes from,” Séné said. “Two large customers” were building capacity at that time. “That’s the significant delta on the order level.”

“Wireless manufacturing was the weakest segment by far,” said Ron Nersesian, Keysight’s president and CEO.

Revenue from Asia, excluding Japan, dropped 14 percent in the second quarter, compared with a year before. China represents the second-largest market for Keysight after the Americas.

Looking forward, Keysight expects third-quarter revenue to drop 10 percent to 16 percent -between $635 million and $675 million.

“The overall economy is mixed,” Séné said, anticipating weakness in the coming quarter. Earnings per share are expected to drop from 70 cents to between 37 cents and 51 cents. “We’d like to take action right away.”

Keysight plans to cut expenses by about $25 million spread over the next two years. Savings will come largely from early-retirement offers to longtime employees, some of whom will be offered a six-month salary bonus for retiring early, according to Séné.

Other savings will come from trimming a defined-benefit health plan for retirees, he said. Employees hired after Aug. 1 will not receive the benefit but will, instead, receive matching contributions to their 401(k) accounts.

Keysight Technologies, a global electronic measurement technology company, had annual revenue of about $2.9 billion in fiscal year 2014. In November, Keysight declared its independence from former parent Agilent Technologies. The last remaining connection between the two companies, an agreement for information technology support, concluded during the second quarter.