SAN FRANCISCO — The grande dame of Silicon Valley is putting on her finery and going to market--but to sell, not to buy.
Palo Alto-based Hewlett-Packard Co., one of the valley's founding companies, will offer a stake in its test and measurement division to the public as soon as next week.
The stock sale is a giant step for historically slow-moving HP, which is parting with a unit that combines the company's first products with some of its most forward-looking.
The new company, which HP recently dubbed Agilent Technologies Inc., could raise nearly $1.3 billion in the stock sale, though the net proceeds will be paid to HP.
HP also intends to keep 87% of Agilent for now. It will distribute that stake to HP shareholders by the middle of next year.
The 57-million-share offering, expected to be priced at $19 to $22 a share, could give Agilent a total market value of about $10 billion.
It is one of the largest tech IPOs since 1996, when AT&T Corp. sold off a stake in its Lucent Technologies Inc. equipment-manufacturing arm, raising $3 billion.
Lucent shares have risen sevenfold since then, and HP is hoping for a similar payoff by liberating its most sophisticated creators of intellectual property from the bindings of a bureaucratic giant yoked to corporate and consumer demand for printers and computers.
"You've got scientists who crank out 80 patents a year that have just had it with the guys who are trying to get a printer to print red in the middle of a sentence," said an Agilent contractor who asked not to be named. "Agilent has to get out from the HP culture."
While Lucent, close to a pure telecom equipment play, was a home run for AT&T, the story of Agilent--which will trade under the prestige ticker symbol "A" on the New York Stock Exchange--is more complicated.
As outlined in HP's Securities and Exchange Commission filings, as well as in the "road show" for institutional investors in Europe last week and the U.S. this week by deal underwriters Morgan Stanley Dean Witter & Co. and Goldman Sachs & Co., Agilent has an assortment of barely related businesses, along with a cyclical core that can leave it at the mercy of economic downturns.
The units, which date as far back as HP's start in 1939, generated $7.95 billion in revenue last year, up slightly from $7.79 billion in 1997. But earnings plunged by more than half, to $257 million, or 68 cents a share in 1998, from $543 million, or $1.43 in 1997. (Earnings rebounded somewhat to 96 cents a share in the three quarters ended July 31, compared with 81 cents in the year-earlier period.)
