10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2004

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-15405

Agilent Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0518772
State or other jurisdiction of Incorporation or organization	I.R.S. Employer Identification No.

Address of principal executive offices: 395 Page Mill Road, Palo Alto, California 94306

Registrant’s telephone number, including area code: (650) 752-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock par value $0.01 per share	New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

The aggregate market value of the registrant’s common equity held by non-affiliates as of April 30, 2004, was approximately $9.436 billion. The aggregate market value of the registrant’s common stock held by non-affiliates as of October 31, 2004 was approximately $9.425 billion. As of October 31, 2004, there were 486,841,087 outstanding shares of common stock, par value $0.01 per share. Shares of stock held by officers, directors and 5 percent or more stockholders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

DOCUMENTS INCORPORATED BY REFERENCE

Document Description	10-K Part
Portions of the Proxy Statement for the Annual Meeting of Stockholders (the “Proxy Statement”) to be held on March 1, 2005, and to be filed pursuant to Regulation 14A within 120 days after registrant’ s fiscal year ended October 31, 2004 are incorporated by reference into Part III of this Report	III

TABLE OF CONTENTS

		Page
PART I
Item 1	Business	3
Item 2	Properties	27
Item 3	Legal Proceedings	28
Item 4	Submission of Matters to a Vote of Security Holders	28
PART II
Item 5	Market for the Registrant’s Common Equity and Related Stockholder Matters	29
Item 6	Selected Financial Data	31
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	68
Item 8	Financial Statements and Supplementary Data	69
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	69
Item 9A	Controls and Procedures	69
Item 9B	Other Information	70
PART III
Item 10	Directors and Executive Officers of the Registrant	71
Item 11	Executive Compensation	71
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
Item 13	Certain Relationships and Related Transactions	71
Item 14	Principal Accountant Fees and Services	71
PART IV
Item 15	Exhibits and Financial Statement Schedules	72
Exhibit Index		116

Visual Studio is a registered trademark of Microsoft Corporation in the United States and/or other countries. Affymetrix is a U.S. registered trademark of Affymetrix, Inc.

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Forward-Looking Statements

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding trends, cyclicality, seasonality and growth in the markets we sell into, our strategic direction, expenditures in research and development, contracts, remediation and indemnification, our future effective tax rate, new product introductions, product pricing, changes to our manufacturing processes, our liquidity position, our ability to generate cash from continuing operations, our image sensor technology and the sale of our camera module business, our expected growth, the potential impact of our adopting new accounting pronouncements, our financial results, revenue generated from international sales, our potential repatriation of earnings, the impact of our enterprise resource planning systems implementation, the impact of our variable cost structure, our obligations under and assumptions about our retirement and post-retirement benefit plans, our lease payment obligations, savings from our restructuring programs and the existence or length of an economic recovery that involve risks and uncertainties. Our actual results could differ from the results contemplated by these forward-looking statements due to certain factors, including those discussed in Item 7 and elsewhere in this report.

PART I

Item 1.    Business

Overview

Agilent Technologies, Inc. (“we”, “Agilent” or “the company”), incorporated in Delaware in May 1999, is a global diversified technology company that provides enabling solutions to markets within the communications, electronics, life sciences and chemical analysis industries. We have four primary businesses:

• test and measurement;

• automated test;

• semiconductor products; and

• life sciences and chemical analysis.

Prior to our initial public offering of 15.9 percent of our stock in November 1999, we were a wholly-owned subsidiary of Hewlett-Packard Company (“Hewlett-Packard”). Hewlett-Packard distributed the remaining 84.1 percent of our stock to its stockholders on June 2, 2000 in the form of a stock dividend.

Our test and measurement, automated test and semiconductor products businesses focus on growth opportunities in the communications and electronics industries, while our life sciences and chemical analysis business focuses on growth opportunities in the life sciences industry and in the environmental, chemical, food and petrochemical industries.

We sell our products primarily through direct sales, but we also utilize distributors, resellers, manufacturer’s representatives, telesales and electronic commerce. Of our total net revenue of $7.2 billion for the fiscal year ended October 31, 2004, we generated 31 percent in the United States (“U.S.”) and 69 percent outside the U.S. As of October 31, 2004, we employed approximately 28,000 people worldwide. Our primary research and development (“R&D”) and manufacturing sites are in California, Colorado, Delaware and Washington in the U.S. and in China, Germany, Japan, Malaysia, Singapore and the United Kingdom.

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Our net revenue by business segment for each of the years ending October 31, 2004, 2003 and 2002 was:

	2004		2003		2002
	(in millions)
Test and Measurement	$	2,903	$	2,529	$	2,612
Automated Test		924		755		706
Semiconductor Products		2,021		1,586		1,559
Life Sciences and Chemical Analysis		1,333		1,186		1,133
Total Net Revenue	$	7,181	$	6,056	$	6,010

More financial information about our business segments is contained in Note 19, “Segment Information,” of the consolidated financial statements included in Item 15 of this report. Hewlett-Packard accounted for approximately 4 percent of our total net revenue for the fiscal year ended October 31, 2004, 5 percent for fiscal year 2003 and 8 percent for fiscal year 2002. These figures include items sold to contract manufacturers who manufacture products on Hewlett-Packard’s behalf.

Test and Measurement Business

Our test and measurement business provides standard and customized solutions that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment and communications networks and services. These solutions include test and measurement instruments and systems, communications services and network monitoring, management and optimization tools, software design tools and related services. Related services include start-up assistance, instrument productivity and application services and instrument calibration and repair. We also offer customization, consulting and optimization services throughout the customer’s product lifecycle.

Our test and measurement business employed approximately 11,200 people as of October 31, 2004. We sell our test and measurement products through direct sales, distributors, resellers, manufacturer’s representatives, telesales and electronic commerce. Our test and measurement business generated $2.9 billion in revenue in fiscal 2004, $2.5 billion in revenue in fiscal 2003 and $2.6 billion in revenue in fiscal 2002.

Test and Measurement Markets

Our test and measurement products compete in two major markets:

• the communications test market; and

• the general purpose test market.

The Communications Test Market

We market our communications test products and services to Network Equipment Manufacturers (“NEMs”) and communications service providers.

NEMs manufacture and sell products to facilitate the transmission of voice and data traffic, including network and subscriber equipment. This transmission may be in various forms, such as electronic signals over copper wire, optical signals over fiber cables and radio frequency (“RF”) or microwave signals. The NEMs’ customers are the distributors of end-user subscriber devices, including cell phones and personal digital assistants (“PDAs”), as well as communications service

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providers that deploy and operate the networks and services. To meet their customers’ demands, NEMs require test and measurement instruments, systems and solutions for the development, production and installation of each network technology.

Communications service providers require reliable network equipment that enables their networks and services to operate at ever-faster speeds, permits an expanding capacity and provides quick feedback. To achieve this, communications service providers require a range of sophisticated test instruments and systems to evaluate network performance and to identify any sources of communications failure.

Agilent’s communications service provider customers require advanced software and systems, known as operations support systems (“OSSs”), to monitor and manage the network infrastructure and services on a continuous, proactive basis to achieve either regulated or customer-specified service levels. Real-time monitoring of the network infrastructure also enables the implementation of additional services, such as fraud detection and intercarrier billing, which enable service providers to capture the greatest revenue from network usage.

The overall market for cellular mobility, specifically in handsets, grew in recent years as the levels of wireless penetration in developed countries have increased. Wireless communications in emerging economies continues to increase. To advance cellular telephone equipment, manufacturers require electronic design automation software, test instruments and systems for the development of wireless devices, high-frequency communications circuits and systems. Cellular equipment manufacturers also require advanced, high-frequency test instruments and systems to develop, manufacture and deploy cellular base stations for these wireless networks. In addition, the rapid expansion of the cellular handset market, coupled with subscriber turnover created by the introduction of new technologies, has fueled growth for automated test equipment to test cellular handsets on the factory floor. Investments continue for advanced R&D verification solutions for 2.5 generation (“G”) and 3G appliance development and network deployment as the demand for complex wireless data networks increases.

Further, as new standards evolve in the wireless industry, new test and measurement equipment and systems have to be developed to enable testing of the new standards in the research, design and development and later in the manufacturing and deployment phases. An example of this is wireless fidelity (“Wi-Fi”), also called 802.11, for wireless local area networking. Companies are constantly finding applications for wireless technology, and are providing their customers wireless network access in areas called “hot spots,” such as airports, coffee shops and libraries. As the adoption of these new standards becomes mainstream, additional markets are emerging, including larger companies and their network operators. The use of wireless test and measurement solutions is quickly being adopted by these larger companies to ensure robust quality of service.

In the last several years, producers of networking communications equipment have increased their use of contract manufacturers. Contract manufacturers require test solutions that are designed for faster production and for use in different applications. Mobile phone and other appliance producers are also increasing their use of contract manufacturers, original design manufacturers and reference design platforms, including using contract manufacturers for functional test. This requires specialized test products and services to address the particular needs of these high-frequency products.

The General Purpose Test Market

We market our general purpose test products and services to the electronics industry. The electronics industry designs, develops and manufactures a wide range of products, including those

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produced in high volumes, such as computers, computer peripherals, electronic components, consumer electronics, enterprise servers, storage networks and communications devices including PDAs. The components, printed circuit assemblies and functional devices for these products may be designed, developed and manufactured by electronic components companies, by original equipment manufacturers or by contract manufacturers. For the development and timely commercialization of new technologies, manufacturers require state-of-the-art test instruments, systems and software design tools in order to design products for efficient and cost-effective manufacturing and to validate product performance in a variety of configurations and environments. Manufacturers of electronics products require sophisticated test equipment to operate and perform highly accurate tests from design through manufacturing. They also demand automated functional test systems, which test an electronic device as if it were in use in its final environment. Finally, electronics manufacturers require standardized test instruments, system components and complete solutions.

We also market our general purpose test products to the aerospace and defense industry. Aerospace and defense is an important market for standardized electronic equipment because of the high electronic content of advanced defense systems and defense-related communications and surveillance equipment. We believe that defense purchasers will continue to shift from specialized test equipment to commercial off-the-shelf test products and systems and will continue to require solutions that optimize asset utilization and effective technology lifecycle management.

Test and Measurement Products

Our test and measurement business designs, develops and manufactures test and measurement products and services that range from single-unit electronic measurement devices priced under $1,000 to large scale test systems or OSS solutions priced at $1 million and higher. We divide our test and measurement products into two groups: (1) communications test products and (2) general purpose test products.

Communications Test Products

We sell installation and maintenance solutions and OSS, including monitoring and network management systems, for the following types of communications networks and systems: fiber optics networks, transport networks, broadband and data networks, wireless communications and microwave networks.

Fiber Optic Network Products.    Our fiber optic network test products include optical signal instruments, spectrum analysis instruments and lightwave optical systems, such as optical amplifier test, passive component test and jitter test instruments. These items are used by the industry’s leading NEMs to develop and manufacture reliable optical components and modules. Our products also include tunable laser sources, multi-wavelength meters, photonic all-parameter testers and high-speed bit-error rate testers that measure key transmission properties of high-speed optical and electrical signals.

Transport Network Products.    Our transport network test products, our OmniBER OTN and OmniBER XM network simulators, provide capabilities for testing next generation Synchronous Optical Network/Synchronous Digital Hierarchy (“SONET/SDH”) network equipment. Our N2X multi-service tester combines services testing with carrier-grade infrastructure testing and emulation, and integrates the performance of Router Tester 900, OmniBER XM and SAN Tester.

Broadband and Data Network Products.    Our broadband and data network test products include our Network Analyzer and Router Tester 900. Our Network Analyzer product line helps to troubleshoot high-speed local area networks (“LANs”), wide area networks (“WANs”) and asynchronous transfer mode networks. Our Router Tester 900 is the industry leader in core edge router performance verification.

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Wireless Communications and Microwave Network Products.    We design and sell RF and microwave test instruments and Electronic Design Automation (“EDA”) software tools, which assist in the design and production of cellular handsets and base stations, as well as satellite and aerospace defense systems. Examples of our wireless communications products include specialized versions of RF and microwave network analyzers, spectrum analyzers, signal sources, mobile testers, circuit simulation tools and system simulation tools. Agilent also offers solutions for centralized wireless LAN monitoring and network optimization. Our AiRMS solution provides remote monitoring of network performance using a series of remote probes deployed in service vehicles and taxicabs. The Agilent N5250A PNA series millimeter-wave network analyzer has frequency coverage from 10 MHz to 110 GHz in a single sweep. This capability enables engineers and system integrators working at millimeter-wave frequencies to take advantage of additional performance and connectivity, and gives them the ability to characterize 1.0 mm coaxial and on-wafer components, subsystems and systems.

Installation and Maintenance Solutions.    Our solutions for installation test enable service providers to install, commission, and activate networks and services more quickly. Agilent has a breadth of solutions for troubleshooting and maintaining optical, wireless, wireline and large-company networks. These solutions include Fiber Break Locator, Network Tester, Optical Time Domain Reflectometers (“OTDR”), Network Troubleshooting Center, and Framescope. We also market bench-top and handheld measurement devices such as lightwave multimeters, power meters and optical sources.

Operations Support Systems and Services.    Agilent’s OSS focus is to help communications service providers manage their business from a customer-centric perspective so they can understand how problems in network or service performance affect individual subscribers or groups of subscribers. Our integrated OSS solutions reduce software integration costs and enable high-value service-level management functions not possible with stand-alone systems. We offer a number of industry-proven monitoring and management systems, such as acceSS7 for Signaling System 7 networks; NETeXPERT for circuit, packet and hybrid networks; NgN Analysis System for next-generation telephony and Internet offload networks; Wireless Service Manager for wireless services and networks; and Wireless QoS Manager for mobile data services and networks.

General Purpose Test Products

We sell the following types of products into the general purpose test market: general purpose instruments, modular instruments and test software, digital design products and high frequency electronic design tools.

General Purpose Instruments.    General purpose test instruments are used principally by engineers in R&D laboratories, manufacturing, calibration and service for measuring voltage, current, frequency, signal pulse width and other standard electronics measurements. Examples of our general purpose test instruments include spectrum analyzers, network analyzers, signal generators, digitizing oscilloscopes, voltmeters, multimeters, frequency counters, bench and system power supplies, function generators and waveform synthesizers.

Modular Instruments and Test Software.    Our modular instruments and test software, including instruments incorporating the new LXI standard (LAN eXtensions for Instrumentation) and modular measurement system software, are used to dynamically configure and reconfigure test systems for designers and manufacturers of electronic devices. This allows easy and fast connectivity between instruments and PCs. In addition, release 14 of Agilent’s IO Library Suite reduces PC configuration and connect time to less than 15 minutes. Together with major revisions of Agilent VEE (7.0) and the Test & Measurement Programmers Toolkit for Visual Studio^® (2.0), these products speed test development and reduce the cost of test for our customers.

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Digital Design Products.    Our digital design products range from simple digital control circuits to complex, high-speed servers incorporating the latest microprocessor technology, and include high performance oscilloscopes, logic analyzers, logic-signal sources and data generators. Agilent’s 10 to 13 GHz real-time oscilloscopes are the only models in the industry that offer full-bandwidth, 40 GSa/s per channel. When these new scopes are paired with the Agilent InfiniiMax probes of up to 12 GHz, the new system delivers industry-leading performance, accuracy and probing connectivity. This is used by R&D engineers in the computer, communications and semiconductor industries for validating and verifying the performance of new high-speed digital product designs.

High-Frequency Electronic Design Tools.    Our high-frequency electronic design automation software tools are used by RF integrated circuit design engineers to model, simulate and analyze communications product designs at the circuit and system levels. The main products in this area are the Advanced Design System (ADS), the RF Design Environment (RFDE) and the IC-CAP Device Modeling Software. Each are well-established software platforms within the wireless and the aerospace and defense design communities. Our customers are also applying this technology more frequently to model signal integrity problems in digital design applications.

Test and Measurement Customers

Agilent’s test and measurement customers include the NEMs who design, develop, manufacture and install network equipment, and the service providers who implement, maintain and manage communication networks and services. Many of our customers purchase solutions across several of our major product lines for their different business units. As of the end of fiscal 2004, no single customer represented greater than 10% of the net revenue of the business.

The orders and revenues of the test and measurement business are somewhat seasonal, with our fourth quarter traditionally bringing larger volumes of business and our first quarter generally showing reduced volumes. This is especially true of products that we sell to the aerospace and defense industry as well as those that are linked to consumer spending, including some of our communications test equipment. However, the seasonal impact is tempered by the diversity of the test and measurement business’s products and customers, which span multiple industries.

Test and Measurement Sales, Marketing and Support

We have a focused sales strategy, using a direct sales force, resellers, manufacturer’s representatives and distributors to strengthen customer satisfaction. Our direct sales force is focused on identifying customer needs and recommending solutions involving the effective use and deployment of our equipment, services, systems and capabilities. Some members of our direct sales force focus on global accounts, providing uniform services on a worldwide basis. Others focus on our more complex products such as our communications OSS monitoring systems, where customers require intensive strategic consultation. Our sales force also specifically targets the contract manufacturer market by collaborating with original equipment manufacturers to specify that contract manufacturers use our test equipment, as well as marketing to contract manufacturers directly.

Our direct sales force consists of field engineers and systems engineers who have in-depth knowledge of the customers’ business and technology needs. Some of our field engineers are account managers for our large accounts, and enhance our understanding of the future needs of these customers. Our systems engineers provide a combination of consulting, systems integration and application and software engineering services, and are instrumental in all stages of the sale, implementation and support of our complex systems and solutions.

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To complement our direct sales force we have agreements with many channel partners around the world. These partners, including resellers, manufacturer’s representatives, and distributors, serve Agilent’s customers across a number of product lines and provide the same level of service and support expected from our direct channel. Our products come with clearly outlined warranties and extended warranties available for an additional cost.

Test and Measurement Manufacturing

We concentrate our test and measurement manufacturing efforts primarily on final assembly and test of our products. To maximize our productivity and our ability to respond to market conditions, we use contract manufacturers for the production of printed circuit boards, sheetmetal fabrication, metal die-casting, plastic molding and standard electronic components. We also manufacture proprietary devices and assemblies, in our own fabrication facilities for competitive advantage.

We generally only manufacture products when we have received firm orders for delivery, and do not generally hold large stocks of finished inventory. However, due to the large number of components and products we manufacture, we hold relatively large amounts of raw materials.

Test and Measurement Competition

The market for test and measurement equipment is highly competitive, and we expect this competition to increase. Our test and measurement business competes with a number of significant competitors in all our major product categories and across our targeted industries. In the general purpose electronic test market, we compete against companies such as Fluke Corporation (a subsidiary of Danaher Corporation), Keithley Instruments, Inc., LeCroy Corporation, National Instruments Corporation and Tektronix, Inc. In the communications test market, our primary competitors are Acterna Corporation, Aeroflex Incorporated, Anritsu Corporation, EXFO Electro-Optical Engineering, Inc., Ixia, Marconi Corporation, McAfee, Inc. (formerly Network Associates, Inc.), Rohde & Schwartz GmbH & Co. KG, Spirent, Tektronix, Inc., as well as Telcordia, Hewlett Packard Company and Micromuse, Inc. in the communications network monitoring market. Our EDA business also has several software competitors, including Ansoft Corporation, APLAC Solutions Corporation, Applied Wave Research, Inc., Eagleware Manufacturing Company, Inc., and Xpedion Design Systems, Inc.

In fiscal year 2004 and following the general economic recovery, pricing pressure eased in some of our markets.

Automated Test Business

Our automated test business provides test solutions that are used in the manufacture of semiconductor devices, electronics (primarily printed circuit-board assemblies) and flat panel displays (“FPDs”). These solutions are complemented by consulting, service and support offerings such as start-up assistance, application services and system calibration and repair. Our automated test business’s test solutions enable electronics designers and manufacturers to shorten the design-to-production cycle, lower manufacturing cost of test, confirm the functional quality of their devices and of their manufacturing processes and accelerate the high-volume delivery of their products.

Our automated test business employed approximately 2,200 people as of October 31, 2004. We sell our automated test business’s solutions through direct sales and through manufacturers’ representatives. Our automated test business generated $0.9 billion in revenue in fiscal 2004, $0.8 billion in revenue in fiscal 2003 and $0.7 billion in revenue in fiscal 2002.

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Automated Test Markets

Agilent’s automated test business sells to the semiconductor manufacturing markets, the electronics manufacturing markets and the FPD markets. Customers in these markets use our automated test equipment for wafer-level parametric testing, wafer-sort and final sort for memory test, package-level functional test, structural and electrical testing and inspection for printed circuit board assemblies and thin-film transistor (“TFT”) array test for FPDs.

Market demand for automated test equipment is driven both by changes in the increased volume of semiconductor devices produced and by developments in semiconductor performance and function, packaging and assembly technology.

The development of increasingly faster and more complex semiconductor devices stimulates demand for testers capable of evaluating these high-speed devices. In addition, the continuing integration of functions, such as microprocessor, logic, analog, RF and logic, application specific integrated circuits (“ASICs”) and memory on a single integrated circuit has created a category of device called system-on-a-chip (“SOC”). These devices require updates to our sophisticated and flexible automated test equipment.

In the electronics manufacturing market, new technologies and processes, increasing density and miniaturization of parts, stimulate demand. New materials and smaller parts such as ceramic column grid arrays, ceramic ball grid arrays and ultra-miniature resistors or capacitors (“0201s”), make new demands on test equipment. The same is true for new and evolving manufacturing processes, such as the pending introduction of lead-free solder. This increases demand for test equipment that provides increased resolution for the highest call accuracy and a range of solutions to access issues.

The use of FPDs is becoming increasingly common in a wide variety of consumer devices that include cellular phones, digital cameras, liquid crystal display (“LCD”) televisions, computer displays, digital cameras and PDAs. Different technologies are evolving to improve brightness and resolution on the screens. A TFT array tester, such as the two testers introduced by our automated test business in October 2004, helps improve display quality while lowering costs. These TFT array testers detect defects accurately and early in the manufacturing process, regardless of the FPD technology being used.

Automated Test Products

Our automated test business designs, develops and manufactures semiconductor test equipment, electronics manufacturing test equipment and TFT array test equipment. We typically develop our automated test products on a single system architecture and then deliver, over time, enhancements to that architecture that extend its test capabilities. For instance, in 2004 Agilent expanded the capabilities of our 93000 SOC system by further expanding its high-speed performance to address emerging high-speed interconnect technology. At the same time, Agilent introduced a low-cost parallel probe (wafer sort) solution on the same platform. Our customers can adapt their 93000 SOC system according to their needs without having to buy multiple unique testers. We also introduced the V5400 memory tester, based on current Agilent Versatest architecture, that addresses the growing phenomenon of stacked, mixed memory chips, including any combination of flash, dynamic random access memory (“DRAM”) and static random access memory (“SRAM”).

Semiconductor Test Equipment

We produce semiconductor test equipment to perform electrical functional testing of the operation of logic, memory, mixed analog and digital signal, RF, microwave and SOC integrated

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circuits. Our parametric test instruments and systems combine hardware technology and customizable system software, and are used to examine semiconductor wafers during the semiconductor manufacturing process. Our product development efforts are targeted at leading edge technologies, such as high-speed interconnects, highly integrated mixed-signal memory, parametric test for 90nm and below geometries, and emerging-technology FPDs.

Our semiconductor test equipment tests a variety of different circuit types. We test both at the wafer level and at final assembly. We are an industry leader in wafer-sort test solutions for flash memory devices, which retain data even when the power is turned off and that are used in digital cameras, cellular phones, PDAs and storage of portable digital audio files. Our flash memory test products can test as many as 4,608 channels to test multiple devices in parallel, greatly improving test throughput and lowering test costs for our customers. Our SOC test system can test not only multiple devices at a time, but also multiple functional elements on a given device at the same time. As a result of its scalable platform architecture, this system can be field-upgraded to the latest technology without the customer needing to buy a new system or shut down the production line for an extended time.

Electronics Manufacturing Test Equipment

Automated Optical Inspection Products.    Our automated optical inspection line of products enables automated visual inspection of printed circuit assemblies. These systems locate, with a high degree of repeatability and reliability, misplaced and misaligned parts, gross solder defects and other process faults without the need for a human inspector.

Automated X-ray Inspection Products.    Our leading x-ray inspection products provide a three-dimensional scan of printed circuit board assemblies to identify and isolate quality defects caused by the manufacturing process. Our products can look through a device to identify structural defects in soldering that are not identified by visual inspection and that may not be detected with in-circuit testing.

Automated In-Circuit Testing Products.    Our leading in-circuit testers use a probe fixture that makes electrical contact with the circuit board. These systems make electrical measurements that identify quality defects such as bad and incorrect parts that affect electrical performance, and allow repair of the defects while it is still relatively inexpensive to make the diagnosis and repair.

Manufacturing Test System Software.    Our Agilent Quality Tool and Agilent Repair Tool software use the Agilent Intelligent Test Framework that connects and integrates information from the Agilent portfolio of test and inspection equipment. The software provides common tools to enable customers to use information across the manufacturing line for effective process control, repair and test design.

TFT Array Test Equipment

Effective production process testing is essential for FPD manufacturing, because most failures occur during the TFT array process, and correcting overlooked failures post-process is prohibitively expensive. Our TFT array tester family, introduced in October 2004, provides FPD manufacturers with a test solution for all key technologies in the rapidly growing FPD market. An array tester can provide significant cost savings by detecting defects early in the process of manufacturing FPDs.

Automated Test Customers

Many of our customers purchase solutions across several of our major product lines for their different business units. Generally, our customers are involved in producing digital consumer and

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wireless products, computation, PC and PC peripherals, wireline communications, or enterprise networking and storage. As of the end of fiscal 2004, no single customer represented greater than 10% of the net revenue of the business.

We also engage in collaborative, co-development relationships with electronics industry leaders and contract manufacturers.

The back-to-school and holiday seasons affect our automated test business to the extent that we are subject to the cycles of consumer electronics manufacturing. Our customers include manufacturers who produce a wide range of consumer electronics equipment requiring the test of semiconductors, printed-circuit board assemblies and FPDs.

Automated Test Sales, Marketing and Support

Our automated test business’s products are distributed using direct sales and through manufacturers’ representatives. Some portions of the direct sales force provide general services around the world, while others provide specialized consultation services for particular segments of the automated test business. Manufacturers’ representatives address specific geographic markets. They provide the same level of service and support to Agilent’s customers as is expected from our direct channel.

Automated Test Manufacturing

Our automated test business has manufacturing facilities in Germany, Japan and Singapore, and contract manufacturing relationships in Europe, Asia, Japan and the U.S. We do not maintain a high level of finished goods inventory, due to a combination of product platform strategy and outsourcing. However, for those products that we do manufacture, we hold relatively large amounts of raw materials.

Automated Test Competition

The market for automated test solutions is highly competitive, and we expect this competition to increase. Our automated test business competes with a number of significant competitors in all our major product categories and across our targeted industries. In the semiconductor test market, we compete primarily against Advantest Corporation and Teradyne. In the electronics manufacturing test market, we compete primarily against Teradyne. In the large-panel FPD test market, we compete against Photon Dynamics, Applied Komatsu Technologies and Shimadzu Corporation. In emerging FPD technologies, we compete primarily against Wintest.

Most of our equipment competes primarily on performance or differentiated capabilities. Other contributing factors include cost of test, system scalability and flexibility, sensitivity, speed, reliability and yield.

Semiconductor Products Business

Our semiconductor products business is a leading supplier of semiconductor components, modules and assemblies for consumer and commercial electronics applications. We design, develop and manufacture products for the networking and personal systems markets. Our networking products include fiber optic transceivers for sending and receiving data over high-speed networks and ICs for enterprise storage and networking. In 2004 and 2003, about two-thirds of the semiconductor products business came from customers in consumer electronics markets.

As of October 31, 2004, our semiconductor products business had approximately 6,800 employees worldwide. Our semiconductor products business generated revenue of $2.0 billion in fiscal year 2004, $1.6 billion in fiscal year 2003 and $1.6 billion in fiscal year 2002.

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Semiconductor Markets

Our semiconductor products business serves the following markets:

Personal Systems Markets

We sell products into the Personal Systems market, which are targeted for use in applications including mobile phones, printers, PC peripherals and consumer electronics.

The driving trend in mobile communications is for higher-speed, higher-bandwidth connections to offer subscribers more digital services through their mobile phones. Consumer products that realize the convergence of palm-top computing, mobile telephony and digital imaging are increasingly appearing on the market.

Networking Markets

We sell products into the networking market, including computing, storage, local area and public network applications. There is a continued evolution of networks both private (local area and storage area networks) and public (metro and wide area networks) to higher speeds and greater bandwidth driven by the ongoing growth of data traffic. Business-to-consumer and business-to-business e-commerce, the internet, the growing volume of e-mail traffic, the growth of streaming video and audio, the delivery of online services, and peer-to-peer communications are all generating ever greater volumes of electronic data that must be processed, moved and stored. As a result, both private and public network managers drive a continual process of upgrading their networks to higher speeds and increased scalability. Fiber optic transceivers and high-speed digital ICs are the semiconductor technologies that help enable higher speed, higher performance networks.

Semiconductor Products

Our semiconductor products business designs and sells semiconductor components modules and assemblies. The major product areas of our semiconductor products business include:

Personal Systems Products

Radio Frequency and Microwave Communications Device Products.    We produce a broad family of RF and microwave communications products, primarily integrated circuits for wireless communications products and infrastructure. Our latest products are the Film Bulk Acoustic Resonator (“FBAR”) duplexer, a semiconductor based filter product, and E-pHEMT power amplifiers, a high power-added efficient wireless transmitter solution. The FBAR duplexer and the E-pHEMT power amplifier help enable smaller, more functionally rich mobile telephones. These two products are targeted for both current and future generation mobile phones. We began increasing the production of these two products towards the end of 2003. They have been among the top growth areas for our semiconductor products business.

Infrared Emitters, Detectors and Transceiver Module Products.    We are a leading supplier of infrared (“IR”) products that enable short range, point-to-point wireless communication between portable and stationary devices, including notebook personal computers, printers, cellular phones, PDAs, pagers and digital cameras. In 2003, we delivered the industry’s first infrared transceiver with remote control functionality for consumer electronics devices such as TVs and VCRs. The semiconductor products business also introduced a solution, known as the Ambient Light Photo Sensor, that senses available light and signals whether backlighting for displays or keypads is required. By not turning on backlighting when it is not needed, mobile systems can save significant battery life. In 2004 we introduced products for Infrared Financial Messaging (“IrFM”), a standard for wirelessly sending digital transactions through use of an IR transceiver in a cell phone, PDA or

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digital wallet. These payment transactions can take place between a customer and millions of point-of-sale devices to provide instant IR connectivity for secure wireless payment.

Printing ASICs.    We are a leading supplier to Hewlett-Packard for printing ASICs, which are the central processing ICs for Hewlett-Packard laser printers, inkjet printers and all-in-one products. Agilent provides subsystem solutions for Hewlett-Packard printers, aimed at capturing more content of printer components and offering higher integration and shorter time-to-market.

Optical Image Sensors and Processors, and Optical Position Sensors.    Our products include sensors used in embedded camera modules for mobile phones, and navigation sensors for laser and LED optical mice. We also produce optical motion control products used primarily for precision paper handling and positioning in inkjet printers and all-in-one products. In the fourth quarter of 2004 we agreed to sell inventory and fixed assets relating to our camera module business. We will continue to sell the image sensors that are a component part of the camera modules, but after the sale we will no longer produce the assembled modules. We will retain intellectual property and research and development activities associated with the image sensor technology.

LEDs and Optocoupler Products.    We manufacture and sell a broad range of LEDs, alphanumeric displays and optocouplers used in consumer electronics, factory automation and transportation. LEDs are semiconductor devices that emit light when an electrical signal is applied. Optocoupler products are devices that provide both electrical insulation, for protection, and signal isolation, to prevent distortion of data between differing electrical environments. We are a leading supplier of optocouplers for use in Plasma Display Panel (“PDP”) digital TVs. We provide integrated color management solutions and color sensor applications for LEDs which are used for color detection, measurement and control capabilities that can be integrated into different applications including LCD TVs using LED backlights. We are a leading supplier of LED optoelectronic solutions used for keypad and display backlighting, and for camera flash.

Lighting Joint Venture.    We are engaged in a global joint venture, Lumileds, with Philips Electronics. Lumileds develops, manufactures and sells LEDs, modules, products and systems for a broad spectrum of lighting applications, including automotive lighting, high-brightness traffic signals, contour lighting and signs, outdoor illumination and white LEDs for both indoor and outdoor applications. In 2004, consumer electronics companies introduced the first products that employ LEDs as an alternative to Cold Cathode Fluorescent lamps (“CCFLs”) as a source of backlighting in LCD displays.

Networking Products

Fibre Channel Controller Products.    We are the leading supplier of controller ICs for Fibre Channel. The Fibre Channel interconnect protocol, a standard for the transfer of information between computers and storage devices defined by the American National Standards Institute, is the leading technology for building storage area networks (“SANs”). In 2004 we introduced the industry’s first 4 Gb/s Fibre Channel controller ICs. The controllers offer storage OEMs performance and port density in a single chip. 4 Gb/s Fibre Channel controller IC provides the industry’s highest performance for redundant arrangement of independent disk (“RAID”) arrays, storage subsystem virtualization devices, storage routers, host bus adapters and host computer motherboards for mid- to high-end storage applications that use multiprocessor systems. These newest products expand our leading portfolio of Fibre Channel controller solutions for 1 and 2 Gb/s. We also offer physical layer ICs, which connect processing ICs, such as our Fibre Channel controllers, to fiber optic transceivers for data transmission.

Fiber Optic Products.    We are a leading supplier of fiber optic transceivers, which convert electronic digital data into light signals for transmission, and convert light signals back into

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electronic digital form on the receiving end of the communication. We market optical transceivers, transmitters and receivers for high-speed data communications for Fast, Gigabit and 10-Gigabit Ethernet, 2 and 4 Gb/s Fibre Channel, and Asynchronous Transfer Mode/Synchronous Optical Network (“ATM/SONET”) applications up to 2.5 gigabits per second (OC-48). In addition, we are developing products for dense wave division multiplexing (“DWDM”) optical transport applications.

High-Speed Digital Integrated Circuit Products.    We provide core electronics chipsets that support central processing units for selected Hewlett-Packard workstations and servers. We provide customer-specific ASIC solutions for next-generation data switching products. Finally, we are a provider of state-of-the-art ASICs and networking ICs for use in next-generation network switches.

Semiconductor Customers

We sell to customers in the networking and personal systems markets. We sell to original equipment manufacturers directly, as well as contract manufacturers. As we move toward more consumer-centric products, including components for mobile phones and for optical mice, we expect our business to reflect the seasonality inherent in the consumer market.

Our semiconductor technology licensing and supply arrangements with Hewlett-Packard limit our ability to sell products to other companies, subject to restrictions contained in the exhibits to our Master Patent Ownership and License Agreement with Hewlett-Packard and our ICBD Technology Ownership and License Agreement with Hewlett-Packard, which are exhibits to this Annual Report on Form 10-K. Through sales of ASICs, storage area networking components and motion-control products, Hewlett-Packard accounted for approximately 14 percent of our semiconductor products revenue in fiscal year 2004, 20 percent in fiscal year 2003 and approximately 33 percent in fiscal year 2002.

Semiconductor Sales, Marketing and Support

Our semiconductor sales organization consists of approximately 300 employees who have responsibility for emerging accounts or for large, global accounts. Our sales force has specialized product and service knowledge that enables it to sell specific offerings at key levels throughout a customer’s organization. We also have a direct sales team that focuses on supporting major contract manufacturers. In addition to direct sales, we generate approximately 30 percent of our revenue through our relationships with key electronic distributors worldwide. We also provide a broad range of products and applications-related information to customers and channel partners via the Internet.

Semiconductor Manufacturing

The majority of our silicon and gallium arsenide wafer fabrication is done in the U.S. and Singapore, while our assembly and test operations are in Malaysia and Singapore. In addition to these facilities, we utilize a network of contract manufacturers throughout Asia for semiconductor fabrication, packaging and test.

Our manufacturing strategy has been to outsource more mature technologies while using our in-house manufacturing fabrication, assembly and test capabilities to develop new products. Our production facilities have developed several quality-management processes designed to increase productivity. We have developed proprietary automated test systems, particularly in optical, LED and microwave test.

For selected customers, we maintain finished goods inventory near or at customer manufacturing sites to support their just-in-time production. In 2004, we negotiated extended payment terms for most of the materials that we purchased.

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Semiconductor Competition

The markets for our semiconductor products are intensely competitive, and we expect competition to increase. Our ability to compete effectively depends on a number of factors, including:

• product reliability and performance in operation;

• price;

• power consumption;

• compliance with standards;

• product size and integration; and

• time to market.

In the fiber-optic products market, our principal competitors are Finisar, Infineon and JDS Uniphase. In the market for high-speed digital ICs, our principal competitors are IBM, LSI Logic, Texas Instruments and Vitesse Semiconductor Corporation. Our principal competitors in RF wireless are Renesas, RF Micro Devices and SkyWorks. In the market for infrared products, our principal competitor is Vishay Intertechnology, Inc. We compete with companies including LSI Logic, Motorola and STMicroelectronics for printer ASICs. Principal competitors in our LED businesses include Lite-on, Inc., Nichia, Osram, Stanley Electronic Co. Ltd. and Toshiba.

Life Sciences and Chemical Analysis Business

Our life sciences and chemical analysis business provides application-focused solutions that include instruments, software, consumables and services that enable customers to identify, quantify and analyze the physical and biological properties of substances and products. Our seven key product categories include: microarrays, microfluidics, gas chromatography, liquid chromatography, mass spectrometry, software and informatics, and related consumables, reagents and services.

We employed approximately 3,900 people as of October 31, 2004 in our life sciences and chemical analysis business. This business generated revenue of $1.3 billion in fiscal 2004, $1.2 billion in fiscal 2003 and $1.1 billion in fiscal 2002.

Life Sciences and Chemical Analysis Markets

Primarily, our life sciences and chemical analysis business serves the following markets:

Life Sciences Markets

Our life science markets account for approximately 40 percent of revenue from our life sciences and chemical analysis business. Agilent’s life science solutions are used by academic researchers, government institutes and pharmaceutical and biopharmaceutical companies in every phase of the drug development process. The drug development process includes research into the basic causes and understanding of disease, drug discovery, drug development, drug manufacturing and quality assurance/quality control (“QA/QC”). Within the life sciences, we focus on the following areas: pharmaceutical analysis (drug development, manufacturing and QA/QC), gene expression and proteomics.

The Pharmaceutical Analysis Market.    Pharmaceutical and biopharmaceutical companies develop and manufacture drugs under strict regulatory guidelines intended to ensure the quality of products developed and given to patients, and to ensure the security and quality of information given to regulatory agencies. We provide liquid chromatography, gas chromatography and mass

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spectrometry solutions for the analysis of chemicals, and provide compliance services and data systems designed to further enable compliance with relevant regulations of the Food and Drug Administration (“FDA”) and other regulatory agencies.

The Gene Expression Market.    Biological researchers today can study organisms and diseases based on genetic material. Gene expression researchers use devices called microarrays to measure the activity levels of many genes in a cell simultaneously for the purpose of understanding and characterizing disease, identifying drug targets and identifying patterns of gene activity that correlate to the potential toxicity or effectiveness of a drug. This is a double-digit growth market in which our microarray, microfluidics and informatics solutions are sold.

The Proteomics Market.    When a drug enters the body, it usually targets one or more proteins. Proteomics is a new and growing field with the goal of identifying, characterizing and analyzing proteins on a high-volume scale. Proteomics is also important to the large-scale manufacture of protein-based therapies in development by biotech companies. Protein scientists currently apply traditional protein analysis technologies such as liquid chromatography, gas chromatography and mass spectrometry, as well as newer microfluidics technologies and reagents. We provide solutions in all of these areas and are investigating new technologies for proteomics research.

Chemical Analysis Markets

Our chemical analysis markets account for approximately 60 percent of revenue from the life sciences and chemical analysis business. Agilent’s chemical analysis solutions are used by corporations, government organizations and academic researchers to detect, characterize, quantify and analyze chemicals and biological entities that could affect human health, both those found in the environment and those created in the manufacturing of products. Within chemical analysis, we focus primarily on the following areas: petrochemical, environmental, homeland security and forensics and bioagriculture and food safety.

The Petrochemical Market.    The natural gas and petroleum refining markets use our products to measure and control the quality of their finished products and to verify the environmental safety of their operations. We sell gas chromatographs, liquid chromatographs and mass spectrometers into these markets. Petroleum refiners use our measurement solutions to analyze crude oil composition, perform raw material analysis, verify and improve refining processes and ensure the overall quality of gasoline, fuels, lubricants and other products. Our gas chromatographs are also used to monitor consistent quality in the delivery of natural gas.

The Environmental Market.    Our gas chromatography, liquid chromatography and mass spectrometry solutions are used by the environmental market for applications such as laboratory and field analysis of chemical pollutants in air, water, soil and solid waste. Environmental industry customers include all levels of government, the industrial and manufacturing sectors, engineering and consulting companies, commercial testing laboratories and colleges and universities. We are seeing increased international demand for environmental instrumentation in the Asia-Pacific region.

The Homeland Security and Forensics Market.    Our liquid chromatography, gas chromatography, mass spectrometry and microfluidics solutions are used by health and forensics laboratories in the U.S. and abroad, particularly in the analysis of evidence associated with crime or with the detection and identification of biological and chemical warfare agents. This instrumentation is either used in static or mobile laboratories. Customers include local, state, federal, and international law enforcement agencies and health laboratories.

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The Bioagriculture and Food Safety Market.    Food safety industries apply the same general technologies for chemical analysis as the pharmaceutical and environmental markets, including gas and liquid chromatography and mass spectrometry. Additionally, bioagriculture industries seek to improve crops and foods by conducting research on these organisms, as well as testing for genetically modified content, using microarray and microfluidics solutions.

Life Sciences and Chemical Analysis Products

A key factor in all of our life sciences and chemical target markets is the need for new products that increase customer productivity and provide high quality data that enables decision-making by our customers.

Microarray Products

Since announcing the launch of our DNA microarray program for the life sciences in December 1999, we have become the second leading supplier of microarray solutions which we sell primarily to pharmaceutical companies, biotech companies and academia. Using our refined inkjet manufacturing process, we make highly sensitive 60-mer oligonucleotide (“oligo”) microarrays. This unique inkjet process is highly flexible and accurate, enabling the faster manufacture of new and custom high-density microarrays with highly uniform spot shape.

In 2004, we introduced our line of whole genome microarrays, including kits for human, mouse and Arabidopsis, a model plant organism. In a collaborative effort, we also commercialized the first 60-mer oligo microarray for the study of rice, a staple food for half the world’s population. We now provide microarrays for the study of human, mouse, rat, Arabidopsis, rice, rice blast (a type of rice fungus) and yeast.

Microfluidics Products

The Agilent 2100 bioanalyzer is the first commercial microfluidics solution for the analysis of a wide range of biological molecules, including DNA, RNA, proteins and cells. The bioanalyzer chips allow sample quality assessment to be done in a fraction of the usual time using less sample and reagents. This technology could eventually replace traditional gel electrophoresis in many applications.

In 2004, we introduced the Agilent 2100 Expert Software with compliance features that enable the bioanalyzer to be used for the development and manufacture of protein-based therapeutics in the pharmaceutical and biotechnology industries.

To standardize RNA quality measurement using the bioanalyzer, Agilent introduced a beta version of its RNA integrity number (“RIN”) software. It is the first tool for objectively grading and communicating the quality of RNA used in experiments.

In November 2004, Agilent introduced the first fully automated, high-throughput lab-on-a-chip system, which will enable unattended analysis of thousands of DNA or protein samples per day.

Gas Chromatography Products

We produce gas chromatography systems, both portable and stationary. A gas chromatograph (“GC”) is used to separate any gas, liquid or solid molecules that can be vaporized in order to determine the quantity and identity of the molecules present. As a market leader in gas chromatography, we continue to expand its applications with new columns and supplies, as well as product and software enhancements.

In 2004, we introduced a network headspace sampler that features an inert sample pathway and significant improvements in sensitivity, performance and productivity. We also introduced a thermal

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performance qualification service for Agilent gas chromatographs, which helps to verify that a GC’s heated zones (oven, injection ports and detectors) are working properly. In April, Agilent also became the first company to offer online training for gas chromatography.

Liquid Chromatography Products

A liquid chromatograph (“LC”) or a high performance liquid chromatograph (“HPLC”) is used to separate molecules of a liquid mixture to determine the quantity and identity of the molecules present. Used when gas chromatography is not an option, these instruments are modular in construction and can be configured to form instruments that perform specific analyses. We offer a HPLC system, the Agilent 1100 Series, with over 50,000 systems sold since its introduction. As a leader in liquid chromatography, we continue to expand its applications with new LC and HPLC columns and provide ongoing product and software enhancements.

In 2004, we introduced improvements to the Agilent 1100 Series HPLC purification system. We released a new dual loop autosampler for the purification platform that provides flexible sample handling and high sample throughput in a compact design that conserves critical bench space. We also released new purification system software, which provide flexible functionality for preparative HPLC, enabling users to add modules for specific needs.

We also introduced the Agilent 1100 Series HPLC micro collection/spotting system. It is a complete software-controlled separation solution for proteomics that features direct spotting on matrix-assisted laser desorption/ionization mass spectrometry (MALDI-MS) targets.

Mass Spectrometry Products

A mass spectrometer (“MS”) identifies and quantifies chemicals based on a chemical’s molecular mass and on characteristic patterns of fragment masses that result when a molecule is broken apart. Mass spectrometry is an important tool in analyzing proteins and other biological entities that undergo transformations because it enables the understanding and characterization of their many different states. MS systems are typically used in combination with gas or liquid chromatographs.

In the past three years, Agilent significantly expanded its mass spectrometry portfolio with a focus on ease of use, sensitivity and reliability. We introduced several instruments including new ion trap, time-of-flight (“TOF”) and inductively coupled plasma mass spectrometry (“ICP-MS”) systems. We also significantly upgraded our existing LC/MS and GC/MS quadrupole systems.

In 2004, we continued to expand our MS portfolio with several new products and solutions. We introduced a new 7500ce ICP-MS system, which is up to five times more sensitive than its predecessor. We introduced the Agilent LC/MSD Trap XCT Plus ion trap MS, which is four times more sensitive than its predecessor. We upgraded our TOF MS by providing new autotuning and compatibility features and improving its integration with our capillary electrophoresis system. We introduced the Agilent protein identification solution, a multiple-system LC/MS package for proteomics and pharmaceutical applications.

Software and Informatics Products

We provide software for controlling instruments, managing the laboratory, and analyzing the data generated by instrument platforms.

Early in 2004, Agilent introduced a new version of the Agilent Cerity Networked Data System for Pharmaceutical QA/QC that is the first system of its kind to provide automated 3-D analysis, generic instrument control and a spreadsheet-style custom calculator. We also released the Agilent

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MSD Security ChemStation, the first Agilent data system for GC/MS that facilitates the regulatory-compliant use of GC/MS in pharmaceutical environments.

Agilent also announced an exclusive agreement in the life sciences area to market, sell and support Scientific Software’s CyberLAB Enterprise Content Management System, a Web-based electronic library that collects, organizes, indexes, stores, archives and shares electronic records.

Agilent shipped an upgrade to its Spectrum Mill MS proteomics workbench for better performance and ease of use in a broad range of proteomics applications. We also released new protein confirmation software for the TOF that allows researchers to easily and reliably check the identity and purity of proteins.

In October 2004, we acquired Silicon Genetics, a leading provider of software solutions for life science discovery. The acquisition adds several new products to Agilent’s portfolio: GeneSpring, a genomics expression data visualization and analysis solution; Varia, high-volume genetic variation analysis software; and GeNet, a scalable repository for expression data.

We also announced an agreement to partner in an $11.7 million grant from the National Institute of Standards and Technology’s Advanced Technology Program to develop informatics technologies for life science research.

Consumables, Reagents and Services

We also offer a broad range of consumable products, which support our LC, GC and MS technology platforms. These consumable products include chemical and biological reagents, instrument replacement parts, brand-specific chromatography columns and consumable supplies to meet our customers’ analysis needs. All of our products, which include generic and proprietary supplies, are designed to work together.

Our support services include all of our chemical and bioinstrumentation analysis hardware and software maintenance, troubleshooting, repair and training. Special service bundles have also been designed to meet the specific analysis instrument needs of various industries.

In 2004, we continued to expand our portfolio of consumables and services. We introduced new versions of our multiple affinity removal system for protein research, including a new LC column that removes the three most abundant proteins from mouse serum and a new spin cartridge format.

We introduced a Lys Tag 4H reagent kit for tagging lysine peptides during MS analysis. We released Agilent Prep LC columns, a line of preparative LC columns designed specifically for industrial-scale purification of target compounds in the pharmaceutical industry. We also introduced the HP-88, a long-lasting GC column designed specifically for efficient, reliable analysis of trans fatty acid content in food.

Life Sciences and Chemical Analysis Customers

Our top 25 customers account for approximately 21 percent of revenue within our life sciences and chemical analysis businesses. We have roughly 21,000 customers, and as of the end of fiscal 2004, no single customer represented greater than 10% of the net revenue of the business.

The life sciences and chemical analysis business is susceptible to seasonality in its orders and revenues primarily based on U.S. government and large pharmaceutical company budgets. The result is that our first and fourth fiscal quarters tend to deliver the strongest profits for this group.

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However, general economic trends, new product introductions and competition might overshadow this trend in any given year.

Life Sciences and Chemical Analysis Sales, Marketing and Support

Our sales and support delivery channels are aligned by key markets. We market products to our customers through direct sales, electronic commerce, resellers, manufacturers’ representatives and distributors. Additionally, we are optimizing our worldwide distribution capabilities to address high-growth opportunities such as the environmental, food safety and pharmaceutical markets in the Asia-Pacific region.

We use direct sales to market our solutions to all of our pharmaceutical and biopharmaceutical accounts, large- and medium-sized chemical customers and environmental accounts. Sales agents supplement direct sales by providing broader geographic coverage and coverage of smaller accounts. Our active reseller program augments our ability to provide more complete solutions to our customers. We sell our consumable products through distributors, telesales and electronic commerce.

We offer a wide range of startup, operational, educational and compliance support services for our measurement and data handling systems. We deliver our support services to customers in a variety of ways, including on-site assistance with repair or exchange of returned products, telephone support and self-diagnostic services provided over the Internet. We also offer special industry-focused service bundles that are designed to meet the specific needs of hydrocarbon processing, environmental, pharmaceutical and biopharmaceutical customers to keep instruments fully operational and compliant with the respective industry requirements.

Life Sciences and Chemical Analysis Manufacturing

Our manufacturing supports our diverse product range and customer-centric focus. We assemble highly configurable products to individual customer orders and make standard products to stock. We employ advanced manufacturing techniques and supply chain management systems to reduce costs and manufacturing cycle times. We selectively use third parties to provide manufacturing capabilities outside our core competencies, such as the manufacture of printed circuit assemblies and the delivery of shipment logistics. We have manufacturing facilities in California and Delaware in the U.S., China, Germany and Japan. We utilize just-in-time manufacturing, and so typically do not maintain a high level of inventory. Our products typically come with standard warranties, and extended warranties are available for additional cost.

Life Sciences and Chemical Analysis Competition

The markets for analytical instruments in which we compete are characterized by evolving industry standards and intense competition. Our principal competitors in the life sciences arena include: Affymetrix®, Applied Biosystems, GE Healthcare, Invitrogen, Thermo Electron and Waters. Our principal competitors in the chemical analysis arena include: Applied Biosystems, Perkin Elmer Corp., Shimadzu Corporation, Thermo Electron and Varian. Agilent competes on the basis of product performance, reliability, support quality, applications expertise and global channel coverage.

Life Sciences and Chemical Analysis Government Regulation

The analysis products and related consumables marketed by our chemical analysis business are subject to regulation in the U.S. by the Environmental Protection Agency (“EPA”) under the Toxic Substances Control Act, and by government agencies in other countries under similar laws. The Toxic Substances Control Act regulations govern, among other things, the testing, manufacture, processing and distribution of chemicals, the testing of regulated chemicals for their effects on

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human health and safety and import and export of chemicals. The Toxic Substances Control Act prohibits persons from manufacturing any chemical in the U.S. that has not been reviewed by EPA for its effect on health and safety, and placed on an EPA inventory of chemical substances. Therefore, we must continually adapt our chemical analysis products to changing regulations. If we fail to comply with the notification, record-keeping and other requirements in the manufacture or distribution of our products, the EPA can obtain an order from a court that would prohibit the further distribution or marketing of a product that does not comply or we could face fines, civil penalties or criminal prosecution.

Agilent Technologies Laboratories (“Agilent Labs”)

Agilent Labs, based in Palo Alto, California, with satellite offices in China; Fort Collins, Colorado; and Scotland, is our central research organization. Agilent Labs engages primarily in two types of research: 1) applied research that leads to technology that can be transferred to our existing businesses in communications, life sciences, and electronics, and 2) research that creates new businesses that are outside of our current markets but within our fields of interest. Agilent Labs also provides technology integration across our company.

Agilent Labs employs approximately 300 people. About 70 percent of Agilent Labs’ employees are members of the technical staff, and about 70 percent of the technical staff have advanced degrees that cover a wide range of scientific fields, including biology, bioinformatics, chemistry, computer science, electrical engineering, image processing, materials science, mathematics, optoelectronics, photonics, physics, physiology, semiconductor technology and systems integration.

The following discussions of Research and Development, Backlog, Intellectual Property, Materials, Environmental, International Operations and Acquisition and Disposal of Material Assets include information common to all four of our segments.

Research and Development

Research and development expenditures were $933 million in 2004, $1,051 million in 2003 and $1,250 million in 2002, the vast majority of which was company-sponsored. We anticipate that we will continue to have significant R&D expenditures in order to maintain our competitive position with a continuing flow of innovative, high-quality products and services.

Backlog

We believe that backlog orders are not a meaningful indicator of future business prospects. Backlog, as we define it, generally only represents cumulative outstanding orders that are scheduled for delivery within a six-month period. Therefore backlog is not a material indicator of our future medium- to long-term business prospects. We believe that our incoming orders in any given period are more indicative of short-term revenue trends for our businesses. However, for our Semiconductor Products business, neither backlog nor orders are indicative of future business prospects since the time between receipt of an order and revenue recognition has decreased significantly during 2004. See “Results of Continuing Operations” in Item 7 of this report.

Intellectual Property

Our general policy has been to seek patent and other intellectual property protection for those inventions and improvements likely to be incorporated into our products and services or to give us a competitive advantage. While we believe that our licenses, patents and applications have value, in general no single patent or license is in itself essential. In addition, there can be no assurance that any of our proprietary rights will not be challenged, invalidated or circumvented, or that our rights will provide significant competitive advantages.

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Materials

Our manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies and raw materials such as plastic resins and sheet metal. Each of our segments purchases materials from thousands of suppliers on a global basis. No single supplier is material, although some of the parts that require custom design work are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Our long-term relationships with our suppliers allow us to proactively manage technology road maps and product discontinuance plans and monitor their financial health. Even so, some suppliers may still extend their lead times, limit supplies, increase prices or cease to produce necessary parts for our products. If these are unique components, we may not be able to find a substitute quickly, or at all. To address the potential disruption in our supply chain, we use a number of techniques, including qualifying multiple sources of supply, redesign of products for alternative components and purchase of incremental inventory for supply buffer.

Environmental

Our R&D, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. We apply strict standards for protection of the environment and worker health and safety to sites inside and outside the U.S., even if not subject to regulation imposed by foreign governments. We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and worker health and safety laws; however, the risk of environmental liabilities cannot be completely eliminated and there can be no assurance that the application of environmental and health and safety laws to Agilent will not require us to incur significant expenditures. We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. These laws are gradually becoming more stringent and may in the future cause us to incur significant expenditures.

Some of our operations are located on properties that are known to have subsurface contamination undergoing remediation by Hewlett-Packard. Hewlett-Packard has agreed to retain the liability for the contamination, perform the required remediation and indemnify us with respect to claims arising out of the contamination. The determination of the existence and cost of any additional contamination caused by us could involve costly and time-consuming negotiations and litigation. While we expect that Hewlett-Packard will meet its remediation and indemnification obligations in this regard, there can be no guarantee that it will do so. Under our agreement with Hewlett-Packard, Hewlett-Packard will have access to these properties to perform the remediation. Hewlett-Packard has agreed to minimize interference with on-site operations at those properties during the course of the remediation, but there can be no guarantee that our operations will not be interrupted or that we will not be required to incur unreimbursed costs associated with the remediation. Remediation could also harm on-site operations and the future use and value of the properties.

In addition, some of these properties are undergoing remediation by Hewlett-Packard under an order of an agency of the state in which the property is located. Although Hewlett-Packard has agreed to indemnify us with respect to that subsurface contamination, it is possible that one or more of the governmental agencies will require us to be named on any of these orders. The naming of Agilent will not affect Hewlett-Packard’s obligation to indemnify us with regard to these matters.

We are liable and are indemnifying Hewlett-Packard for any contamination found at all facilities transferred to us by Hewlett-Packard excluding the properties undergoing remediation. In addition, we are indemnifying Hewlett-Packard for any liability associated with past non-compliance with environmental laws regulating ongoing operations at all properties transferred to us by Hewlett-

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Packard, as well as at sold or discontinued businesses that are related to our businesses. While we are not aware of any material liabilities associated with such indemnified matters, there is no guarantee that such contamination or regulatory non-compliance does not exist, and will not expose us to material liability in the future.

We are being indemnified by Hewlett-Packard with respect to all environmental liabilities for which Hewlett-Packard accrued a reserve and we are not aware of any material and probable environmental liabilities being assumed by us which are not subject to the indemnity.

International Operations

Our net revenue originating outside the U.S., as a percentage of our total net revenue, was approximately 69 percent in fiscal 2004, 64 percent in fiscal 2003 and 61 percent in fiscal 2002, the majority of which was from customers other than foreign governments. Approximately 11 percent of our revenue in the last three years was derived from Japan. Revenues from external customers are generally attributed to countries based upon the location of the Agilent sales representative. Long-lived assets located outside of the U.S., as a percentage of our total long-lived assets, was approximately 53 percent in fiscal year 2004, 47 percent in fiscal year 2003 and 43 percent in fiscal year 2002. Approximately 12 percent of our long-lived assets were located in Japan in fiscal year 2004, approximately 14 percent were located in Japan in fiscal year 2003 and approximately 10 percent in fiscal year 2002.

Most of our sales in international markets are made by foreign sales subsidiaries. In countries with low sales volumes, sales are made through various representatives and distributors. However, we also sell into international markets directly from the U.S.

Our international business is subject to risks customarily encountered in foreign operations, including interruption to transportation flows for delivery of parts to us and finished goods to our customers, changes in a specific country’s or region’s political or economic conditions, trade protection measures, import or export licensing requirements, unexpected changes in tax laws and regulatory requirements, difficulty in staffing and managing widespread operations, differing labor regulations and differing protection of intellectual property. We are also exposed to foreign currency exchange rate risk inherent in our sales commitments, anticipated sales, and assets and liabilities denominated in currencies other than the local functional currency, and may also become subject to interest rate risk inherent in any debt we incur, or investment and finance receivable portfolios we hold. The U.S. and international response to recent terrorist activities could exacerbate these risks. For example, there may be an increased risk of political unrest in regions where we have significant manufacturing operations such as Southeast Asia. However, we believe that our international diversification provides stability to our worldwide operations and reduces the impact on us of adverse economic changes in any single country. Financial information about our international operations is contained in Note 19, “Segment Information,” of the consolidated financial statements included in Item 15 of this report.

Acquisition and Disposal of Material Assets

On January 5, 2001, we acquired Objective Systems Integrators, Inc. (“OSI”) for approximately $716 million. OSI was a provider of next-generation operations-support-system software for communications service providers and has become part of our test and measurement business. In January 2000, April 2000 and January 2001, we acquired Yokogawa Electric Corporation’s 25 percent equity interest in Agilent Technologies Japan, Ltd. for approximately $521 million. In addition to the OSI and Yokogawa acquisitions, we acquired several other companies since our incorporation that were not material.

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In the fourth quarter of 2000, we entered into an asset purchase agreement with CIT Group Inc. (“CIT,” formerly Tyco Capital Corporation) to sell them substantially all of our leasing portfolio over the course of 2000 and 2001. We also entered into a vendor financing arrangement with CIT whereby CIT will provide equipment financing and leasing services to our customers on a global basis.

In February 2001, we sold a parcel of surplus land in San Jose, California for $287 million in cash.

Executive Officers of the Registrant

The names of our executive officers and their ages, titles and biographies as of December 16, 2004, appear below.

Edward W. Barnholt, 61, Mr. Barnholt has served as Agilent’s President and Chief Executive Officer and as a director since May 1999 and also as Chairman of the Board since November 2002. Before being named Agilent’s Chief Executive Officer, Mr. Barnholt served as Executive Vice President and General Manager of Hewlett-Packard Company’s Measurement Organization from 1998 to 1999, which included the business organizations that have become Agilent. From 1990 to 1998, he served as General Manager of Hewlett-Packard Company’s Test and Measurement Organization. He was elected a Senior Vice President of Hewlett-Packard Company in 1993 and an Executive Vice President in 1996. He is a director of KLA-Tencor Corporation.

Adrian T. Dillon, 50, has served as our Executive Vice President and Chief Financial Officer since December 2001. Prior to assuming this position, Mr. Dillon served as Executive Vice President and Chief Financial and Planning Officer of Eaton Corporation from April 1997 to December 2001. Mr. Dillon held various management positions at Eaton Corporation from 1979 to 1997.

Jean M. Halloran, 52, has served as our Senior Vice President, Human Resources since August 1999. From 1997 to 1999, Ms. Halloran served as Director of Corporate Education and Development for Hewlett-Packard. Prior to assuming this position, from 1993 to 1997, Ms. Halloran acted as human resources manager for Hewlett-Packard’s Measurement Systems Organization. Ms. Halloran joined Hewlett-Packard in 1980 in the Medical Products Group, where she held a variety of positions in human resources, manufacturing and strategic planning.

Didier Hirsch, 53, has served as our Vice President and Corporate Controller since April 2003. Prior to assuming that position, Mr. Hirsch served as Vice President and Treasurer from September 1999 to April 2003. In 1996, Mr. Hirsch became Director of Finance and Administration of Hewlett-Packard Europe, Middle East, and Africa. In 1993, Mr. Hirsch became Director of Finance and Administration of Hewlett-Packard Asia Pacific. Mr. Hirsch joined Hewlett-Packard Company in 1989 as Director of Finance and Administration of Hewlett-Packard France.

D. Craig Nordlund, 55, was named our Senior Vice President, General Counsel and Secretary in May 1999 and serves as an officer or director for a variety of Agilent subsidiaries. He is also a director of the Addison Avenue Federal Credit Union. Mr. Nordlund served as Associate General Counsel and Secretary of Hewlett-Packard Company from 1987 to 1999.

Young K. Sohn, 48, has served as Senior Vice President of Agilent Technologies, Inc. and President of the Semiconductor Products Group since August 2003. He also has served as a Senior Vice President of Agilent Technologies, Inc. since August 2003. Prior to assuming that position, Mr. Sohn was Chairman and Chief Executive Officer of Oak Technology, from February 1999 to August 2003. Before joining Oak Technology, from January 1993 to February 1999, Mr. Sohn held a variety of management positions at Quantum Corporation, including President of its Hard Drive Group, Vice

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President of Marketing for the Desktop Division, and President of the Asia-Pacific region. From August 1983 to January 1993, Mr. Sohn held a number of management positions at Intel Corporation. Mr. Sohn serves on the Boards of Directors of Cymer Corporation and Synnex Technology, Inc.

William P. Sullivan, 54, has served as our Executive Vice President and Chief Operating Officer since March 2002. In this capacity, he shares the responsibilities of the president’s office with Agilent President and Chief Executive Officer Edward W. Barnholt. Mr. Sullivan also has overall responsibility for Agilent’s Electronic Products and Solutions Group, the company’s largest business group. Prior to assuming this position, Mr. Sullivan served as our Senior Vice President, Semiconductor Products Group from August 1999 to March 2002. Before that, Mr. Sullivan held various management positions at Hewlett-Packard. Mr. Sullivan serves on the Board of the Children’s Discovery Museum in San Jose, California.

Jack P. Trautman, 54, has served as Senior Vice President of Agilent Technologies, Inc. and President of the Automated Test Group since May 2002. Prior to assuming that position, Mr. Trautman served as Vice President and General Manager of Communications Management Solutions Business Unit from 2001 to 2002. He served as General Manager of the Data Protection Unit of Hewlett-Packard from 2000 to 2001. Mr. Trautman was the General Manager of Hewlett-Packard’s Computer Peripherals Bristol Division in Bristol, England from 1997 to 2000. Mr. Trautman joined Hewlett-Packard in 1974 and held a number of managerial positions over the years.

Chris van Ingen, 58, has served as Senior Vice President of Agilent Technologies, Inc. and President of the Life Sciences and Chemical Analysis Group since May 2001. Prior to assuming this position, Mr. Van Ingen held a number of positions at Hewlett-Packard including, Chemical Analysis Group Sales and Marketing Manager from 1996 to April 2001, the Americas Marketing Center Manager from 1989 to 1996, Product Marketing Manager at Little Falls Division from 1986 to 1989, and Sales Support Manager at Little Falls Division from 1984 to 1986.

Thomas E. White, 47, has served as Senior Vice President of Agilent Technologies, Inc. and President of the Communications Solutions Group since August 1999. From 1997 to August 1999, Mr. White served as Vice President and General Manager of the Communications Solutions Group of Hewlett-Packard. From 1996 to 1997, he served as General Manager of Hewlett-Packard’s Computer Peripherals Bristol Division and, beginning in 1994, he served as General Manager for Hewlett-Packard’s Telecommunications Systems Division, South Queensferry, Scotland.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 (the ”Exchange Act”). Therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

You can access financial and other information at our Investor Relations website. The address is www.investor.agilent.com. We make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

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Our Corporate Governance Standards, the charters of our Audit and Finance Committee, our Compensation Committee, our Executive Committee and our Nominating/Corporate Governance Committee, as well as our Standards of Business Conduct (including code of ethics provisions that apply to our principal executive officer, principal financial officer, controller and senior financial officers) are available on our website at www.investor.agilent.com under “Corporate Governance Policies.” These items are also available in print to any stockholder who requests them by calling (877) 942-4200 in the U.S. and Canada, and (402) 573-9919 outside the U.S. and Canada.

Item 2.    Properties

Our corporate headquarters and Agilent Technologies Laboratories are located in Palo Alto, California. In total, we have 17 primary sites. Of these primary sites, 10 are located in the U.S. and the remaining 7 are located in China, Germany, Japan, Malaysia, Singapore and the United Kingdom. Nearly all of our primary functions are conducted at multi-building campuses.

Site	Major Activity	Owned/Leased
Palo Alto, CA, U.S. — Corporate Headquarters	Corporate Administration	Owned
Palo Alto, CA, U.S. — Agilent Laboratories	R&D	Primarily Owned
Santa Clara, CA, U.S.	Manufacturing, R&D, Marketing, and Sales and Administration	Owned
San Jose, CA, U.S.	Manufacturing, R&D	Owned
Santa Rosa, CA, U.S.	Manufacturing, R&D	Owned
Loveland, CO, U.S.	Manufacturing, R&D, and Marketing	Owned
Fort Collins, CO, U.S.	Manufacturing, R&D	Owned
Colorado Springs, CO, U.S.	Manufacturing, R&D, Marketing, and Sales and Administration	Owned
Wilmington, DE, U.S. (Little Falls Area)	Manufacturing, R&D, and Administration	Owned
Spokane, WA, U.S.	Manufacturing, R&D, and Marketing	Owned
Shanghai, China	Manufacturing, R&D	Leased
Boeblingen, Germany	Manufacturing, R&D, and Marketing	Owned
Waldbronn, Germany	Manufacturing, R&D	Owned
Hachioji, Japan	Manufacturing, R&D, Marketing, and Sales and Administration	Owned
Penang, Malaysia	Manufacturing, R&D	Owned
Yishun, Singapore	Manufacturing, R&D, Marketing, Sales and Administration	Primarily Owned
South Queensferry, United Kingdom	Manufacturing, R&D	Owned

As of October 31, 2004, we owned or leased a total of approximately 16.0 million square feet of space worldwide. Of that, we owned approximately 11.5 million square feet and leased the remaining 4.5 million square feet. Our sales and support facilities occupied a total of approximately 2.0 million square feet. Our manufacturing plants, R&D facilities and warehouse and administrative facilities occupied approximately 14.0 million square feet. Information about each of our businesses appears below:

Test and Measurement.    Our test and measurement business has manufacturing and R&D facilities in Australia, Canada, China, Germany, Japan, Malaysia, Singapore, the United Kingdom

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and the U.S. Additionally, we have marketing centers in Germany, Hong Kong, Japan, the United Kingdom, and the U.S., and sales offices throughout the world.

Automated Test.    Our automated test business has manufacturing and R&D facilities in Germany, Japan, Singapore and the U.S.

Semiconductor Products.    Our semiconductor products business has manufacturing and R&D facilities in Italy, Malaysia, Singapore, the United Kingdom and the U.S. Additionally, we have marketing centers in Germany, Malaysia, Singapore and the U.S., and sales offices throughout the world.

Life Sciences and Chemical Analysis.    Our life sciences and chemical analysis business has manufacturing facilities in China, Germany, Japan and the U.S. Additionally, we have marketing centers in Germany, Japan, Singapore and the U.S., and sales offices throughout the world.

Item 3.    Legal Proceedings

In November 2001, a securities class action, Kassin v. Agilent Technologies, Inc., et al., Civil Action No. 01-CV-10639, was filed in United States District Court for the Southern District of New York (the “Southern District Court of New York”) against certain investment bank underwriters for our initial public offering (“IPO”), Agilent and various of our officers and directors at the time of the IPO. On February 19, 2003, the Southern District Court of New York granted Agilent’s motion to dismiss the claims against the Company based on Section 10 of the Securities Exchange Act of 1934, as amended, but denied Agilent’s motion to dismiss the claims based on Section 11 of the Securities Act of 1933, as amended. Agilent and more than 200 other issuer defendants have reached an agreement in principle for a settlement with plaintiffs. Under the settlement, plaintiffs’ claims against the Company and its directors and officers would be released, in exchange for a contingent payment (which, if made, would be paid by the Company’s insurer) and an assignment of certain potential claims. On June 14, 2004, papers formalizing the settlement among the plaintiffs, issuer defendants and insurers were presented to the Southern District Court of New York. The settlement remains subject to Court approval. Plaintiffs continue to prosecute their claims against the underwriter defendants, and discovery is now underway.

We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, commercial and environmental matters, which arise in the ordinary course of business. Other than the matter described above, there are no matters pending that we expect to be material in relation to our business, consolidated financial condition, results of operations or cash flows.

Item 4.    Submission of Matters to a Vote of Security Holders

During the fourth quarter of fiscal 2004, there were no matters submitted to a vote of securities holders, through the solicitation of proxies or otherwise.

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PART II

Item 5.    Market for the Registrant’s Common Equity and Related Stockholder Matters

Our common stock is listed on the New York Stock Exchange with the ticker symbol “A.” For the 2004 and 2003 fiscal years, the New York Stock Exchange reported the high and low prices per quarter as follows:

Fiscal 2004	High		Low
First Quarter (ended January 31, 2004)	$	38.80	$	24.97
Second Quarter (ended April 30, 2004)	$	37.62	$	26.91
Third Quarter (ended July 31, 2004)	$	29.68	$	22.63
Fourth Quarter (ended October 31, 2004)	$	25.31	$	19.51

Fiscal 2003	High		Low
First Quarter (ended January 31, 2003)	$	20.30	$	13.19
Second Quarter (ended April 30, 2003)	$	16.82	$	11.30
Third Quarter (ended July 31, 2003)	$	22.64	$	15.48
Fourth Quarter (ended October 31, 2003)	$	26.48	$	20.31

As of October 29, 2004, there were 62,831 stockholders of record of common stock. The closing share price for our common stock on October 29, 2004, as reported by the New York Stock Exchange, was $25.06.

We have not paid any dividends to date, and we currently intend to retain any future income to fund the development and growth of our business. We do not anticipate paying any cash dividends in the foreseeable future.

On October 28, 2004, we issued 771,573 shares of Agilent common stock in consideration of all the shares of Silicon Genetics. The shares were issued in reliance on Section 3(a)(10) of the Securities Act of 1933, as amended.

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EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information about our equity compensation plans as of October 31, 2004. All outstanding awards relate to our common stock.

Plan category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	71,149,209	$	29	76,349,608	(1)(2)(3)
Equity compensation plans not approved by security holders	—		—	—
Total	71,149,209	$	29	76,349,608

(1) Includes 23,026,610 of securities authorized and available for issuance in connection with the Agilent Technologies, Inc. Employee Stock Purchase Plan (the “423(b) Plan”).

(2) Shares authorized for issuance in connection with the 423(b) Plan are subject to an automatic annual increase of the lesser of one percent of the outstanding common stock of Agilent or an amount determined by the Compensation Committee of our Board of Directors. In no event shall the number of shares authorized for issuance in connection with the 423(b) Plan exceed 75 million shares.

(3) We issue securities under our equity compensation plans in forms other than options, warrants or rights. Under the Agilent Technologies, Inc. 1999 Stock Plan, (the “Stock Plan”), we may issue Stock Awards, including but not limited to restricted stock and restricted stock units, as that term is defined in the Stock Plan. No more than 10 percent of the total shares available for issuance under the Stock Plan will constitute restricted stock awards. Under the Agilent Technologies, Inc. 1999 Non-Employee Director Stock Plan (the “1999 Non-Employee Director Stock Plan”), we may issue Special Compensation, as that term is defined in Section 7 of the 1999 Non-Employee Director Stock Plan.

CHANGES IN SECURITIES, USE OF PROCEEDS AND

ISSUER PURCHASES OF EQUITY SECURITIES

None.

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Item 6.    Selected Financial Data

SELECTED FINANCIAL DATA

(Unaudited)

	Years Ended October 31,
	2004		2003			2002			2001			2000
	(in millions, except per share data)
Consolidated Statement of Operations Data (1, 2, 3):
Net revenue	$	7,181	$	6,056		$	6,010		$	8,396		$	9,361
Income (loss) from continuing operations before taxes		440		(690	)		(1,547	)		(477	)		1,018
Income (loss) from continuing operations		349		(1,790	)		(1,022	)		(406	)		672
Income from discontinued operations, net of taxes		—		—			—			6			85
Gain (loss) from the sale of discontinued operations, net of taxes		—		—			(10	)		646			—
Income (loss) before cumulative effect of accounting changes		349		(1,790	)		(1,032	)		246			757
Cumulative effect of adopting SFAS No. 133, net of taxes		—		—			—			(25	)		—
Cumulative effect of adopting SAB 101, net of taxes		—		—			—			(47	)		—
Cumulative effect of adopting SFAS No. 142		—		(268	)		—			—			—
Net income (loss)	$	349	$	(2,058	)	$	(1,032	)	$	174		$	757
Net income (loss) per share — Basic:
Income (loss) from continuing operations	$	0.72	$	(3.78	)	$	(2.20	)	$	(0.89	)	$	1.49
Income from discontinued operations, net		—		—			—			0.01			0.19
Gain (loss) from the sale of discontinued operations, net		—		—			(0.02	)		1.41			—
Cumulative effect of adopting SFAS No. 133, net		—		—			—			(0.05	)		—
Cumulative effect of adopting SAB 101, net		—		—			—			(0.10	)		—
Cumulative effect of adopting SFAS No. 142		—		(0.57	)		—			—			—
Net income (loss)	$	0.72	$	(4.35	)	$	(2.22	)	$	0.38		$	1.68
Net income (loss) per share — Diluted:
Income (loss) from continuing operations	$	0.71	$	(3.78	)	$	(2.20	)	$	(0.89	)	$	1.48
Income from discontinued operations, net		—		—			—			0.01			0.18
Gain (loss) from the sale of discontinued operations, net		—		—			(0.02	)		1.41			—
Cumulative effect of adopting SFAS No. 133, net		—		—			—			(0.05	)		—
Cumulative effect of adopting SAB 101, net		—		—			—			(0.10	)		—
Cumulative effect of adopting SFAS No. 142		—		(0.57	)		—			—			—
Net income (loss)	$	0.71	$	(4.35	)	$	(2.22	)	$	0.38		$	1.66
Weighted average shares used in computing basic net income (loss) per share		483		473			465			458			449
Weighted average shares used in computing diluted net income (loss) per share		490		473			465			458			455

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	October 31,
	2004		2003		2002		2001		2000
	(in millions)
Consolidated Balance Sheet Data (1):
Cash and cash equivalents	$	2,315	$	1,607	$	1,844	$	1,170	$	996
Working capital	$	2,706	$	1,983	$	2,899	$	2,797	$	2,476
Total assets	$	7,056	$	6,297	$	8,203	$	7,986	$	8,330
Senior convertible debentures	$	1,150	$	1,150	$	1,150	$	—	$	—
Stockholders’ equity	$	3,569	$	2,824	$	4,627	$	5,659	$	5,265

(1) Consolidated financial data and notes for all periods present our healthcare solutions business as a discontinued operation.

(2) Income from continuing operations for the year ended October 31, 2004 includes a pre-tax restructuring charge of $161 million, including a pre-tax asset impairment charge of $25 million. Loss from continuing operations for the year ended October 31, 2003 includes a pre-tax restructuring charge of $372 million, including a pre-tax asset impairment charge of $15 million, and a non-cash charge recorded during the third quarter of 2003 to establish a tax valuation allowance of $1.4 billion. The $1.4 billion included $0.4 billion of tax benefits recorded during the first six months of 2003 resulting in approximately $1.0 billion net tax provision recorded within provision for taxes for the year ended October 31, 2003; the valuation allowance essentially eliminated our net deferred tax assets. Loss from continuing operations for the year ended October 31, 2002 includes a pre-tax restructuring charge of $474 million including a pre-tax asset impairment charge of $163 million. Loss from continuing operations for the year ended October 31, 2001 includes a pre-tax gain of $269 million relating to the sale of surplus land in California, inventory charges of $460 million, a pre-tax restructuring charge of $154 million primarily relating to severance expenses and a pre-tax asset impairment charge of $74 million for our customer support software.

(3) Consolidated statement of operations data for the year ended October 31, 2001 and 2000 includes the impact of the sale of our portfolio of lease assets to CIT Group Inc. (formerly known as Tyco Capital Corporation). In 2001, net proceeds from this sales transaction were $287 million and we recognized $254 million in net revenue from continuing operations and $131 million in cost of products from continuing operations. In 2000, net proceeds from this sales transaction were $234 million and we recognized $197 million in net revenue from continuing operations and $83 million in cost of products from continuing operations.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding trends, cyclicality, seasonality and growth in the markets we sell into, our strategic direction, expenditures in research and development, contracts, remediation and indemnification, our future effective tax rate, new product introductions, product pricing, changes to our manufacturing processes, our liquidity position, our ability to generate cash from continuing operations, our image sensor technology and the sale of our camera module business, our expected growth, the potential impact of our adopting new accounting pronouncements, our financial results, revenue generated from international sales, our potential repatriation of earnings, the impact of our enterprise resource planning systems implementation, the impact of our variable cost structure, our obligations under and assumptions about our retirement and post-retirement benefit plans, our lease payment obligations, savings from our restructuring programs and the existence or length of an economic recovery that involve risks and uncertainties. Our actual results could differ from the results

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contemplated by these forward-looking statements due to certain factors, including those discussed in Item 7 and elsewhere in this report.

Overview

Agilent, incorporated in Delaware in May 1999, is a global diversified technology organization that provides enabling solutions to markets within the communications, electronics, life sciences and chemical analysis industries. Prior to our initial public offering of 15.9 percent of our stock in November 1999, we were a wholly-owned subsidiary of Hewlett-Packard. Hewlett-Packard distributed the remaining 84.1 percent of our stock to its stockholders on June 2, 2000 in the form of a stock dividend.

Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer to our fiscal year.

Reclassifications

Amounts in the consolidated financial statements as of and for the years ended October 31, 2003 and October 31, 2002 have been reclassified to conform to the presentation used in 2004.

Executive Summary

The sales of our products and services are dependent, to a large degree, on customers whose industries are subject to cyclical trends in the demand for their products. Shifts in the semiconductor market, electronics industry, computer industry and telecommunications markets, as well as rapidly shifting global economic conditions, have had and will have significant impacts on our businesses.

In those industry segments where we are a capital equipment provider, our revenue is dependent on the capital expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction to changes in their businesses and in the economy. We expect some portions of our businesses to remain cyclical in the foreseeable future. Given these spending patterns, we are moving towards a more variable cost structure in order to minimize any adverse impact to our profitability. This includes the use of contract manufacturers and third-party service providers.

We generate revenue directly from sales of components incorporated in consumer electronics, such as cell phones, cameras, games, personal computers, and printers, or indirectly from sales of test and measurement equipment used to design, manufacture or test such components. Sales of these components and test and measurement equipment are concentrated during the holiday season. This seasonal pattern means that we typically experience higher revenues and orders during our fourth quarter as manufacturers ramp up production and then decline in our first quarter. We also experience larger volumes of business in our fourth quarter for products that we sell to the aerospace and defense industry and the U.S. government and generally experience reduced volumes during our first quarter. However, in the fourth quarter of 2004 our usual seasonal increase in revenues and orders did not occur. We experienced a decline in orders in the third and fourth quarter largely in the semiconductor and wireless handset manufacturing test markets.

Orders in 2004 were up by 15 percent, with much of that growth in the first half of the year. Test and measurement orders increased 18 percent year-over-year related to a strong Aerospace and Defense industry, growth in consumer electronics, and expansion of the Asian handset manufacturing capacity. Semiconductor products orders grew 20 percent over 2003, with strength in the personal systems market, offset by a decline in the networking market. Our automated test business saw a slight decline in orders over the prior year, caused by a market decrease in the second half of the year. Orders increased 13 percent over last year in the life sciences and chemical analysis markets. This increase was driven by the demand for replacement systems over our large

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installed base, increased U.S. government spending for homeland security, spending related to environmental testing in Asia, and increased demand from generic drug manufacturers.

Annual revenues were at their highest level since 2001. Net revenue for the year was $7,181 million, an increase of 19 percent over 2003. Our test and measurement and our life sciences and chemical analysis businesses experienced revenue growth throughout 2004. However our automated test and semiconductor products business experienced revenue declines in the second half of the year, particularly in the fourth quarter. These declines were in large part due to our customers’ excess capacity and excess inventory in the semiconductor industry.

Cost of sales as a percentage of net revenue decreased 5 percentage points from 2003 to 2004. This is a reflection of our continued work on lowering our cost structure. We will continue to see the benefits of a more variable cost structure, including the impact of using contract manufacturers and third-party service providers.

Operating expenses as a percent of revenue have declined from 62 percent in 2002 and 50 percent in 2003 to 38 percent in 2004. In dollar terms, operating expenses have declined $720 million from 2002 to 2003 and $294 million from 2003 to 2004. Reduced restructuring and asset impairment charges, coupled with increased savings from these efforts, account for the majority of the expense reduction in both years. In 2004, pension and post-retirement benefits decreased by $45 million due to additional funding, better investment results and a favorable interest rate environment. Our efforts to reduce our infrastructure costs and to control discretionary spending also contributed to the decrease. We completed the implementation of our Enterprise Resource Planning (“ERP”) and Customer Relationship Management (“CRM”) projects, and have now begun to see some of the benefits in cost savings and operational improvement.

Total cash and cash equivalents increased $708 million to $2.3 billion at October 31, 2004. Net cash provided from operating activities was $663 million for 2004. Cash on hand as of October 31, 2004 was $2,315 million. Days sales outstanding decreased to 52 days as of October 31, 2004 from 58 days a year ago. We have improved our inventory days-on-hand from 93 days as of October 31, 2003 to 89 days as of the end of the current period.

Income from operations in 2004 was $386 million, an increase of approximately $1,111 million. The increase was due to an increase in revenue of $1,125 million, as well as the benefit of our restructuring plans. As we increased our revenues, we continued to keep spending under tight control allowing this revenue increase to fully impact our profit increase.

Looking forward, we expect increases in the test and measurement and life sciences and chemical analysis markets in 2005. We expect the semiconductor and semiconductor capital equipment markets to be slightly down. We intend to further reduce our costs and expenses to meet our operating cost structure goals. The announced sale of our camera module business is not expected to have a material impact on operating profits in 2005. The revenues for 2004 associated with the camera module business were approximately $300 million.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the

34

estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, restructuring and asset impairment charges, inventory valuation, retirement and post-retirement plan assumptions, valuation of long-lived assets and accounting for income taxes.

Revenue recognition.    We enter into agreements to sell products (hardware or software), services, and other arrangements (multiple element arrangements) that include combinations of products and services. Revenue from product sales, net of trade discounts and allowances, is recognized provided that persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Revenue is reduced for estimated product returns and distributor price protection, when appropriate. For sales that include customer-specified acceptance criteria, revenue is recognized after the acceptance criteria have been met. For products that include installation, if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and recognition of installation revenue occurs when the installation is complete. Otherwise, neither the product nor the installation revenue is recognized until the installation is complete. Revenue from services is deferred and recognized over the contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, we use objective evidence of fair value to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. The amount of product revenue recognized is affected by our judgments as to whether an arrangement includes multiple elements and if so, whether vendor-specific objective evidence of fair value exists for those elements. Changes to the elements in an arrangement and the ability to establish vendor-specific objective evidence for those elements could affect the timing of the revenue recognition. Most of these conditions are subjective and actual results could vary from the estimated outcome, requiring future adjustments to revenue.

Restructuring and asset impairment charges.    We recognize a liability for restructuring costs at fair value only when the liability is incurred. The three main components of our restructuring plans are related to workforce reductions, the consolidation of excess facilities and asset impairments. Asset impairments primarily consist of property, plant and equipment. Workforce-related charges are accrued when it is determined that a liability has been incurred, which is generally after individuals have been notified of their termination dates and expected severance payments. Plans to consolidate excess facilities result in charges for lease termination fees and future commitments to pay lease charges, net of estimated future sublease income. We recognize charges for consolidation of excess facilities when we have vacated the premises. Asset impairment charges are based on an estimate of the amounts and timing of future cash flows related to the expected future remaining use and ultimate sale or disposal of buildings and equipment. These estimates were derived using the guidance of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), Staff Accounting Bulletin 100, “Restructuring and Impairment Charges” (“SAB 100”), Emerging Issues Task Force 94-3, “Liability Recognition for Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”) and lastly, SFAS No. 146 “Accounting for Exit or Disposal Activities” (“SFAS No. 146”) which is effective for exit and disposal activities initiated after December 31, 2002. If the amounts and timing of cash flows from restructuring activities are significantly different from what we have estimated, the actual amount of restructuring and asset impairment charges could be materially different, either higher or lower, than those we have recorded.

Inventory valuation.    We assess the valuation of our inventory on a quarterly basis and periodically write down the value for estimated excess and obsolete inventory based upon estimates about future demand and actual usage. Such estimates are difficult to make under most economic

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conditions. The excess balance determined by this analysis becomes the basis for our excess inventory charge. Our marketing department plays a key role in our excess inventory review process by providing updated sales forecasts, managing product rollovers and working with manufacturing to maximize recovery of excess inventory. If actual market conditions are less favorable than those projected by management, additional write-downs may be required. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.

Retirement and post-retirement plan assumptions.    Retirement and post-retirement benefit plans are a significant cost of doing business and yet represent obligations that will be ultimately settled far in the future and therefore are subject to estimation. Pension accounting is intended to reflect the recognition of future benefit costs over the employee’s approximate service period based on the terms of the plans and the investment and funding decisions made by us. We are required to make assumptions regarding such variables as the expected long-term rate of return on assets and the discount rate, which are used to determine service cost and interest cost to arrive at pension income or expense for the year. As of October 31, 2004, the expected long-term rate of return in the U.S. was 8.5 percent, and ranged from 4.5 to 7.5 percent for our plans outside the U.S. We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans’ historical performance relative to the overall markets in the countries where the plans are effective. Management will continue to assess the assumptions on the expected long-term rate of return on plan assets for each plan based on relevant market conditions as prescribed by accounting principles generally accepted in the U.S. and will make adjustments to the assumptions as appropriate. Discount rate assumptions were based on the prevailing market long-term interest rates at the measurement date. We are also required to make assumptions for the long-term health care cost trend rates for our post-retirement benefit plans. If any of our assumptions were to change, our benefit plan expenses would also change. A one percent decrease in the estimated return on plan assets would result in increased pension expense of $6 million for 2005 in the U.S. and $11 million for 2005 for all plans outside the U.S. Retirement and post-retirement benefit plan expense is allocated to cost of sales, research and development and selling, general and administrative expenses in the consolidated statement of operations. We incurred expenses of $142 million in 2004, $187 million in 2003 and $122 million in 2002 for our retirement and post-retirement plans. We expect expenses of approximately $117 million in 2005 for our retirement and post-retirement plans.

Workforce-related events such as restructuring cause curtailment and settlement gains or losses when they have a material impact on the average future working lifetime or total number of participants in our retirement and postretirement plans. Our restructuring programs have resulted in material changes to our plan demographics in the U.S. and several other countries in 2002 and 2003. The curtailment and settlement gains and losses related to each event are separately identified in Note 14, “Retirement Plans and Post-retirement Benefits” to the consolidated financial statements in Item 15 of this report.

Valuation of long-lived assets.    We performed our fiscal 2004 annual goodwill impairment analysis in the fourth quarter of 2004. Based on our estimates of forecasted discounted cash flows and our market capitalization, at that time, we concluded that we did not have any impairment. We have also assessed the recoverability of our long-lived assets, by determining whether the carrying value of such assets will be recovered through undiscounted future cash flows. We incurred $25 million of asset impairment charges in 2004, primarily relating to a manufacturing site in California.

The process of evaluating the potential impairment of goodwill and other intangibles is highly subjective and requires significant judgment. We estimate expected future cash flows of our various businesses, which operate in a number of markets and geographical regions. We then determine the carrying value of these businesses. We exercise judgment in assigning and allocating certain assets

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and liabilities to these businesses. We then compare the carrying value including goodwill and other intangibles to the discounted future cash flows. If the total of future cash flows is less than the carrying amount of the assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Estimates of the future cash flows associated with the assets are critical to these assessments. Changes in these estimates based on changed economic conditions or business strategies could result in material impairment charges in future periods. We performed the required transitional impairment test upon our adoption of SFAS No. 142 in the first quarter of 2003 and recorded a $268 million charge related to goodwill.

The process of evaluating the potential impairment of long-lived assets such as our property plant and equipment is also highly subjective and requires significant judgment. In order to estimate the fair value of long-lived assets, we typically make various assumptions about the future prospects for the business that the asset relates to, consider market factors specific to that business and estimate future cash flows to be generated by that business. Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the asset stated on our balance sheet to reflect its estimated fair value. Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as the real estate market, industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, changes in assumptions and estimates could materially impact our reported financial results.

Accounting for income taxes.    Significant management judgment is required in determining our provision for income taxes and in determining whether deferred tax assets will be realized in full or in part. When it is more likely than not that all or some portion of specific deferred tax assets such as net operating losses or foreign tax credit carryforwards will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that are determined not to be realizable. Realization is based on our ability to generate sufficient future taxable income. During the third quarter of 2003, we recorded a non-cash charge to establish a valuation allowance of $1.4 billion, which included approximately $0.4 billion of tax benefits recorded during the first six months of 2003 resulting in an approximately $1.0 billion net tax provision recorded within provision for taxes for 2003. The valuation allowance was determined in accordance with the provisions of SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”), which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. Cumulative losses incurred in the U.S. and in the U.K. jurisdictions in recent years represented sufficient negative evidence, which made it difficult for positive evidence to overcome under SFAS No. 109. Accordingly, a full valuation allowance was recorded. We intend to maintain a full valuation allowance until sufficient positive evidence exists to support reversal of the valuation allowance. Profits or losses incurred in the U.S. and the U.K. affect the ongoing amount of the valuation allowance. We expect that pre-tax income in fiscal 2005 will be recognized at a lower rate because future income taxes in the U.S. and the U.K. will be offset against adjustments to the valuation allowance to effectively eliminate any tax expense or benefit in those jurisdictions. Income taxes will continue to be recorded for various jurisdictions subject to the need for valuation allowances in those jurisdictions.

We have not provided for U.S. federal income and foreign withholding taxes on a portion of our non-U.S. subsidiaries’ undistributed income as of October 31, 2004 because we intend to reinvest such income indefinitely. Should we decide to remit this income to the U.S. in a future period, our provision for income taxes may increase materially in that period.

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On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA includes a deduction of 85 percent for certain foreign earnings that are repatriated, as defined in the AJCA, at an effective tax cost of 5.25 percent on any such repatriated foreign earnings. Agilent may elect to apply this provision to qualifying earnings repatriations in fiscal 2005. We have begun an evaluation of the effects of the repatriation provision. However, Agilent does not expect to be able to complete this evaluation until after Congress or the Treasury Department provides additional clarifying language on key elements of the provision. We expect to complete our evaluation of the effects of the repatriation provision within a reasonable period of time following the publication of the additional clarifying language. The range of possible amounts that Agilent is considering for repatriation under this provision is between zero and $970 million. The related potential range of income tax is between zero and $51 million.

We are subject to ongoing tax examinations of our tax returns by the Internal Revenue Service and other tax authorities in various jurisdictions. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Restructuring and Asset Impairment

Summary

We currently have three restructuring plans – one initiated in the fourth quarter of 2001 (the “2001 Plan”), a second initiated in the fourth quarter of 2002 (the “2002 Plan”), and a third initiated in the first quarter of 2003 (the “2003 Plan”) after it became clear that the actions taken in fiscal 2001 and fiscal 2002 would not be sufficient to return the company to profitability.

All of our plans were designed to reduce costs and expenses in order to return the company to profitability. As of the end of 2004, we have reduced our workforce by approximately 16,700 people (approximately 15,100 from involuntary terminations and approximately 1,600 from net attrition) to approximately 28,000 employees.

Our plans to consolidate excess facilities resulted in charges for lease termination fees and losses anticipated from sub-lease agreements. We have exited more than 115 production, support and sales facilities in the U.S., Korea, Japan, U.K. and other countries, representing more than 4.6 million square feet, or about 24 percent of our worldwide property. We will continue to make lease payments on some of this space over the next five years. We lease most of these buildings from third parties, and the closures impacted all segments. In most cases, we are exiting administrative office buildings which house sales and administrative employees. However, a small number of production facilities were closed as a result of our plans to consolidate manufacturing into fewer sites.

Actions for all plans have been focused on segments that were impacted most severely by the market downturn – primarily our test and measurement and semiconductor products businesses – but actions have also been taken to reduce the costs associated with support services such as finance, information technology, workplace services and to a lesser extent our other business segments. Cost reductions were initiated by moving manufacturing and some of our global shared services operations sites to lower cost regions, reducing the number of properties, particularly sales and administrative sites, and by reducing our workforce through involuntary terminations and selected outsourcing of manufacturing and administrative functions. Our strategy is to move towards a more variable operating cost structure.

We have executed all key actions under our 2001 Plan, although there may be changes in estimates for the consolidation of excess facilities due to changes in market conditions from those originally expected at the time the charges were recorded. Our 2002 Plan is complete. We are continuing to see the estimated savings of $350 million per quarter ($300 million from the 2001 Plan

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and $50 million from the 2002 Plan) that was initially projected. The 2003 Plan is still being implemented, however, we have already realized the expected $125 million reduction in quarterly operational costs. We expect to incur further restructuring costs and increase the savings related to the 2003 Plan in the first half of 2005.

We recorded restructuring and asset impairment charges of $161 million, $372 million and $474 million for 2004, 2003 and 2002, respectively. Our plans to consolidate excess facilities resulted in charges of $35 million in 2004 for lease termination fees and losses anticipated from sub-lease agreements related to our 2001 and 2003 Plans. Similar charges in 2003 and 2002 were $37 million and $53 million, respectively. We will continue to make lease payments on some of this excess facility space over the next five years. Charges associated with workforce reductions and asset impairments related to our 2003 Plan were $101 million and $25 million, respectively, for 2004. Similar charges relating to all plans were $353 million for 2003 and $421 million for 2002.

The restructuring accrual for all plans, representing future outlays, which totaled $87 million as of October 31, 2004 and $89 million as of October 31, 2003 is recorded in other accrued liabilities on the consolidated balance sheet. For further details on our restructuring plans, see Note 13, “Restructuring and Asset Impairment” to the consolidated financial statements in Item 15 of this report.

New Accounting Pronouncements

Adoption of New Pronouncements

In January 2003 the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) which was amended by FIN 46R issued in December 2003. FIN 46 addresses consolidation by business enterprises of variable interest entities (“VIE’s”) that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) for which the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires consolidation of VIE’s for which Agilent is the primary beneficiary and disclosure of a significant interest in a VIE for which Agilent is not the primary beneficiary. As a result of our review, no entities were identified requiring disclosure or consolidation under FIN 46.

In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” (“SAB No. 104”). SAB No. 104 rescinds certain sections of SAB No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”), related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). The revenue recognition principles of SAB No. 101 remain largely unchanged by the issuance of SAB No. 104. The adoption of this standard did not affect our financial condition, results of operations or cash flows.

In December 2003, the FASB issued a revision SFAS No. 132 (the “revision”), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. The revision requires additional disclosures relating to the description of the types of plan assets, investment strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans recognized during interim periods. We adopted the disclosure requirements beginning with the first quarter of 2004 and the standard is effective for all future quarterly and annual reports; see Note 14 for such disclosures.

In March 2004, the FASB issued EITF No. 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments,” which provides new guidance for assessing impairment losses on debt and equity investments. The new impairment model applies to investments

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accounted for under the cost or equity method and investments accounted for under FAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” EITF No. 03-01 also includes new disclosure requirements for cost method investments and for all investments that are in an unrealized loss position. In September 2004, the FASB delayed the accounting provisions of EITF No. 03-01; however the disclosure requirements remain effective and the applicable ones have been adopted for our year-end 2004. We will evaluate the effect, if any, of EITF 03-01 when final guidance is issued.

In March 2004, the EITF reached a consensus on EITF Issue No. 03-16, “Accounting for Investments in Limited Liability Companies” (“EITF 03-16”). The EITF concluded that if investors in a limited liability company have specific ownership accounts, they should follow the guidance prescribed in Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures, and EITF Topic No. D-46, Accounting for Limited Partnership Investments.” Otherwise, investors should follow the significant influence model prescribed in Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” The adoption of this Issue did not have a material impact on the company’s financial condition, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R addresses all forms of share-based payment (“SBP”) awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R will require Agilent to expense SBP awards with compensation cost for SBP transactions measured at fair value. The FASB originally stated a preference for a lattice model because it believed that a lattice model more fully captures the unique characteristics of employee stock options in the estimate of fair value, as compared to the Black-Scholes model which Agilent currently uses for its footnote disclosure. The FASB decided to remove its explicit preference for a lattice model and not require a single valuation methodology. SFAS No. 123R requires Agilent to adopt the new accounting provisions beginning in our fourth quarter of 2005. Agilent has not yet determined the impact of applying the various provisions of SFAS No. 123R.

In May 2004, the FASB issued a FASB Staff Position (“FSP”) regarding SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. FSP No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” discusses the effect of the Medicare Prescription Drug, Improvement and Modernization Act (the “Act”) enacted in December 2003 and supersedes FSP No. 106-1, which was issued in January 2004. FSP No. 106-2 considers the effect of the two new features introduced in the Act in determining our accumulated postretirement benefit obligation (“APBO”) and net periodic postretirement benefit cost. The effect on the APBO will be accounted for as an actuarial experience gain to be amortized into income over the average remaining service period of plan participants. Companies may elect to defer accounting for this benefit or may attempt to reflect the best estimate of the impact of the Act on their net periodic costs currently. The adoption of FSP No. 106-2 in the fourth quarter of 2004 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2004, the FASB issued FASB Statement No. 151, “Inventory Costs – an amendment of ARB No. 43” (“FAS 151”), which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. FAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are evaluating the impact of this standard on our consolidated financial statements.

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In December 2004, the FASB issued an FSP regarding “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the AJCA, FSP 109-b. FSP 109-b allows Agilent time beyond the fourth quarter of 2004, the period of enactment, to evaluate the effect of the AJCA on our plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 “Accounting of Income Taxes.” See the discussion of the potential impact on Agilent in “Critical Accounting Policies and Estimates — Accounting for Income Taxes,” above.

Acquisitions

We made one acquisition during 2003 and three during 2004, which were not significant to our consolidated financial position, results of operations or cash flows. These acquisitions were accounted for either under the purchase method of accounting as defined in SFAS No. 141 or as a purchase of assets. For the acquisitions accounted for under SFAS No. 141, the results of operations of the acquired companies were included prospectively from the date of acquisition and the acquisition cost was allocated to the acquired tangible assets and liabilities and identifiable intangible assets based on fair values at the date of acquisition. Residual amounts were recorded as goodwill. In-process research and development write-offs were insignificant.

Unaudited pro forma statement of operations information has not been presented because the effects of the purchase method acquisitions were not material on either an individual or an aggregated basis.

Foreign Currency

Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. We hedge net cash flow and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short term and anticipated basis. We do experience some fluctuations within individual lines of the consolidated statement of operations and balance sheet as our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. However, movements in exchange rates net of our hedging activities had no material effect on our net income (loss) in the periods presented. For example, the weakening of the U.S. dollar throughout 2004 led to an increase in revenue of approximately $150 million, which primarily affected Europe and Japan. However, this was offset by an increase to cost of sales of approximately $65 million and an increase to operating expenses of approximately $80 million relating to those foreign currency movements. Our hedging activities resulted in an increase of cost of sales of approximately $3 million for the fiscal year end October 31, 2004. The effect of exchange rate movements on our consolidated statement of cash flows was $14 million in 2004 compared to $20 million and $6 million in 2003 and 2002, respectively.

Indemnifications

Indemnifications to Hewlett-Packard Company

We have given multiple indemnities to Hewlett-Packard Company in connection with our activities prior to our spin-off from Hewlett-Packard for the businesses that constituted Agilent prior to the spin-off. These indemnifications cover a variety of aspects of our business, including, but not limited to, employee, tax, intellectual property and environmental matters. The agreements containing these indemnifications have been previously disclosed as exhibits to our registration statement on Form S-1 filed on August 16, 1999. In our opinion, the fair value of these indemnifications is not material.

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Indemnifications to Koninklijke Philips Electronics, N.V. (“Philips”)

In connection with the sale of our healthcare solutions business to Philips on August 1, 2001, we indemnified Philips for various matters, including product liability issues arising within two years of the sale agreement. In our opinion, the fair value of these indemnifications is not material.

Indemnifications to Officers and Directors

Our corporate by-laws require that we indemnify our officers and directors, as well as those who act as directors and officers of other entities at our request, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to Agilent. In addition, we have entered into separate indemnification agreements with each director and each board-appointed officer of Agilent which provide for indemnification of these directors and officers under similar circumstances and under additional circumstances. The indemnification obligations are more fully described in the by-laws and the indemnification agreements. See Exhibits 3.2 and 10.6 of this document. We purchase standard insurance to cover claims or a portion of the claims made against our directors and officers. Since a maximum obligation is not explicitly stated in our by-laws or in our indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, we have not made payments related to these obligations, and the fair value for these obligations is zero on the consolidated balance sheet as of October 31, 2004.

Other Indemnifications

As is customary in our industry and as provided for in local law in the U.S. and other jurisdictions, many of our standard contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and the use of our products and services, the use of their goods and services, the use of facilities and state of our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts, usually up to a specified maximum amount. In addition, from time to time we also provide protection to these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

Results of Continuing Operations

Income from continuing operations increased to $349 million in 2004 from losses of $1,790 million in 2003 and $1,022 million in 2002. The increase in income from 2003 to 2004 of approximately $2,139 million was primarily due to revenues increasing by $1,125 million, gross margins improving by 5 percentage points, while operating expenses were down $294 million year-over-year. The provision for taxes also decreased by $1,009 million year over year due to the $1,022 million valuation allowance charge in 2003. The increase in loss from 2002 to 2003 of approximately $768 million was also primarily due to this tax provision of $1,022 million, offset by a reduction of $326 million of goodwill amortization charges. Fiscal year 2004 was an improved year for Agilent. Agilent had strong profitability in all four quarters of 2004 due to tight controls on our operating structure and 19 percent revenue growth. This is despite a weakening in our semiconductor-related businesses markets, which we began to experience in the third quarter after a strong first half. We have accomplished cost reductions via streamlining our IT systems environment and the number of IT applications. This was brought about by the completion of the implementation

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of our ERP and CRM projects. Direct IT costs incurred for the implementation of our ERP and CRM projects were $162 million in 2004, $180 million in 2003 and $146 million in 2002. We have also reduced our workforce to 28,000 employees from a peak of 44,000 in April 2001. The final step of our restructuring was the consolidation of excess manufacturing facilities and moving global shared services to lower cost regions and outsourcing services where it made economic sense. Our gross margins improved in 2004. We have reduced our indirect spending by approximately $82 million. This reduction was accomplished by focusing our spending with preferred suppliers and by continuing to reduce spending on IT consulting services. We have also continued to monitor our professional service agreements for savings and value provided to the business. Indirect spending has been reduced through a combination of stronger sourcing negotiations, demand management and compliance with our policy of using preferred suppliers.

We have continued to maintain our research and development expenditures in order to prepare for our future. We introduced several new products including new proteomic tools and the industry’s first fully automated lab-on-a-chip system for basic research and drug discovery in our life sciences and chemical analysis business. In our automated test business, we introduced a new memory test system as well as strengthened the systems on a chip platform with enhancements and new products. We have also entered into the flat panel display test market with our acquisition of IBM’s flat panel display business. In our test and measurement segment we introduced the world’s first 13 gigahertz oscilloscope.

Orders and Net Revenue

	Years Ended October 31,									2004 over 2003 % Change		2003 over 2002 % Change
	2004			2003			2002
				(in millions)
Orders	$	6,997		$	6,084		$	6,013		15	%	1	%
Net Revenue:
Products	$	6,302		$	5,240		$	5,234		20	%	—
Services and other		879			816			776		8	%	5	%
Total net revenue	$	7,181		$	6,056		$	6,010		19	%	1	%
	Years Ended October 31,									2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
	2004			2003			2002
% of Total Net Revenue:
Products		88	%		87	%		87	%	1	%	—
Services and other		12	%		13	%		13	%	(1	)%	—
Total		100	%		100	%		100	%	—		—
	Years Ended October 31,									2004 over 2003 % Change		2003 over 2002 % Change
	2004			2003			2002
				(in millions)
Americas	$	2,424		$	2,347		$	2,553		3	%	(8	)%
Europe		1,474			1,214			1,154		21	%	5	%
Asia Pacific		3,283			2,495			2,303		32	%	8	%
Total net revenue	$	7,181		$	6,056		$	6,010		19	%	1	%

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Orders in 2004 were up by 15 percent, with much of that growth in the first half of the year. Orders were up year over year in all businesses except automated test, which saw a 2 percent decrease over the prior year, primarily caused by our customers’ excess capacity and excess inventory that had built up over the second half. We started experiencing a weakening in orders in the third and fourth quarters largely in the semiconductor related and wireless handset manufacturing test markets. The order demand remained strong in aerospace defense, personal systems, life sciences and chemical analysis markets. Orders in 2003 were flat compared to 2002, although during the fourth quarter of 2003, we saw a marked increase from earlier in the year. Orders in 2003 were driven by an increase in orders from cell phone manufacturers and demand for components that are included in consumer electronics, such as cell phones, cameras, games, personal computers, printers and test and measurement solutions used in the design and manufacturing of consumer electronics.

Net revenue in 2004 increased by 19 percent over 2003, including the impact of foreign currency exchange rates. All of our businesses experienced this increase in revenue. The semiconductor products market was very strong in the first half, but we have seen a decline as our customers work off inventory. We experienced a similar decline in the second half of the year in our automated test business, which is also highly dependent on the semiconductor market. Geographically, net revenue significantly increased in Europe and especially in Asia Pacific while having a modest increase in the U.S., Canada, Latin America (collectively referred to as the “Americas”). This modest improvement in the Americas was as expected as the economy in the U.S. recovered and the excess supply of used equipment was depleted. The strong growth in Asia Pacific was due to continued growth in the contract manufacturing and outsourcing markets in that region. Net revenue in 2003 was flat compared to 2002, although during fiscal year 2003 we saw an increase at the end of the year during our seasonally high fourth quarter.

Services and other includes revenue generated from servicing our installed base of products, warranty extensions and consulting in all years. In 2004 and 2003, services and other revenue increased as our installed base of products increased.

Costs and Expenses

As a % of Net Revenue	Years Ended October 31,						2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
	2004		2003		2002
Cost of products as a percentage of product revenue	55	%	61	%	64	%	(6	)	(3	)
Cost of services and other as a percentage of services and other revenue	65	%	70	%	65	%	(5	)	5
Total costs as a percentage of total net revenue	57	%	62	%	64	%	(5	)	(2	)
Research and development	13	%	17	%	21	%	(4	)	(4	)
Selling, general and administrative	25	%	32	%	41	%	(7	)	(9	)

Total cost of sales as a percentage of net revenue decreased 5 percentage points from 2003 to 2004. Cost of services and other as a percentage of services and other revenue decreased by 5 percentage points and cost of products as a percentage of product revenue decreased 6 percentage points from 2003. This is a reflection of our continued work on lowering our cost structure, principally through our restructuring programs that contributed incremental savings of $248 million in 2004 as compared to 2003. We will continue to see the benefits of a more variable cost structure through use of selective outsourcing and our variable pay programs for our employees.

Total cost of sales as a percentage of net revenue was relatively flat from 2002 to 2003. Cost of services and other as a percentage of services and other revenue increased by 5 percentage points

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while cost of products as a percentage of product revenue decreased slightly from 2002. The increase in cost of services and other was driven by increased materials consumption for our service and support businesses. Cost of products decreased primarily due to net incremental restructuring savings of $310 million, and a reduction of inventory charges. This decrease was offset by unfavorable mix and volume impacts and the unfavorable currency impact due to the weakening of the U.S. dollar.

Inventory charges totaled $45 million in 2004, $11 million in 2003 and $74 million in 2002. Inventory charges in 2004 included a $20 million charge relating to our camera module business. Inventory charges in 2002 reflected continuing weakness in some of our largest markets, particularly in the telecommunications market. We experienced a significant decline in inventory charges in 2003 compared to 2002 primarily due to our efforts to effectively manage our inventory levels. Sales of previously reserved inventory were $24 million in 2004, compared to $17 million in 2003 and $34 million in 2002.

Research and development expenses as a percentage of net revenue decreased by 4 percentage points in 2004 as a result of net incremental savings from our restructuring efforts of approximately $89 million. The actual decrease from 2003 to 2004 was $118 million. Research and development expenses as a percentage of net revenue decreased in 2003 from 2002 as a result of savings from our restructuring efforts of approximately $220 million and decreased indirect spending of approximately $95 million in 2003. These savings were offset by increased costs due to the weakening of the U.S. dollar of approximately $30 million. Our research and development efforts focus on potential new products and product improvements covering a wide variety of technologies in communications, electronics, life sciences and chemical analysis, none of which is individually significant to our operations. At our central research facility, Agilent Laboratories, we conduct five types of research and development: basic research, which contributes to the fundamental understanding of areas anticipated to be important in the very long term; foundation technologies research, which enables fundamental advances across all businesses; communications research, which creates technologies to enable pervasive access to information; life sciences research, which enables new measurement solutions to facilitate the development of next-generation pharmaceuticals and molecular diagnostics; and measurement research, which provides critical advances in test and measurement electronics and systems. The research at Agilent Laboratories represents less than 10 percent of Agilent’s consolidated spending on research and development and is intended to be relatively high in technical risk and to be the foundation for future products over a longer time horizon, generally five to ten years out. The majority of our research and development is nearer term and occurs in Agilent’s four business segments. This research and development is aimed at improving the more than 20,000 products already in production and on new product releases. Because of the large number of new and existing products and research and development projects across all of our businesses and at Agilent Laboratories, it is difficult to quantify the impact of any specific products or projects. We are committed to bringing new products to the market and have focused our development efforts on key strategic opportunities in order to align our business with available markets and position ourselves to capture market share.

Selling, general and administrative expenses as a percentage of net revenue decreased 8 percentage points in 2004 compared to 2003. Of the $176 million decline, approximately $137 million related to our ongoing restructuring cost savings. The decline was also driven in part by the decrease in indirect spending. The remainder of the decrease reflects our efforts in reducing our infrastructure costs and initiatives to control discretionary spending. Selling, general and administrative expenses as a percentage of net revenue decreased 9 percentage points in 2003 compared to 2002. Selling and general and administrative expenses declined primarily due to a decrease in goodwill amortization and impairments of $326 million. The decline was also driven in part by a decline in indirect spending of $55 million, and incremental net restructuring savings of

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approximately $170 million, which were partially offset by increased costs due to the weakening of the U.S. dollar.

At October 31, 2004, our headcount was approximately 28,000 compared to 29,000 in 2003 and 36,000 in 2002.

Income (Loss) from Operations

	Years Ended October 31,									2004 over 2003 Change	2003 over 2002 Change
	2004			2003			2002
	(in millions)
Income (loss) from operations	$	386		$	(725	)	$	(1,607	)	153%	55%
Operating profit (deficit) margin		5	%		(12	)%		(27	)%	17 ppts	15 ppts

Income from operations in 2004 was $386 million, an increase of approximately $1,111 million. The increase was primarily due to a revenue increase of $1,125 million, combined with $211 million less restructuring charges in 2004 compared to 2003 and approximately $474 million of incremental savings that the restructuring produced.

Our decrease in loss from operations in 2003 to 2002 of $882 million was primarily due to a decrease in goodwill amortization and impairments of $326 million, decreased spending on indirect expenses of approximately $160 million, decreased inventory charges of $63 million and net incremental savings from our restructuring plans.

Other Income (Expense), Net

	Years Ended October 31,									2004 over 2003 % Change		2003 over 2002 % Change
	2004			2003			2002
	(in millions)
Interest income	$	27		$	26		$	44		4	%	(41	)%
Interest expense		(36	)		(36	)		(36	)	—		—
Other income (expense), net		63			45			52		40	%	(13	)%
Total other income (expense), net	$	54		$	35		$	60		54	%	(42	)%

Other income (expense), net generally includes interest income, interest expense, rental income, currency gain (loss) on balance sheet remeasurement, our share of income from joint ventures and equity investments and other miscellaneous items. Other income (expense), net increased by $19 million in 2004 compared to 2003 due primarily to an increase in equity income from a joint venture of $22 million. Other income (expense), net decreased $25 million in 2003 over 2002. This decrease was driven primarily by a decrease in net interest income of $17 million as interest rates and cash decreased.

Tax Valuation Allowance and Provision (Benefit) for Taxes

	Years Ended October 31,
	2004		2003		2002
	(in millions)
Provision (benefit) for taxes	$	91	$	1,100	$	(525	)

For the year ended October 31, 2004, we recorded an income tax provision of $91 million as compared with an income tax provision of $1,100 million, for the year ended October 31, 2003. The current year-to-date provision was recorded for taxes on income generated in certain jurisdictions

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other than the U.S. and the U.K. During the third quarter of 2003, we recorded a non-cash charge to establish a valuation allowance of $1.4 billion which included approximately $0.4 billion of tax benefits recorded during the first six months of 2003, resulting in an approximately $1.0 billion net deferred tax provision recorded within provision for taxes for 2003. The valuation allowance was determined in accordance with the provisions of SFAS No. 109 which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction by jurisdiction basis. Cumulative losses incurred in the U.S. and the U.K. in recent years represented sufficient negative evidence under SFAS No. 109 to require a full valuation allowance in these jurisdictions. We intend to maintain a full valuation allowance in these jurisdictions until sufficient positive evidence exists to support the reversal of the valuation allowance.

For 2004, the annual effective tax rate was 20.7 percent. With the exception of other comprehensive income (“OCI”), this tax rate reflects taxes in jurisdictions other than the U.S. and the U.K., in which income tax or benefit continues to be offset by adjustments to the valuation allowance. From time to time the company undertakes certain employment, capital and other investment actions that subjects the company’s income to reduce tax rates. This tax rate may change over time as the amount or mix of income and taxes changes. Our effective tax rate is calculated using our projected annual pre-tax income or loss and is affected by research and development tax credits, the expected level of other tax benefits, the effects of business acquisitions and dispositions, the impact of changes to the valuation allowance, changes in OCI, as well as changes in the mix of income and losses outside the U.S. and the U.K. jurisdictions having varying statutory rates. The income tax provision of $91 million includes a $53 million (12 percent) benefit for valuation allowance adjustments based on changes in OCI items during 2004, which is comprised of $16 million due to increases in currency translation adjustments and $37 million due to the elimination of the minimum pension liability in the U.K. Under SFAS No. 109, adjustments to the valuation allowance may be required to be recorded to the provision for income taxes line item, even though the tax effects arose from changes in items in other comprehensive income.

For 2003, the effective tax rate was affected by the charge for the valuation allowance. For 2002, the effective tax rate was 34 percent. In 2004 compared to 2003, the lower tax rate in 2004 results principally from the company recording a net $1 billion deferred tax expense related to the valuation allowance charge in 2003 combined with the mix of income and losses outside the U.S. and U.K. jurisdictions having varying statutory rates.

As a result of cumulative actions we have undertaken such as restructuring, geographic location of activities and other actions, our tax rate is lower than in the past and we expect it to continue to be lower in the future. For 2005, we expect an effective tax rate of roughly 20 percent plus or minus 5 percentage points.

General Infrastructure and Shared Services

Overall, we have decreased our infrastructure costs primarily through our restructuring programs and cost controls. We have reduced the number of employees in our workforce that provide support services such as finance, information technology and workplace services, decreased the space that we occupy in our sales and administrative buildings and moved some of our global shared services operations sites to lower cost regions. Compared to the same time last year, incremental savings for infrastructure costs for the twelve months ended October 31, 2004 associated with restructuring plans and cost controls were approximately $230 million. We allocated these savings to all businesses according to usage of related services. The general infrastructure and shared services ended 2004 with approximately 4,000 employees, a decrease of approximately 200 employees from one year ago and approximately 1,700 employees from two years ago.

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Segment Overview

Agilent is a global diversified technology company that provides enabling solutions to markets within the communications, electronics, life sciences and chemical analysis industries. We have four primary businesses: test and measurement, automated test, semiconductor products and life sciences and chemical analysis. In addition to the discussion below, also see Note 19, “Segment Information” in Notes to Consolidated Financial Statements.

Test and Measurement

Our test and measurement business provides standard and customized solutions that are used in the design, development, manufacture, installation, deployment and operation of electronic equipment and systems and communications networks and services. Our communications test solutions generated approximately 70 percent of test and measurement revenues in 2004 while our general purpose test solutions generated approximately 30 percent. Overall order activity over the last 3 years demonstrates the cyclical nature of the markets for our test and measurement products. Orders dropped dramatically during 2002 (29 percent) and 2003 (5 percent) and grew 18 percent year-over-year in 2004.

Orders and Net Revenue

	Years Ended October 31,									2004 over 2003 Change	2003 over 2002 Change
	2004			2003			2002
	(in millions)
Orders	$	2,856		$	2,413		$	2,549		18%	(5)%
Net revenue from products	$	2,498		$	2,135		$	2,219		17%	(4)%
Net revenue from services and other		405			394			393		3%	—
Total net revenue	$	2,903		$	2,529		$	2,612		15%	(3)%
Income (loss) from operations		219			(315	)		(710	)	170%	56%
Operating margin (deficit)		8	%		(12	)%		(27	)%	20 ppts	15 ppts
Return on invested capital (“ROIC”)		8	%		(9	)%		(17	)%	17 ppts	8 ppts

The increase in orders in 2004 compared to 2003, was related to strong aerospace defense business, growth in consumer electronics (DVD players, LCD TVs, cell phones) and expansion of the Asian handset manufacturing capacity. Compared to 2003, test and measurement has experienced an 18 percent increase in orders. While our wireline test orders grew slightly from last year, we experienced significant growth in our wireless communications test (primarily one box testers, network analyzers and wireless systems) and general purpose test (mainly driven by integrated circuit (“IC”) lithography and basic instruments like multi-meters, oscilloscopes and counters) businesses. The decrease in orders in 2003 compared to 2002 was driven by the deterioration of the wireline communications market, pricing pressures, the competitive pressures of the used equipment market and reduction in capital expenditure spending by telecommunications providers.

Test and measurement revenues were up 15 percent year-over-year. Leading this trend in the communications test markets, wireless test revenues were up 22 percent while wireline test was down 11 percent year-over-year. The good results in wireless test was in large part due to the expansion of cell phone handset production in Asia. Pricing pressure and the used equipment market impacted wireline revenues. Communications test makes up approximately 70 percent of the test and measurement revenues and wireless test makes up approximately 80 percent of communications test. General purpose test revenues were up 13 percent year-over-year mainly as a result of growth in aerospace defense as well as in our logic analyzers, oscilloscopes and design software.

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We saw a reduction in orders from wireless handset manufacturers in the fourth quarter of 2004, as they began to absorb the excess capacity that they put in place earlier in the year. This was partially offset by growth in our wireless handset R&D products as customers began to focus on new cellular formats, investments in 3.5G technologies and the development of converged cellular and wireless network devices. In the fourth quarter of 2004, we saw growth in our wireless infrastructure test as top base station manufacturers continued to expand capacity of existing formats to upgrade or improve the quality of service. In some regions, the expansion of 3G capacity has increased the need for additional test equipment. We expect our wireless test business to remain soft through most of the first half 2005 as handset manufacturers rebalance their manufacturing capacity versus the demand. In our general purpose test market, we expect to see continued demand from the U.S. government and prime military contractors, as recapitalization and modernization continues.

Net revenue for 2003 declined 3 percent compared to 2002, following the same trends as orders. The decline in net revenue was primarily the result of the slowdown in the telecommunications industry partially offset by favorable currency impacts.

Costs and Expenses

The following table shows the percentage point decrease in our test and measurement business’s costs and expenses as a percentage of net revenue for 2004 versus 2003 and 2003 versus 2002.

Decrease as a % of Net Revenue	2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
Cost of products and services	(8	)	(4	)
Research and development	(5	)	(5	)
Selling, general and administrative	(8	)	(5	)

Over the past three years, we have implemented cost reduction and restructuring plans to help the company lower it’s cost structure. Our test and measurement segment ended 2004 with approximately 11,200 employees, a decrease of approximately 660 employees from one year ago and 4,600 employees from two years ago. Inventory charges were not material for 2004 or 2003 and were $69 million in 2002. The impact of sales of inventory previously reserved was $7 million in 2004, was not material for 2003 and was $7 million for 2002.

Cost of products and services as a percentage of net revenue decreased by 8 percent year-over-year in 2004. The reduction in 2004 was attributable to incremental restructuring savings of approximately $90 million from consolidation of manufacturing sites, transfer of some manufacturing lines from Sonoma, California to Penang, Malaysia and savings in people related expenses due to headcount reductions, benefit of higher volumes, and improvements in discount levels. By the end of 2003, the restructuring plans had provided cumulative savings to cost of products and services of $140 million. Cost of products and services as a percentage of net revenue decreased in 2003 over 2002 by 4 percent year-over-year.

Research and development expenses as a percentage of net revenue decreased 5 percent year-over-year. On a dollar basis, expenses were down 15 percent, mainly due to $35 million of restructuring savings and an $11 million reduction in indirect expenses. We have reduced our research and development headcount to match the size and focus of the business. We have focused our development efforts on strategic opportunities that align our business with available markets and have cancelled new product introductions that would not result in an adequate return on investment. Research and development expenses as a percentage of net revenue decreased 5 percent in 2003 from 2002 due to restructuring savings and reduction in indirect expense savings.

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Selling, general and administrative expenses as a percentage of net revenue decreased 8 percent in 2004 compared to 2003 due to increased revenue, $42 million in restructuring savings, efficiencies gained from our ERP implementation and a $2 million reduction in indirect expenses. These reductions were partially offset by an unfavorable currency impact of $26 million. Selling, general and administrative expenses as a percentage of net revenue decreased 5 percent in 2003 compared to 2002 due to restructuring savings, efficiencies gained from our ERP implementation and reduction in indirect expenses.

Income (Loss) from Operations

Operating profit increased by $534 million compared to 2003 on a revenue increase of only $374 million. Aggressive restructuring through workforce reductions, reduction in our cost structure and strict discretionary spending controls helped comparative operating results. This resulted in restructuring savings of $167 million for the test and measurement business. This segment’s return on invested capital (“ROIC”) was 8 percent, negative 9 percent and negative 17 percent for 2004, 2003 and 2002, respectively.

Automated Test

Our automated test business provides test system solutions that are used in the manufacture of semiconductor devices, electronics (primarily printed circuit-board assemblies) and flat panel displays. Our test solutions enable electronics designers and manufacturers to shorten the design-to-production cycle, lower manufacturing cost of test, confirm the functional quality of their devices and of their manufacturing processes, and accelerate the high-volume delivery of their products. The main driver of our customers’ business (IT, networking, and internet infrastructure) are the consumers who drive the market for PC’s, cell phones, electronic games, and similar consumer electronics. Our automated test segment experienced a difficult last quarter in 2004 as the business environment was much weaker than expected. This segment is undergoing major product transitions in several of its product lines.

Orders and Net Revenue

	Years Ended October 31,									2004 over 2003 Change	2003 over 2002 Change
	2004			2003			2002
	(in millions)
Orders	$	831		$	845		$	745		(2)%	13%
Net revenue from products	$	749		$	604		$	572		24%	6%
Net revenue from services and other		175			151			134		16%	13%
Total net revenue	$	924		$	755		$	706		22%	7%
Income (loss) from operations		66			(34	)		(70	)	294%	51%
Operating margin (deficit)		7	%		(5	)%		(10	)%	12 ppts	5 ppts
ROIC		6	%		(3	)%		(6	)%	9 ppts	3 ppts

Orders in 2004 decreased 2 percent compared to 2003, primarily due to a weak second half caused by our customers’ excess inventory. Our customers also delayed purchases in anticipation of our recently released next-generation flash memory and system-on-a-chip (“SOC”) test systems. Semiconductor test orders were down 6 percent while electronic manufacturing test orders were up 18 percent compared to last year. In the fourth quarter of 2004, our automated test segment reached its lowest level of quarterly orders since the first quarter of 2003. This downturn could continue through the first half of next year.

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Orders in 2003 increased 13 percent compared to 2002 primarily due to increasing strength in the semiconductor test market as customers started to build increased production capacity for next generation devices. This increase was mainly driven by demand for consumer products in computation such as PC chip sets, graphics, and networking, digital consumer products and wireless products. In the fourth quarter of 2003, our automated test segment reached its highest level of quarterly orders since the fourth quarter of 2000 and continued to achieve market growth through design wins.

Net revenue in 2004 increased 22 percent compared to 2003 primarily due to an improved marketplace. Semiconductor test revenue growth was mixed, with strong parametric test revenue from our investments in 300-millimeter fabrication and wafer production test and solid SOC test revenue. Revenue for our flash memory business declined 13 percent. Services and other revenue increased 16 percent. Services and other includes the sale of support for hardware and software, and the sale of services such as, training, application development and test consulting for new installations and our installed base. We expect the downturn in orders we experienced in the second half of 2004 to impact revenues in the first half of 2005.

Net revenue in 2003 increased 7 percent compared to 2002 primarily due to increased sales of our products across the board in semiconductor test such as, flash memory and SOC, and electronic manufacturing test markets. Semiconductor test grew 7 percent and electronic manufacturing test also grew 7 percent. Support and services revenue increased 13 percent.

Costs and Expenses

The following table shows the percentage point increase/(decrease) in our automated test segment’s costs and expenses as a percentage of net revenue for 2004, 2003 and 2002.

Increase/(Decrease) as a % of Net Revenue	2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
Cost of products and services	(2	)	2
Research and development	(3	)	(2	)
Selling, general and administrative	(7	)	(6	)

As a part of the effort to lower our company’s cost structure, our automated test segment ended this fiscal year with approximately 2,200 employees, a decrease of approximately 60 employees from one year ago and 600 employees from two years ago.

Cost of products and services as a percentage of net revenue decreased in 2004 compared to 2003. Our automated test segment continued to control costs through outsourcing to contract manufacturers, and monitoring indirect and direct material costs. The decreases were driven primarily by higher revenue, savings from costs controls, lower infrastructure costs and efficiencies from outsourcing to contract manufacturers. The pricing environment remains highly competitive.

Cost of products and services as a percentage of net revenue increased in 2003 compared to 2002. Savings from cost controls, and efficiencies from outsourcing to contract manufacturers were offset by competitive pricing pressures. In 2002, integrated device manufacturers (“IDMs”), design houses, and contract manufacturers focused on buying technology capability through high margin testers. However in 2003, as we saw signs of economic recovery, our customers added capacity and bought more focused cost effective systems. Pricing pressures affected the majority of our products.

We sold $3 million of inventory in 2004 that was previously reserved compared to $8 million in 2003 and $4 million in 2002.

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Research and development expenses in 2004 as a percentage of net revenue decreased 3 percentage points from 2003. On a dollar basis, expenses increased 7 percent compared to last year. The increase is related to the company’s plan to aggressively expand the breadth of its offerings in flash and SOC test systems. The 2 percentage point decrease in research and development expenses as a percentage of net revenue in 2003 compared to 2002 was due to aggressive cost controls put in place, which focused our efforts on more strategic opportunities to align our business with available markets. On a dollar basis, research and development expenses in 2003 decreased 4 percent from 2002.

Selling, general and administrative expenses as a percentage of net revenue decreased 7 percentage points in 2004 compared to 2003, while on a dollar basis, expenses were down 7 percent. The decreases reflect our efforts in reducing our infrastructure costs and initiatives to control discretionary spending. In 2003, selling, general, and administrative expenses as a percentage of net revenue were down 6 percentage points compared to 2002, while on a dollar basis, expenses were down 9 percent. The decrease reflects our success in controlling discretionary spending.

Income (Loss) from Operations

In 2004, our automated test segment achieved an operating profit of $66 million, a rebound from an operating loss of $34 million from 2003. This $100 million profit improvement was the result of $169 million in revenue growth, gross margin improvement and expense controls. In 2003, our automated test segment reduced operating losses by 51 percent compared to 2002 while revenue increased 7 percent. Automated test returned to profitability in the second half of 2003. The reduction in loss from operations in 2003 compared to 2002 was primarily due to higher net revenue and reduced spending resulting from our cost reduction measures. In addition, operational efficiencies arising from outsourcing to contract manufacturers contributed to the return to profitability in the second half and improvement in 2003. This segment achieved a ROIC of 6 percent in 2004 compared to a ROIC of negative 3 percent in 2003 and negative 6 percent in 2002.

Semiconductor Products

Our semiconductor products business is a leading supplier of semiconductor components, modules and assemblies for consumer and commercial electronics applications. We design, develop and manufacture products for the networking and personal systems markets. Our personal systems products, which accounted for 72 percent of our 2004 revenue, are used in mobile phones, optical mice, flat panel displays, printers and plasma televisions. Our networking products include fiber optic transceivers for sending and receiving data over high-speed networks and ICs for enterprise storage and networking.

Overall, 2004 marked the semiconductor products business’s return to healthy financial performance, with orders and revenue growing over 2003 by 20 percent and 27 percent, respectively. A small operating loss in 2003 was replaced by solid profit in 2004. After a strong first half of 2004, this business, along with most of our industry, experienced a decline in the second half, due to our customers working off excess inventory. The decline is expected to extend into 2005, but we do anticipate growth opportunities for some of our new products, such as E-pHEMT based front-end modules and laser mouse navigation devices.

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Orders and Net Revenue

	Years Ended October 31,									2004 over 2003 Change	2003 over 2002 Change
	2004			2003			2002
	(in millions)
Orders	$	1,978		$	1,652		$	1,568		20%	5%
Net revenue	$	2,021		$	1,586		$	1,559		27%	2%
Income (loss) from operations		166			(59	)		(115	)	381%	49%
Operating margin (deficit)		8	%		(4	)%		(7	)%	12 ppts	3 ppts
ROIC		17	%		(2	)%		(3	)%	19 ppts	1 ppt

Total orders grew 20 percent in 2004, up from 5 percent growth experienced in 2003. Our personal systems market achieved 32 percent growth in 2004 orders, but our networking market suffered a 4 percent decline. There is a continuing geographic shift of our business, with orders from Asia increasing 5 percent in 2003 and 40 percent in 2004, and accounting for 62 percent of total orders in 2004. Orders from the Americas declined 1 percent in 2003 and 11 percent in 2004.

Robust 2004 order growth in the personal systems market was driven by strength in physical layer networking components, FBAR duplexers, E-pHEMT power modules, optocouplers and camera modules. Within our networking segment, despite being down as a whole, there were a number of product lines that had marked increases. For example, application specific integrated circuits (“ASICs”) grew 18 percent and physical layer networking components grew 74 percent over 2003. Fiber optics and storage area network products, however, suffered double-digit declines compared to 2003.

Revenue grew 27 percent overall in 2004 compared to a 2 percent increase in 2003. Growth continued in the personal systems segment, as revenue increased 37 percent in 2004, following 3 percent growth in 2003. Optocouplers and wireless communication components led the increase in 2004. The Networking segment grew 7 percent in 2004 after declining 1 percent in 2003. Revenues from sales to Hewlett-Packard, primarily for ASICs, storage area networking and motion-control products, were 14 percent of the business’s net revenue in 2004, compared to 20 percent in 2003 and 33 percent in 2002.

Costs and Expenses

The following table shows the percentage point increase/(decrease) in our semiconductor products business’s costs and expenses as a percentage of its net revenue for 2004 versus 2003, and 2003 versus 2002.

Increase/(Decrease) as a % of Net Revenue	2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
Cost of products	(4	)	2
Research and development	(4	)	(4	)
Selling, general and administrative	(3	)	(2	)

Though gross margins suffered in the final quarter of 2004 as revenue fell, 2004 as a whole still showed a four percentage point improvement in cost of sales compared to 2003. Despite typical erosion of average selling prices within the semiconductor industry, most notably in our fiber-optics and camera module businesses, significant gross margin improvement was achieved as a result of the incremental margins on $435 million in additional revenue over 2003, as well as approximately $100 million of incremental restructuring savings and ERP implementation efforts that took place largely in 2002 and 2003.

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The erosion of average selling prices of established products is typical of the industry and new products typically yield larger gross margins. Consistent with trends in the semiconductor markets, we anticipate that average-selling prices will continue to deteriorate in 2005. However, as part of our normal course of business, we plan to offset this deterioration with ongoing cost reduction activities and new product introductions.

The sale of previously reserved inventory, due to unanticipated demand for products previously considered to be unmarketable, had a small impact on year-over-year cost of sales comparisons. In 2004 we sold $11 million worth of inventory that we had previously written down, compared to $5 million in 2003 and $18 million in 2002. Inventory charges were not material in any of the periods presented.

Research and development expenses dropped 4 percentage points expressed as a percentage of revenue from 2003 to 2004. Selling, general and administrative expenses dropped 3 percentage points as a percentage of revenue from 2003 to 2004. This improvement resulted from the increase in revenue from 2003 to 2004 in combination with expenses being held slightly under 2003’s level in absolute dollar terms. Total semiconductor products headcount was flat from 2003 to 2004.

Income (Loss) from Operations

Operating profit in 2004 of $166 million represents a $225 million improvement over the operating loss of $59 million in 2003, and a 12 percentage point improvement in operation margins. The segment’s ROIC was 17 percent, negative 2 percent and negative 3 percent for 2004, 2003 and 2002 respectively. The improvement achieved in 2004 drew from a variety of previously mentioned sources, such as higher revenue, ERP efficiencies, restructuring efforts from early 2003, and the continual release of new products. Restructuring efforts played a proportionally larger role in the improvement seen in 2003 compared to 2002.

In the fourth quarter of 2004 we agreed to sell inventory and fixed assets relating to our camera module business. We will continue to sell the image sensors that are a component part of the camera modules, but after the sale we will no longer produce the assembled modules. We will retain intellectual property and research and development activities associated with the image sensor technology. This announced sale is not expected to have a material impact on operating profits in 2005. The revenues for 2004 associated with the camera module business were approximately $300 million.

Life Sciences and Chemical Analysis

Our life sciences and chemical analysis business provides application-focused solutions that include instruments, software, consumables and services that enable customers to identify, quantify and analyze the physical and biological properties of substances and products. Our seven key product categories include: microarrays, microfluidics, gas chromatography, liquid chromatography, mass spectrometry, software and informatics, and related consumables, reagents and services. The business achieved solid growth in 2004, with orders and revenue growing by 13 percent and 12 percent, respectively, compared to 2003, and operating income up 30 percent. Growth was relatively even between our businesses serving the life sciences and chemical analysis markets.

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Orders and Net Revenue

	Years Ended October 31,									2004 over 2003 Change	2003 over 2002 Change
	2004			2003			2002
	(in millions)
Orders	$	1,332		$	1,174		$	1,151		13%	2	%
Net revenue from products	$	1,034		$	915		$	884		13%	4	%
Net revenue from services and other		299			271			249		10%	9	%
Total net revenue	$	1,333		$	1,186		$	1,133		12%	5	%
Income from operations		192			148			140		30%	6	%
Operating margin		14	%		12	%		12	%	2 ppts	—
ROIC		22	%		21	%		21	%	1 ppt	—

Current year growth rates for orders and revenue were the highest seen for several years, causing 2004 revenues and orders to exceed levels achieved in prior years. Growth was achieved in all geographies, with the highest rates achieved in Asia and Europe. In 2004, growth over 2003 was driven by demand for replacement systems in our large installed base in the U.S. and Europe, increased U.S. government spending for homeland security, spending related to environmental testing in Asia, and increased demand from generic drug manufacturers.

Looking forward to 2005, we anticipate order and revenue levels to grow from 2004’s level, with strength across both our life science and chemical analysis businesses. We anticipate growth to be driven by new products such as the XCT Plus Ion Trap and other proteomics solutions, microfluidic products, software and informatics solutions, and new offerings in consumables and services.

Costs and Expenses

The following table shows the percentage point decrease in our life sciences and chemical analysis business’s costs and expenses as a percentage of its net revenue for 2004 versus 2003, and 2003 versus 2002.

Decrease as a % of Net Revenue	2004 over 2003 Ppts Change		2003 over 2002 Ppts Change
Cost of products and services	—		—
Research and development	—		—
Selling, general and administrative	(1	)	—

Cost of products and services as a percentage of net revenue has been flat for the past two years. The benefits of higher revenue levels and savings from restructuring programs have largely been offset by increases in wages, restoration of full pay in 2003, and information technology expenses associated with our ERP implementation. Looking forward to 2005, we expect to make progress in improving our cost of products and services as revenue grows and ERP efficiencies are realized.

Inventory charges have not had a material impact on life sciences and chemical analysis results for several years, at $3 million in 2004 and 2003, down from $5 million in 2002.

Research and development expenses, as well as selling, general and administrative expenses, rose slightly in absolute dollar terms in 2004 as we continued to invest to accommodate growth. Expressed as a percentage of net revenue, however, selling, general and administrative expenses declined 1 percentage point and research and development expenses remained flat compared to 2003, due to strong revenue growth outweighing increased expenses.

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Income from Operations

Our life science and chemical analysis business’s 30 percent increase in income from operations in 2004 compared to 2003 was accomplished by strong, broad-based revenue growth combined with prudent expense management. Operating profit as a percentage of revenue increased 2 percentage points in 2004 compared to 2003, reaching 14 percent of revenue. The segment’s ROIC was 22 percent, 21 percent and 21 percent for 2004, 2003 and 2002 respectively.

Financial Condition

Liquidity and Capital Resources

Our financial position remained strong at October 31, 2004, with cash and cash equivalents of $2,315 million.

Net Cash Used in Operating Activities

We generated cash from continuing operations of $663 million in 2004 compared to $164 million used in 2003. We spent $138 million on restructuring activities in 2004, primarily in the form of severance payments, compared to $379 million in fiscal 2003. We generated cash from continuing operations of $409 million in the last quarter of 2004.

In 2004, accounts receivable generated cash of $80 million versus cash generated of $52 million in 2003. In 2004, accounts payable generated cash of $43 million versus cash generated of $69 million in 2003. Cash used from inventory was $79 million in 2004 compared to cash generation of $157 million in 2003. Inventory days on hand were slightly improved as of the end of 2004 at 89 days compared to 93 days in 2003.

We used $63 million of cash in 2004 to fund our U.S. defined benefit plan and contributed $83 million to our international defined benefits plans. Cash contributions in 2004 were approximately $72 million or 33 percent less than in 2003. In 2005, we expect funding requirements for our various benefit plans to continue to decrease. Our annual contributions are highly dependent on the relative performance of our assets versus our projected liabilities, among other factors. As the value of our assets increases relative to our future projected obligations we will make smaller contributions to maintain our funded status.

In 2004, as in 2003, we recorded no goodwill amortization in accordance with SFAS No. 142. Depreciation and amortization decreased from $362 million in 2003 to $292 million in 2004 reflecting the reduced acquisitions of property plant and equipment over the past few years and the full amortization of other intangibles relating to business combinations. We had a non-cash charge of $268 million related to the adoption of SFAS No. 142 in the first quarter of 2003.

We paid income taxes amounting to $149 million in 2004, as compared to $122 million in 2003.

Net Cash Used in Investing Activities

Net cash used in investing activities for 2004 was $114 million compared to $203 million in 2003. Investments in property, plant and equipment continue to decrease to $118 million, a decrease of $87 million from 2003. Over half of the property, plant and equipment purchases were related to our investments in information technology programs such as the ERP and CRM systems and the development of our website. We also have been making investments in some of our facilities. The total cash outlays for these initiatives were $102 million in 2004 compared to $209 million in 2003. Cash used for investments in property, plant and equipment has decreased driven by our overall

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strategy of tight spending controls and cash conservation. However, we are making appropriate investments in our IT and facility infrastructure with our improved cash position.

Net Cash Provided by Financing Activities

Net cash generated by financing activities for 2004 was $145 million compared to $110 million in 2003. In the first quarter of 2002, we borrowed $1,123 million, net of issuance costs, under a private offering of three percent senior convertible debenture due 2021. Beginning in December 2004, we have an option to redeem the debt in whole or in part in cash. If we choose to redeem the debt, the holders may elect to receive common stock at the initial conversion price of $32.22 per share in place of cash. Holders of the debentures have an option to require us to repurchase debentures, in whole or in part, on December 1 in each of 2006, 2011 and 2016.

Other

We have contractual commitments for non-cancelable operating leases and vendor financing arrangements with CIT and others. We provide lease guarantees on these financing arrangements and we have no other material guarantees or commitments. See Note 17, “Commitments” in Item 15 of this report for further information on our non-cancelable operating leases.

Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets. Our cash balances are generated and held in many locations throughout the world. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout our global organization.

On February 7, 2003 Standard and Poor’s Rating Services lowered its corporate credit and senior note ratings for Agilent to “speculative grade” status, from BBB minus to BB. On May 22, 2003 Moody’s Investors Service downgraded its senior unsecured rating of Agilent from Baa2 to Ba2. Moody’s also assigned the company a first time senior implied rating of Ba2. Both Moody’s and S&P attached a “negative outlook” to their ratings at the time of the downgrades. The downgrades did not have any material impact on our liquidity. On May 25, 2004, S&P revised its outlook to “positive” from “negative”. On December 20, 2004, Moody’s revised its outlook to “stable” from “negative”. There are no financial covenants related to our senior unsecured convertible notes. We believe that our current cash and cash equivalents and other financing capabilities will be sufficient to satisfy our working capital, capital expenditure and other liquidity needs for 2005.

Contractual Commitments

Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, accounts receivable collections, inventory management, and the timing of tax and other payments. As a result, the impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.

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The following table summarizes our contractual obligations at October 31, 2004 and excludes amounts recorded in our Consolidated Balance Sheet with the exception of long-term debt obligations (in millions):

	Less than one year		One to three years		Three to five years		More than five years
Operating leases	$	108	$	154	$	101	$	81
Long-term debt obligations (Senior Convertible Debentures)		—		1,150		—		—
Commitments to contract manufacturers and suppliers		380		—		—		—
Other purchase commitments		131		216		77		34
Retirement plans		84		—		—		—
Total	$	703	$	1,520	$	178	$	115

Operating leases.    Commitments under operating leases relate primarily to leasehold property.

Long-term debt obligations.    Our Senior Convertible Debentures bear interest of 3 percent per annum, or approximately $34 million. See Note 16, “Senior Convertible Debentures and Lines of Credit” in Notes to Consolidated Financial Statements.

Commitments to contract manufacturers and suppliers.    We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. However, our agreements with these suppliers usually allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. Typically purchase orders outstanding with delivery dates within 30 days are non-cancelable. Therefore, only approximately 40 percent of our reported purchase commitments arising from these agreements are firm, non-cancelable, and unconditional commitments. We expect to fulfill the purchase commitments for inventory within one year.

In addition to the above, we record a liability for firm, non-cancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with our allowance for inventory. As of October 31, 2004, the liability for our firm, non-cancelable, and unconditional purchase commitments was $16 million, compared with $11 million as of October 31, 2003. These amounts are included in other accrued liabilities in our Consolidated Balance Sheets at October 31, 2004 and 2003, and are not included in the preceding table.

Other purchase commitments.    Relate primarily to contracts with professional services suppliers. Purchase commitments are typically cancelable within a 90-day period without significant penalties.

Retirement plans.    Retirement plan funding includes the expected tax-deductible contribution planned for 2005. Funding projections beyond the current year are not practical to estimate due to the rules affecting tax deductible contributions and the impact from asset performance and interest rates.

We had no material off-balance sheet arrangements as of October 31, 2004 or October 31, 2003.

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Non-GAAP Financial Information

ROIC is a tool by which we track how much value we are creating for our shareholders. ROIC is calculated by dividing the annualized segment return by the average of the last five quarter-end balances of segment invested capital, as shown below. We utilize ROIC as a performance measure for our businesses, and our senior managers’ compensation is linked to ROIC improvements as well as other performance criteria. We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments.

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Reconciliation of Segment ROIC

(in millions, except ROIC)

(Unaudited)

	FY04			FY04			FY04			FY04
	Test and Measurement			Automated Test			Semiconductor Products			Life Sciences and Chemical Analysis
Numerator:
Segment income from operations	$	219		$	66		$	166		$	192
Less:
Other (income) expense and taxes		68			23			(34	)		75
Segment return	$	151		$	43		$	200		$	117
Denominator:
Segment assets (1)	$	2,148		$	718		$	1,434		$	725
Less:
Net current liabilities (2)		414			117			241			181
Invested capital (4)	$	1,734		$	601		$	1,193		$	544
Average invested capital	$	1,816		$	666		$	1,158		$	525
ROIC		8	%		6	%		17	%		22	%
	FY03			FY03			FY03			FY03
Numerator:
Segment income (loss) from operations	$	(315	)	$	(34	)	$	(59	)	$	148
Less:
Other (income) expense and taxes		(140	)		(12	)		(29	)		55
Segment return	$	(175	)	$	(22	)	$	(30	)	$	93
Denominator: (3)
Segment assets (1)	$	2,268		$	804		$	1,420		$	680
Less:
Net current liabilities (2)		470			115			289			181
Invested capital (4)	$	1,798		$	689		$	1,131		$	499
Average invested capital	$	1,869		$	655		$	1,256		$	449
ROIC		(9	)%		(3	)%		(2	)%		21	%
	FY02			FY02			FY02			FY02
Numerator:
Segment income (loss) from operations	$	(710	)	$	(70	)	$	(115	)	$	140
Less:
Other (income) expense and taxes		(348	)		(31	)		(67	)		48
Segment return	$	(362	)	$	(39	)	$	(48	)	$	92
Denominator: (3)
Segment assets (1)	$	2,717		$	852		$	1,797		$	643
Less:
Net current liabilities (2)		696			148			296			205
Invested capital (4)	$	2,021		$	704		$	1,501		$	438
Average invested capital	$	2,162		$	708		$	1,402		$	437
ROIC		(17	)%		(6	)%		(3	)%		21	%

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(1) Segment assets consist of inventory, accounts receivable, property, plant and equipment, allocated corporate assets, gross goodwill and other intangibles less impairments. Allocated corporate assets include estimated net deferred tax assets as if the valuation allowance had not been recorded.

(2) Includes accounts payable, employee compensation and benefits and other accrued liabilities.

(3) Segment assets, net current liabilities, invested capital and average invested capital were all changed in 2004. Amounts for 2003 and 2002 have been restated to conform to the current period’s presentation.

(4) Average invested capital was computed using an average of the last five quarters.

We provide non-GAAP financial information in order to provide meaningful supplemental information regarding our operational performance and to enhance our investors’ overall understanding of our core current financial performance and our prospects for the future. We believe that our investors benefit from seeing our results “through the eyes” of management in addition to the GAAP presentation. Management measures segment and enterprise performance, including employee performance, using measures such as those that are disclosed in this report. This information facilitates management’s internal comparisons to the company’s historical operating results and comparisons to competitors’ operating results.

Non-GAAP information allows for greater transparency to supplemental information used by management in its financial and operational decision-making. Historically, we have reported similar non-GAAP information to our investors in our press releases and in items furnished to the SEC. We believe that the inclusion of comparative numbers provides consistency in our financial reporting.

This information is not in accordance with, or an alternative for generally accepted accounting principles in the United States. The non-GAAP information we provide may be different from the non-GAAP information provided by other companies.

Risks, Uncertainties and Other Factors That May Affect Future Results

Our operating results and financial condition could be harmed if the markets into which we sell our products decline.

We recently experienced reduced demand for our products and services in many of the markets that we serve worldwide, as was the case in semiconductor test and semiconductor products. Revenues in the semiconductor test and semiconductor products businesses fluctuated significantly over the past three years. However, other markets we serve have stabilized or demonstrated growth, such as life sciences and chemical analysis. Agilent consists of several diverse businesses, and demand in our markets remains cyclical and volatile. Pricing pressures and competition remain especially intense in semiconductor-related industries, which could prevent achievement of our long-term gross margin goals and could require us to implement additional cost cutting measures to sustain profitability.

Visibility into our markets is limited. Any decline in our customers’ markets or in general economic conditions would likely result in a reduction in demand for our products and services. For example, if the Asia Pacific market does not grow as anticipated, or if the semiconductor market continues to slow, our results could suffer. As the broader semiconductor market is one of the drivers for our test and measurement business, a continued slowdown in the semiconductor market could result in a slowdown in our Test and Measurement business. Also, if our customers’ markets decline, we may not be able to collect on outstanding amounts due to us. Such decline could harm our consolidated financial position, results of operations, cash flows and stock price, and could limit our ability to sustain profitability. Also, in such an environment, pricing pressures could intensify, and if we were unable to respond quickly enough this could further reduce our gross margins.

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Finally, we may be required to secure additional debt or equity financing at some time in the future, and we cannot assure you that such financing will be available on acceptable terms when required. If our senior unsecured convertible notes rating is downgraded, we could be required to pay a higher interest rate for future borrowing needs and we may have stricter terms.

We may not be successful in our efforts to maintain a reduced cost structure, and the actions that we take in order to accomplish this transition could have long-term adverse effects on our business.

We have taken, and continue to take, various actions to transition our company to a reduced cost structure. In response to declining revenues, beginning in 2001 we scaled back our operations, reduced our expenses, decreased our workforce by approximately one-third, froze hiring, cut back significantly on our use of temporary workers and reduced discretionary spending. We also initiated facility closures to reduce production levels. Although our revenues are no longer declining, we continue to take steps to reach or maintain our quarterly operating cost structure goal.

There are several risks inherent in our efforts to maintain a reduced cost structure. These include the risk that we will not be able to reduce expenditures quickly enough and hold them at a level necessary to sustain or increase profitability, and that we may have to undertake further restructuring initiatives that would entail additional charges and cause us to take additional actions. Our expenses were higher than anticipated during the second quarter of 2004, which adversely affected our performance. As we grow, we expect to face ongoing pressure to control expenses. If we are not able to hold down expenses we may have to further reduce our workforce. There is also the risk that cost-cutting initiatives will impair our ability to effectively develop and market products, to remain competitive in the industries in which we compete and to operate effectively. Each of the above measures could have long-term effects on our business by reducing our pool of technical talent, decreasing or slowing improvements in our products, making it more difficult for us to respond to customers, limiting our ability to increase production quickly if and when the demand for our products increases and limiting our ability to hire and retain key personnel. These circumstances could cause our income to be lower than it otherwise might be, which would adversely affect our stock price.

If we do not introduce successful new products and services in a timely manner, our products and services will become obsolete, and our operating results will suffer.

We generally sell our products in industries that are characterized by rapid technological changes, frequent new product and service introductions and changing industry standards. In addition, many of the markets in which we operate are seasonal and cyclical. Without the timely introduction of new products, services and enhancements, our products and services will become technologically obsolete over time, in which case our revenue and operating results would suffer. The success of our new products and services will depend on several factors, including our ability to:

• properly identify customer needs;

• innovate and develop new technologies, services and applications;

• successfully commercialize new technologies in a timely manner;

• manufacture and deliver our products in sufficient volumes on time;

• differentiate our offerings from our competitors’ offerings;

• price our products competitively;

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• anticipate our competitors’ development of new products, services or technological innovations; and

• control product quality in our manufacturing process.

Dependence on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring products to market and damage our reputation. Dependence on outsourced information technology function may impair our ability to operate effectively.

As part of our efforts to streamline operations and to cut costs, we have been outsourcing and will continue to evaluate additional outsourcing. If our contract manufacturers or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers’ orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control. In addition, we outsourced significant portions of our information technology function. Since information technology is critical to our operations, any failure to perform on the part of the contract manufacturers could impair our ability to operate effectively. In addition to the risks outlined above, problems with manufacturing or IT outsourcing could result in lower revenues, and impact our results of operations and our stock price. Much of our outsourcing takes place in developing countries, and as a result may be subject to geopolitical uncertainty.

Future changes in financial accounting standards or taxation rules may adversely affect our reported results of operations.

A change in accounting standards or a change in existing taxation rules can have a significant effect on our reported results. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements have occurred and may occur in the future. These new accounting pronouncements and taxation rules may adversely affect our reported financial results or the way we conduct our business.

For example, under the newly-issued SFAS No. 123R we will be required to account for equity under our stock plans as a compensation expense and our net income and net income per share will be significantly reduced. Currently, we record compensation expense only in connection with option grants that have an exercise price below fair market value. For option grants that have an exercise price at fair market value, we calculate compensation expense and disclose their impact on net income (loss) and net income (loss) per share, as well as the impact of all stock-based compensation expense in a footnote to the consolidated financial statements. SFAS No. 123R requires Agilent to adopt the new accounting provisions beginning in our fourth quarter of 2005, and will require Agilent to expense SBP awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights, as compensation cost.

Fluctuations in our quarterly operating results may cause volatility in the price of our common stock and the senior convertible debentures.

Given the nature of the markets in which we participate, we cannot reliably predict future revenue and profitability. Our quarterly sales and operating results have become highly dependent on the volume and timing of orders received during the quarter, which are difficult to forecast. These results are also dependent on the seasonal and cyclical nature of our end markets such as consumer electronics, including cell phones. In addition, a significant portion of our operating expenses is relatively fixed in nature due to our significant sales, research and development and manufacturing costs. If we cannot adjust spending quickly enough to compensate for a revenue shortfall, this may magnify the adverse impact of such revenue shortfall on our results of operations. Fluctuations in our operating results may cause volatility in the price of our common stock and the debentures.

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Our income may suffer if our manufacturing capacity does not match our demand.

Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand does not meet our expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in one of our segments, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner. This inability could materially and adversely affect our results. By contrast, during the economic downturn we had excess manufacturing capacity as a result of the decrease in purchasing and capital spending in the communications, electronics and semiconductor industries. The fixed costs associated with excess manufacturing capacity adversely affected, and could in the future affect our income.

Failure to adjust our purchases due to changing market conditions or failure to estimate our customers’ demand could adversely affect our income.

Our income could be harmed if we are unable to adjust our purchases to market fluctuations, including those caused by the seasonal or cyclical nature of the markets in which we operate. The sale of our products and services are dependent, to a large degree, on customers whose industries are subject to seasonal or cyclical trends in the demand for their products. For example, the consumer electronics market is particularly volatile, making demand difficult to anticipate. During a market upturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could materially affect our results. In addition, some of the parts that require custom design are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Should a supplier cease manufacturing such a component, we would be forced to reengineer our product. In addition to discontinuing parts, suppliers may also extend lead times, limit supplies or increase prices due to capacity constraints or other factors. By contrast, in order to secure components for the production of products, we may continue to enter into non-cancelable purchase commitments with vendors, or at times make advance payments to suppliers, which could impact our ability to adjust our inventory to declining market demands. Prior commitments of this type have resulted in an excess of parts when demand for our communications, semiconductor and electronics products has decreased. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges.

Economic, political and other risks associated with international sales and operations could adversely affect our results of operations.

Because we sell our products worldwide, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a majority of our total revenue. In addition, many of our employees, contract manufacturers, suppliers, job functions and manufacturing facilities are increasingly located outside the U.S. Accordingly, our future results could be harmed by a variety of factors, including:

• interruption to transportation flows for delivery of parts to us and finished goods to our customers;

• changes in foreign currency exchange rates;

• changes in a specific country’s or region’s political, economic or other conditions;

• trade protection measures and import or export licensing requirements;

• negative consequences from changes in tax laws;

• difficulty in staffing and managing widespread operations;

• differing labor regulations;

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• differing protection of intellectual property;

• unexpected changes in regulatory requirements; and

• geopolitical turmoil, including terrorism and war.

We centralized most of our accounting processes to two locations: Malaysia and India. These processes include general accounting, accounts payable and accounts receivables functions. If conditions change in those countries, it may adversely affect operations, including impairing our ability to pay our suppliers and collect our receivables. Our results of operations, as well as our liquidity, may be adversely affected and possible delays may occur in reporting financial results.

Our business will suffer if we are not able to retain and hire key personnel.

Our future success depends partly on the continued service of our key research, engineering, sales, marketing, manufacturing, executive and administrative personnel. If we fail to retain and hire a sufficient number of these personnel, we will not be able to maintain or expand our business. Since 2001, we have experienced temporary pay reductions, workforce reductions and limited pay increases, which may harm our long-term ability to hire and retain key personnel. As the market continues its recovery, there is intense competition for certain highly technical specialties in geographic areas where we continue to recruit, and it may become more difficult to retain our key employees.

Our acquisitions, strategic alliances, joint ventures and divestitures may result in financial results that are different than expected.

In the normal course of business, we frequently engage in discussions with third parties relating to possible acquisitions, strategic alliances, joint ventures and divestitures. As a result of such transactions, our financial results may differ from the investment community’s expectations in a given quarter. In addition, acquisitions and strategic alliances may require us to integrate a different company culture, management team and business infrastructure. We may have difficulty developing, manufacturing and marketing the products of a newly acquired company in a way that enhances the performance of our combined businesses or product lines to realize the value from expected synergies. Depending on the size and complexity of an acquisition, our successful integration of the entity depends on a variety of factors, including:

• the retention of key employees;

• the management of facilities and employees in different geographic areas;

• the retention of key customers; and

• the integration or coordination of different research and development, product manufacturing and sales programs and facilities.

A successful divestiture depends on various factors, including our ability to:

• effectively transfer liabilities, contracts, facilities and employees to the purchaser;

• identify and separate the intellectual property to be divested from the intellectual property that we wish to keep; and

• reduce fixed costs previously associated with the divested assets or business.

Any additional impairment of the value of purchased assets and goodwill could have a significant negative impact on our future operating results.

In addition, if customers of the divested business do not receive the same level of service from the new owners, this may adversely affect our other businesses to the extent that these customers

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also purchase other Agilent products. All of these efforts require varying levels of management resources, which may divert our attention from other business operations. Further, if market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions. If we do not realize the expected benefits or synergies of such transactions, our consolidated financial position, results of operations, cash flows and stock price could be negatively impacted.

Unforeseen problems with the stability and maintenance of our new information systems have interfered and could further interfere with our operations.

As a part of the effort to replace our current information systems, we implemented new enterprise resource planning software and other software applications to manage our business operations. Our profit projections could be inaccurate if we misjudged the potential savings from the implementation of the new systems, or if we are unable to adequately maintain or adjust the systems. In addition, if our new systems fail to provide accurate and increased visibility into pricing and cost structures, we may be unable to improve or maximize our profit margins. Following the first phase of our enterprise resource planning software implementation, we experienced difficulties in providing customer quotes and in acknowledging and shipping customer orders. Although we believe that these systems are stable, as we add additional functionality, new problems could arise that we have not foreseen. Such problems could adversely impact our ability to do the following in a timely manner: provide quotes, take customer orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations and otherwise run our business. As a result, our financial position, results of operations, cash flows and stock price could be adversely affected.

Environmental contamination from past operations could subject us to unreimbursed costs and could harm on-site operations and the future use and value of the properties involved and environmental contamination caused by ongoing operations could subject us to substantial liabilities in the future.

Some of our properties are undergoing remediation by Hewlett-Packard for subsurface contaminations that were known at the time of our separation from Hewlett-Packard. Hewlett-Packard has agreed to retain the liability for this subsurface contamination, perform the required remediation and indemnify us with respect to claims arising out of that contamination. The determination of the existence and cost of any additional contamination caused by us could involve costly and time-consuming negotiations and litigation. In addition, Hewlett-Packard will have access to our properties to perform remediation. While Hewlett-Packard has agreed to minimize interference with on-site operations at those properties, remediation activities and subsurface contamination may require us to incur unreimbursed costs and could harm on-site operations and the future use and value of the properties. We cannot be sure that Hewlett-Packard will continue to fulfill its indemnification or remediation obligations.

We have agreed to indemnify Hewlett-Packard for any liability associated with contamination from past operations at all other properties transferred from Hewlett-Packard to us other than those properties currently undergoing remediation by Hewlett-Packard. While we are not aware of any material liabilities associated with any potential subsurface contamination at any of those properties, subsurface contamination may exist, and we may be exposed to material liability as a result of the existence of that contamination.

Our semiconductor and other manufacturing processes involve the use of substances regulated under various international, federal, state and local laws governing the environment. We may be subject to liabilities for environmental contamination, and these liabilities may be substantial. Although our policy is to apply strict standards for environmental protection at our sites inside and

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outside the U.S., even if the sites outside the U.S. are not subject to regulations imposed by foreign governments, we may not be aware of all conditions that could subject us to liability.

Our customers and we are subject to various governmental regulations, compliance with which may cause us to incur significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Our businesses are subject to various significant international, federal, state and local regulations, including but not limited to health and safety, packaging, product content, labor and import/export regulations. These regulations are complex, change frequently and have tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could also result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products.

Our products and operations are also often subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation by other agencies such as the U.S. Federal Communications Commission. We also must comply with work safety rules. If we fail to adequately address any of these regulations, our businesses could be harmed.

Some of our chemical analysis products are used in conjunction with chemicals whose manufacture, processing, distribution and notification requirements are regulated by the U.S. Environmental Protection Agency under the Toxic Substances Control Act, and by regulatory bodies in other countries with laws similar to the Toxic Substances Control Act. We must conform the manufacture, processing, distribution of and notification about these chemicals to these laws and adapt to regulatory requirements in all countries as these requirements change. If we fail to comply with these requirements in the manufacture or distribution of our products, then we could be made to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing our products in commerce until the products or component substances are brought into compliance.

We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with these customers.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations might result in suspension of these contracts, or administrative penalties.

Third parties may claim that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products.

While we do not believe that any of our products infringe the valid intellectual property rights of third parties, we may be unaware of intellectual property rights of others that may cover some of our technology, products or services. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also

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require us to enter into costly license agreements. However, we may not be able to obtain license agreements on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of certain of our products.

We often rely on licenses of intellectual property useful for our businesses. We cannot ensure that these licenses will be available in the future on favorable terms or at all.

Third parties may infringe our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury.

Our success depends in large part on our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results.

Our pending patent and trademark registration applications may not be allowed, or competitors may challenge the validity or scope of our patents, copyrights or trademarks. In addition, our patents may not provide us a significant competitive advantage.

We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and our competitive position may be harmed before we do so. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights and our ability to enforce them may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share and result in lost revenues. Furthermore, some intellectual property rights are licensed to other companies, allowing them to compete with us using that intellectual property.

If we suffer loss to our factories, facilities or distribution system due to catastrophe, our operations could be seriously harmed.

Our factories, facilities and distribution system are subject to catastrophic loss due to fire, flood, terrorism or other natural or man-made disasters. In particular, several of our facilities could be subject to a catastrophic loss caused by earthquake due to their locations. Our production facilities, headquarters and Agilent Technologies Laboratories in California, and our production facilities in Washington and Japan, are all located in areas with above average seismic activity. If any of these facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility. In addition, since we have recently consolidated our manufacturing facilities, we are more likely to experience an interruption to our operations in the event of a catastrophe in any one location. Although we carry insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from earthquakes or terrorism.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to foreign currency exchange rate risks inherent in our sales commitments, anticipated sales, and assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. We hedge future cash flows denominated in currencies other than the functional currency using sales forecasts up to twelve months in advance. Our exposure to exchange rate risks is managed on an enterprise-wide basis. This strategy utilizes derivative financial instruments, including option and forward contracts, to hedge foreign currency exposures with the intent of offsetting gains and losses that occur on the underlying exposures with gains and losses on the derivative contracts hedging them. We do not currently and do not intend to utilize derivative financial instruments for trading purposes.

68

Our operations generate non-functional currency cash flows such as revenues, third party vendor payments and inter-company payments. In anticipation of these foreign currency cash flows and in view of volatility of the currency market, we enter into such foreign exchange contracts as are described above to manage our currency risk. Approximately 75 percent of our revenues in 2004, 74 percent of our revenues in 2003 and 75 percent of our revenues in 2002 were generated in U.S. dollars.

We performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above. As of October 31, 2004 and October 31, 2003, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.

Item 8.    Financial Statements and Supplementary Data

The Financial Statements appear in Item 15 of this report.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

We carried out an evaluation required by Rule 13a-15(b) of the Securities Exchange Act of 1934 under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Agilent’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this report.

Disclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in the company’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Internal controls over financial reporting are procedures designed with the objective of providing reasonable assurance that our (a) transactions are properly authorized, (b) assets are safeguarded against unauthorized or improper use and (c) transactions are properly recorded and reported; all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

The evaluation of Agilent’s disclosure controls and procedures and internal control over financial reporting included a review of our objectives and processes, implementation by the company and the effect on the information generated for use in this Annual Report on Form 10-K. In the course of this evaluation and in accordance with Section 302 of the Sarbanes Oxley Act of 2002 (but not in accordance with Section 404 of the Sarbanes Oxley Act of 2002), we sought to identify any significant deficiencies or material weaknesses in our controls, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our internal controls over financial reporting, and to confirm that any necessary corrective action, including process improvements, were being undertaken. This type of evaluation will be done quarterly so that the conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. Our internal control over financial reporting are also evaluated on an ongoing basis by Agilent’s internal auditors and by other personnel in Agilent’s finance organization. The

69

overall goals of these evaluation activities are to monitor our disclosure and internal controls over financial reporting and to make modifications as necessary. We intend to maintain these controls as processes that may be appropriately modified as circumstances warrant.

Based on their evaluation, Agilent’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the company (including our consolidated subsidiaries) required to be included in our periodic reports filed with the SEC as of the end of the period covered by this report. There were no changes in our internal control over financial reporting that occurred during Agilent’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management necessarily applied its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected.

Items 308(a) and (b) of Regulations S-K and S-B will require management to include in their annual reports a report of management on the company’s internal controls over financial reporting, and to evaluate, as of the end of each fiscal period, any change in the company’s internal control over financial reporting that occurred during the period that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. On February 24, 2004, the Securities and Exchange Commission issued a release extending the deadline for certain issuers to comply with the management report on internal control over financial reporting requirement. Accordingly, Agilent will begin reporting this information in fiscal 2005, its first fiscal year ending after November 15, 2004. In addition, the release extended, until the first fiscal year ending after November 15, 2004, compliance dates for amendments to certain representations that must be included in the certifications required by Exchange Act Rules 13a-14 and 15d-14 and Investment Company Act of 1940 Rule 30a-2, regarding the company’s internal control over financial reporting.

Item 9B.    Other Information.

None.

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PART III

Item 10.    Directors and Executive Officers of the Registrant

Information regarding our directors appears under “Proposal No. 1—Election of Directors” in our Proxy Statement for the Annual Meeting of Stockholders (the “Proxy Statement”), to be held March 1, 2005. That portion of the Proxy Statement is incorporated by reference into this report. Information regarding our executive officers appears in Item 1 of this report under “Executive Officers of the Registrant.” Information regarding our Audit and Finance Committee and our Audit and Finance Committee’s financial expert appears under “Audit and Finance Committee Report” in our Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report. There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. Information regarding our code of ethics (the company’s Standards of Business Conduct) applicable to our principal executive officer, our principal financial officer, our controller and other senior financial officers appears in Item 1 of this report under “Investor Information.” We will post amendments to or waivers from a provision of the Standards of Business Conduct on our website at www.investor.agilent.com.

Compliance with Section 16(a) of the Exchange Act

Information about compliance with Section 16(a) of the Exchange Act appears under “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.

Item 11.    Executive Compensation

Information about compensation of our named executive officers appears under “Executive Compensation” and under “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement. Information about compensation of our directors appears under “Director Compensation Arrangements and Stock Ownership Guidelines” in the Proxy Statement. Those portions of the Proxy Statement are incorporated by reference into this report.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information about security ownership of certain beneficial owners and management appears under “Common Stock Ownership of Certain Beneficial Owners and Management” in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report. Information regarding securities authorized for issuance under equity compensation plans appears in Item 5 of this report.

Item 13.    Certain Relationships and Related Transactions

Information about certain relationships and related transactions appears under “Certain Relationships and Related Transactions” in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.

Item 14.    Principal Accountant Fees and Services

Information about principal accountant fees and services as well as related pre-approval policies appears under “Fees Paid to PricewaterhouseCoopers LLP” and “Policy on Audit and Finance Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm” in the Proxy Statement. Those portions of the Proxy Statement are incorporated by reference into this report.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	73
Consolidated Statement of Operations for each of the three years ended October 31, 2004	74
Consolidated Balance Sheet at October 31, 2004 and 2003	75
Consolidated Statement of Cash Flows for each of the three years ended October 31, 2004	76
Consolidated Statement of Stockholders’ Equity for each of the three years ended October 31, 2004	77
Notes to Consolidated Financial Statements	78
Quarterly Summary (unaudited)	112

2. Financial Statement Schedules

None.

3. Exhibits

See Index to Exhibits. The Exhibits listed in the accompanying Index to Exhibits are filed as part of this report.

72

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Agilent Technologies, Inc.:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, cash flows and stockholders’ equity present fairly, in all material respects, the financial position of Agilent Technologies, Inc. and its subsidiaries at October 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in the notes to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” as of November 1, 2002.

PRICEWATERHOUSECOOPERS LLP

San Jose, California

December 17, 2004

73

AGILENT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

	Years Ended October 31,
	2004		2003			2002
	(in millions, except per share data)
Net revenue:
Products	$	6,302	$	5,240		$	5,234
Services and other		879		816			776
Total net revenue		7,181		6,056			6,010
Costs and expenses:
Cost of products		3,487		3,182			3,360
Cost of services and other		571		568			506
Total costs		4,058		3,750			3,866
Research and development		933		1,051			1,250
Selling, general and administrative		1,804		1,980			2,501
Total costs and expenses		6,795		6,781			7,617
Income (loss) from operations		386		(725	)		(1,607	)
Other income (expense), net		54		35			60
Income (loss) from continuing operations before taxes		440		(690	)		(1,547	)
Provision (benefit) for taxes		91		1,100			(525	)
Income (loss) from continuing operations		349		(1,790	)		(1,022	)
(Loss) from sale of discontinued operations (net of tax benefit of $6 million)		—		—			(10	)
Income (loss) before cumulative effect of accounting changes		349		(1,790	)		(1,032	)
Cumulative effect of adopting SFAS No. 142		—		(268	)		—
Net income (loss)	$	349	$	(2,058	)	$	(1,032	)
Net income (loss) per share — Basic:
Income (loss) from continuing operations	$	0.72	$	(3.78	)	$	(2.20	)
Loss from sale of discontinued operations, net		—		—			(0.02	)
Cumulative effect of adopting SFAS No. 142		—		(0.57	)		—
Net income (loss) per share – Basic	$	0.72	$	(4.35	)	$	(2.22	)
Net income (loss) per share — Diluted:
Income (loss) from continuing operations	$	0.71	$	(3.78	)	$	(2.20	)
Loss from sale of discontinued operations, net		—		—			(0.02	)
Cumulative effect of adopting SFAS No. 142		—		(0.57	)		—
Net income (loss) per share – Diluted	$	0.71	$	(4.35	)	$	(2.22	)
Weighted average shares used in computing net income (loss) per share:
Basic		483		473			465
Diluted		490		473			465

The accompanying notes are an integral part of these consolidated financial statements.

74

AGILENT TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEET

	October 31,
	2004			2003
	(in millions, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents	$	2,315		$	1,607
Accounts receivable, net		1,044			1,086
Inventory		1,026			995
Other current assets		192			201
Total current assets		4,577			3,889
Property, plant and equipment, net		1,258			1,447
Goodwill and other intangible assets, net		443			402
Other assets		778			559
Total assets	$	7,056		$	6,297
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	441		$	441
Employee compensation and benefits		545			566
Deferred revenue		284			262
Income and other taxes payable		340			326
Other accrued liabilities		261			311
Total current liabilities		1,871			1,906
Senior convertible debentures		1,150			1,150
Other liabilities		466			417
Total liabilities		3,487			3,473
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $0.01 par value; 125 million shares authorized; none issued and outstanding		—			—
Common stock; $0.01 par value; 2 billion shares authorized; 487 million shares at October 31, 2004 and 476 million shares at October 31, 2003 issued and outstanding		5			5
Additional paid-in-capital		5,195			4,984
Accumulated deficit		(1,810	)		(2,159	)
Accumulated comprehensive income (loss)		179			(6	)
Total stockholders’ equity		3,569			2,824
Total liabilities and stockholders’ equity	$	7,056		$	6,297

The accompanying notes are an integral part of these consolidated financial statements.

75

AGILENT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Years Ended October 31,
	2004			2003			2002
	(in millions)
Cash flows from operating activities:
Net income (loss)	$	349		$	(2,058	)	$	(1,022	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		292			362			735
Deferred taxes		(33	)		1,071			(664	)
Excess and obsolete inventory-related charges		45			11			74
Non-cash restructuring and asset impairment charges		41			91			204
Retirement plans curtailment (gain) loss		—			5			(19	)
Net (gain) loss on divestitures and sale of assets		1			(5	)		(18	)
Adoption of SFAS No. 142		—			268			—
Changes in assets and liabilities:
Accounts receivable		80			52			(141	)
Inventory		(79	)		157			241
Accounts payable		43			69			(90	)
Employee compensation and benefits		29			(21	)		83
Income taxes and other taxes payable		(50	)		(63	)		137
Other current assets and liabilities		(9	)		(6	)		16
Other long-term assets and liabilities		(46	)		(97	)		(127	)
Net cash provided by (used in) operating activities		663			(164	)		(591	)
Cash flows from investing activities:
Investments in property, plant and equipment		(118	)		(205	)		(301	)
Dispositions of property, plant and equipment		36			6			—
Proceeds from (net investment in) lease receivable		—			—			237
Purchases of intangibles and investments		(14	)		(4	)		(23	)
Acquisitions, net of cash acquired		(18	)		—			(15	)
Proceeds from dispositions		—			—			31
Net cash used in investing activities		(114	)		(203	)		(71	)
Cash flows from financing activities:
Issuance of senior convertible debentures, net of issuance costs		—			—			1,123
Issuance of common stock under employee stock plans		144			112			121
Net borrowings to notes payable and short-term borrowings		1			(2	)		(1	)
Net cash provided by financing activities		145			110			1,243
Effect of exchange rate movements		14			20			6
Net proceeds and cash provided by discontinued operations		—			—			87
Net increase (decrease) in cash and cash equivalents		708			(237	)		674
Cash and cash equivalents at beginning of year		1,607			1,844			1,170
Cash and cash equivalents at end of year	$	2,315		$	1,607		$	1,844

The accompanying notes are an integral part of these consolidated financial statements.

76

AGILENT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	Number of Shares	Common Stock				Retained Income/ (Accumulated Deficit)			Accumulated Comprehensive Income/(Loss)			Total
		Par Value		Additional Paid-in Capital
	(in millions, except number of shares in thousands)
Balance as of October 31, 2001	461,031		5		4,723		931			—			5,659
Components of comprehensive loss:
Net loss	—		—		—		(1,032	)		—			(1,032	)
Reclassification adjustment relating to derivatives (net of tax benefit of $4 million)	—		—		—		—			(7	)		(7	)
SFAS No. 133 cumulative transition adjustment (net of tax benefit of $3 million)	—		—		—		—			(6	)		(6	)
Foreign currency translation (net of tax of $4 million)	—		—		—		—			7			7
Change in unrealized gain (loss) on investment (net of tax benefit of $1 million)	—		—		—		—			(1	)		(1	)
Unrealized gain on derivatives (net of tax expense of $2 million)	—		—		—		—			4			4
Change in minimum pension liability adjustment (net of tax benefit of $78 million)	—		—		—		—			(146	)		(146	)
Total comprehensive loss													(1,181	)
Shares issued for employee benefit plans and other	5,993		—		145		—			—			145
Other additional paid-in-capital	—		—		4		—			—			4
Balance as of October 31, 2002	467,024		5		4,872		(101	)		(149	)		4,627
Components of comprehensive loss:
Net loss	—		—		—		(2,058	)		—			(2,058	)
Reclassification adjustment relating to derivatives (net of tax expense of $2 million)	—		—		—		—			4			4
Reclassification adjustment relating to investments (net of tax expense of $1 million)	—		—		—		—			2			2
Foreign currency translation (net of tax benefit of $46 million)	—		—		—		—			96			96
Unrealized gain (loss) on derivatives (net of tax expense of $7 million)	—		—		—		—			(13	)		(13	)
Change in minimum pension liability adjustment (net of tax expense of $38 million)	—		—		—		—			54			54
Total comprehensive loss													(1,915	)
Shares issued for employee benefit plans and other	9,125		—		112		—			—			112
Balance as of October 31, 2003	476,149		5		4,984		(2,159	)		(6	)		2,824
Components of comprehensive income:
Net income	—		—		—		349			—			349
Reclassification adjustment relating to derivatives (net of tax expense of $3 million)	—		—		—		—			5			5
Reclassification adjustment relating to investments (net of tax expense of $2 million)	—		—		—		—			3			3
Foreign currency translation (net of tax expense of $14 million)	—		—		—		—			89			89
Unrealized gain (loss) on derivatives (net of tax benefit of $2 million)	—		—		—		—			(4	)		(4	)
Change in minimum pension liability adjustment (net of tax expense of $40 million)	—		—		—		—			92			92
Total comprehensive income													534
Shares issued for employee benefit plans and other	9,920		—		193		—			—			193
Issuance of common stock for an acquisition	772		—		18		—			—			18
Balance as of October 31, 2004	486,841	$	5	$	5,195	$	(1,810	)	$	179		$	3,569

The accompanying notes are an integral part of these consolidated financial statements.

77

AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Overview

Agilent Technologies, Inc. (“we,” “Agilent” or “the company”), incorporated in Delaware in May 1999, is a global diversified technology organization that provides enabling solutions to technology markets within the communications, electronics, life sciences and chemical analysis industries. Prior to our initial public offering of 16 percent of our stock in November 1999, we were a wholly-owned subsidiary of Hewlett-Packard Company (“Hewlett-Packard”). Hewlett-Packard distributed the remaining 84 percent of our stock to its stockholders on June 2, 2000 in the form of a stock dividend.

Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer to our fiscal year.

2.    Summary of Significant Accounting Policies

Basis of presentation.    The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Amounts in the consolidated financial statements as of and for the years ended October 31, 2003 and October 31, 2002 were reclassified to conform to the presentation in 2004.

Principles of consolidation.    The consolidated financial statements include the accounts of the company and our wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Partially owned, non-controlled equity affiliates are accounted for under the equity method.

Use of estimates.    The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, restructuring and asset impairment charges, inventory valuation, retirement and post-retirement plan assumptions, valuation of long-lived assets and accounting for income taxes.

Revenue recognition.    We enter into agreements to sell products (hardware and/or software), services and other arrangements (multiple element arrangements) that include combinations of products and services.

We recognize revenue, net of trade discounts and allowances, provided that (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the price is fixed or determinable and (4) collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, for products, or when the service has been provided. We consider the price to be fixed or determinable when the price is not subject to refund or adjustments. We consider arrangements with extended payment terms not to be fixed or determinable and accordingly we defer revenue until amounts become due. At the time of the transaction, we evaluate the creditworthiness of our customers to determine the appropriate timing of revenue recognition.

Product revenue.    Our product revenue is generated predominantly from the sales of various types of test equipment and semiconductor components. Software is embedded in many of our test

78

AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

equipment products, but the software component is generally considered to be incidental. Product revenue, including sales to resellers and distributors, is reduced for estimated returns and distributor price protection, when appropriate. For sales or arrangements that include customer-specified acceptance criteria, including those where acceptance is required upon achievement of performance milestones, revenue is recognized after the acceptance criteria have been met. For products that include installation, if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and recognition of installation revenue is delayed until the installation is complete. Otherwise, neither the product nor the installation revenue is recognized until the installation is complete.

Where software is licensed separately, revenue is recognized when the software is delivered and title and risk of loss have been transferred to the customer or, in the case of electronic delivery of software, when the customer is given access to the licensed software programs. We also evaluate whether collection of the receivable is probable, the fee is fixed or determinable and whether any other undelivered elements of the arrangement exist, on which a portion of the total fee would be allocated based on vendor-specific objective evidence. Revenue from software licensing was not material for all periods presented.

Service revenue.    Revenue from services includes extended warranty, customer support, consulting, training and education. Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer. For example, customer support contracts are recognized ratably over the contractual period, while training revenue is recognized as the training is provided to the customer. In addition the four revenue recognition criteria described above must be met before service revenue is recognized.

Multiple element arrangements.    We use objective evidence of fair value to allocate revenue to elements in multiple element arrangements and recognize revenue when the criteria for revenue recognition have been met for each element. If the criteria are not met, then revenue is deferred until such criteria are met or until the period(s) over which the last undelivered element is delivered. In the absence of objective evidence of fair value of a delivered element, we allocate revenue to the fair value of the undelivered elements and the residual revenue to the delivered elements. The price charged when an element is sold separately generally determines fair value.

Deferred revenue.    Deferred revenue is primarily comprised of advanced billing and customer deposits for service, support and maintenance agreements.

Accounts receivable and allowance for doubtful accounts.    Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Such accounts receivable has been reduced by an allowance for doubtful accounts, which is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on our historical write-off experience and the aging of such receivables, among other factors. The allowance has not been material for any periods presented. We do not have any off-balance-sheet credit exposure related to our customers.

Warranty.    Our warranty terms typically extend 90 days after delivery for on-site repairs and one to three years for products returned to Agilent for repair. Our warranty is accounted for in accordance with Statement of Financial Standards No. 5, “Accounting for Contingencies” (“SFAS No. 5”), such that an accrual is made when it is estimable and probable based on historical experience. We accrue for warranty costs based on historical trends in warranty charges as a percentage of gross product shipments. A provision for estimated future warranty costs is recorded

79

AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as cost of products when revenue is recognized and the resulting accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. See Note 12, “Guarantees”.

Stock-based compensation.    We account for stock-based awards to employees and directors using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” (“APB 25”). Under the intrinsic value method, we record compensation expense related to stock options in our consolidated statement of operations when the exercise price of our employee stock-based award is less than the market price of the underlying stock on the date of the grant. See Note 5, “Stock-Based Compensation” for the impact on net income (loss) and net income (loss) per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) to stock-based incentives.

Pro forma information.    Pro forma net income (loss) and net income (loss) per share information, as required by SFAS No. 123 have been determined as if we had accounted for all employee stock options granted, including shares issuable to employees under the Agilent Technologies, Inc. Employee Stock Purchase Plan (the “423(b) Plan”), the Agilent Technologies, Inc. Long-Term Performance Program (the “LTPP”) and the Option Exchange Program described below, under SFAS No. 123’s fair value method. The pro forma effect of recognizing compensation expense in accordance with SFAS No. 123 is as follows:

	2004			2003			2002
	(in millions, except per share data)
Net income (loss) — as reported	$	349		$	(2,058	)	$	(1,032	)
SFAS No. 123 based compensation (1)		(249	)		(328	)		(471	)
Tax impact (2)		17			(613	)		160
Net income (loss) — pro forma	$	117		$	(2,999	)	$	(1,343	)
Basic net income (loss) per share — as reported	$	0.72		$	(4.35	)	$	(2.22	)
Basic net income (loss) per share — pro forma	$	0.24		$	(6.34	)	$	(2.89	)
Diluted net income (loss) per share — as reported	$	0.71		$	(4.35	)	$	(2.22	)
Diluted net income (loss) per share — Pro forma	$	0.24		$	(6.34	)	$	(2.89	)
Weighted average shares used in computing net income (loss) and pro forma net income (loss) per share:
Basic shares		483			473			465
Diluted shares (3)		490			473			465

(1) The pro forma results for 2004 include approximately $70 million of compensation expense relating to our Option Exchange Program. The remainder of the expense for those periods related to options granted over the past four years.

(2) Due to the valuation allowance provided on our net deferred tax assets as described in Note 4, “Tax Valuation Allowance and Provision (Benefit) for Taxes”, we have not recorded any tax benefits attributable to pro foma stock option expenses for employees in the U.S. and the U.K. jurisdictions in 2004. In addition to not recording such benefits in 2003, we also eliminated $613 million of accumulated tax benefits recognized between 1996 and 2002 for pro forma reporting purposes.

(3) Approximately 41 million outstanding options were considered antidilutive for the purposes of this pro-forma calculation for fiscal year 2004.

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The fair value of options granted was estimated at grant date using a Black-Scholes option-pricing model with the following weighted-average assumptions:

	2004	2003	2002
Risk-free interest rate for options	2.75-3.95%	1.15-3.31%	2.90%
Risk-free interest rate for the 423(b) Plan	1.04-1.31%	1.10-1.77%	1.89-5.87%
Dividend yield	0%	0%	0%
Volatility for options	53-64%	60-80%	63%
Volatility for the 423(b) Plan	36-61%	63-80%	47-77%
Expected option life	5.5 years	3.5-5.5 years	5.5 years
Expected life for the 423(b) Plan	6 months-1 year	6 months-2 years	6 months-1 year

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period of the options and amortized over six months to two years for the 423(b) Plan.

Shipping and handling costs.    Our shipping and handling costs charged to customers are included in net revenue and the associated expense is recorded in total costs for all periods presented.

Goodwill and purchased intangible assets.    On November 1, 2002, we adopted SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”), which requires that goodwill no longer be amortized but reviewed annually (or more frequently if impairment indicators arise) for impairment. Subsequently, we were required to evaluate our existing goodwill and intangible assets and make any necessary reclassification in order to comply with the new criteria in SFAS No. 142.

As part of our initial assessment of goodwill impairment, we used the fair value measurement requirement, rather than the previously required undiscounted cash flows approach. As a result of that assessment, we recorded a transitional impairment loss from the implementation of SFAS No. 142 as a change in accounting principle in the first quarter of 2003. The fair value of the reporting units was determined primarily by the income approach, which estimates the fair value based on the future discounted cash flows. The first step evaluation of reporting units on a fair value basis, as required by SFAS No. 142, indicated that an impairment existed in the communications solutions reporting unit within our test and measurement business. The revenue forecasts of the communications solutions reporting unit have been impacted by the prolonged economic downturn in the communications test markets. As such, we were required to perform the second step analysis to determine the amount of the impairment loss for the reporting unit that failed the first step test. The second step analysis consisted of comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of the reporting unit’s goodwill, with an impairment charge resulting from any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill. Based upon this evaluation, we recorded an impairment charge of $268 million, representing 100 percent of the reporting unit’s goodwill and approximately 44 percent of total consolidated goodwill recorded as of November 1, 2002. We also reclassified approximately $6 million of intangible assets associated with workforce-in-place to goodwill on November 1, 2002. The adoption of SFAS No. 142 had a material impact on our results of operations because goodwill is no longer being amortized. Amortization of goodwill was $326 million for the year ended October 31, 2002.

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Net loss and basic and diluted net loss per share for the year ended October 31, 2002 is disclosed below, adjusted to remove goodwill amortization, certain intangibles amortization and its related tax impact, as if SFAS No. 142 had applied to the period.

	For the Year Ended October 31, 2002
Reported loss before cumulative effect of accounting changes	$	(1,032	)
Add back: Goodwill and workforce-in-place amortization, net		320
Adjusted loss before cumulative effect of accounting changes		(712	)
Per share data — Basic and diluted reported loss before cumulative effect of accounting changes per share	$	(2.22	)
Adjustment for goodwill and workforce-in-place amortization, net		0.69
Adjusted loss before cumulative effect of accounting changes per share	$	(1.53	)
Reported net loss	$	(1,032	)
Add back: Goodwill and workforce-in-place amortization, net		320
Adjusted net loss	$	(712	)
Per share data — Basic and diluted reported net loss per share	$	(2.22	)
Adjustment for goodwill and workforce-in-place amortization, net		0.69
Adjusted net loss per share	$	(1.53	)
Weighted average shares used in per share computations above — Basic and diluted:		465

Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the economic lives of the respective assets, generally three to five years.

Advertising.    Advertising costs are expensed as incurred and amounted to $48 million in 2004, $44 million in 2003 and $81 million in 2002.

Research and Development.    Costs related to research, design and development of our products are charged to research and development expense as they are incurred.

Taxes on income.    Income tax expense or benefit is based on income or loss before taxes. Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Tax expense is also affected by any valuation allowance against deferred tax assets and changes in other comprehensive income (“OCI”).

Net income (loss) per share.    Basic net income (loss) per share is computed by dividing net income (loss) — the numerator — by the weighted average number of common shares outstanding — the denominator — during the period excluding the dilutive effect of stock options, other employee stock plans and our senior convertible debentures. Diluted net income (loss) per share gives effect to all potentially dilutive common stock equivalents outstanding during the period. In computing diluted net income (loss) per share, the average stock price for the period is used in determining the

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number of shares assumed to be purchased from the proceeds of stock option exercises. Diluted net income per share for 2004 excluded the potentially dilutive effect of 41 million common stock equivalents as their effect was antidilutive. Diluted net loss per share for 2003 and 2002 excluded the potentially dilutive effect of all common stock equivalents as the effect was antidilutive.

Cash and cash equivalents.    We classify investments as cash equivalents if their original maturity is three months or less at the date of purchase. Cash equivalents are stated at cost, which approximates fair value.

Approximately 30 percent of our cash and cash equivalents is held in the U.S. and 50 percent is held in a centrally managed global cash pool outside the U.S. The remainder is diversified among various major financial institutions throughout the world. Approximately 10 percent of our overall cash and cash equivalents is maintained in demand deposit accounts with global financial institutions of high credit quality, and is available to be used in paying and receiving activities. The remainder is invested in institutional money market funds, short-term bank time deposits and similar short-duration instruments with fixed maturities from overnight to 90 days. Agilent monitors the credit-worthiness of these financial institutions and institutional money market funds on a continuous basis. We have not experienced any credit losses from cash investments placed with these institutions.

Fair value of financial instruments.    The carrying values of certain of our financial instruments, including cash and cash equivalents, accrued compensation and other accrued liabilities approximate fair value because of their short maturities. The fair values of investments are determined using quoted market prices for those securities or similar financial instruments.

Concentration of credit risk.    We sell the majority of our products through our direct sales force. No single customer accounted for 10 percent or more of the combined accounts receivable balance at October 31, 2004 and 2003. Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographies. We perform ongoing credit evaluations of our customers’ financial conditions, and require collateral, such as letters of credit and bank guarantees, in certain circumstances.

Derivative instruments.    For derivative instruments that are designated and qualify as a fair value hedge, changes in value of the derivative are recognized in income in the current period, along with the offsetting gain or loss on the hedged item attributable to the hedged risk. For derivative instruments that are designated and qualify as a cash flow hedge, changes in the value of the effective portion of the derivative instrument are recognized in other comprehensive loss, a component of stockholders’ equity. These amounts are reclassified and recognized in income when either the forecasted transaction occurs or it becomes probable the forecasted transaction will not occur. Changes in the fair value of the ineffective portion of derivative instruments are recognized in income in the current period. Ineffectiveness in 2004, 2003 and 2002 was not significant.

We enter into foreign exchange contracts, primarily forward contracts and purchased options, to hedge exposures to changes in foreign currency exchange rates. These contracts are designated at inception as hedges of the related foreign currency exposures, which include committed and anticipated intercompany transactions and assets and liabilities that are denominated in currencies other than the functional currency of the subsidiary, which has the exposure. To achieve hedge accounting, contracts must reduce the foreign currency exchange rate risk otherwise inherent in the amount and duration of the hedged exposures and comply with established risk management

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policies; hedging contracts generally mature within twelve months. We do not use derivative financial instruments for speculative or trading purposes.

When hedging anticipated cash flow exposure, foreign exchange contract expirations are set so as to occur in the same period that the goods are expected to be sold to third parties, allowing realized gains and losses on the contracts to be recognized into total costs. When hedging balance sheet exposure, gains and losses on foreign exchange contracts are recognized in other income (expense), net in the same period as the occurrence of gains and losses on remeasurement of the non-functional currency denominated assets and liabilities. The gains and losses, which have not been material, are included in cash flows from operating activities in the consolidated statement of cash flows.

We may also, from time to time, acquire warrants to purchase securities of other companies as part of strategic relationships.

Inventory.    Inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of market value. We assess the valuation of our inventory on a quarterly basis and periodically write down the value for estimated excess and obsolete inventory based on estimates about future demand and actual usage.

Property, plant and equipment.    Property, plant and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized; maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation and amortization are removed from our general ledger and the resulting gain or loss is reflected in the consolidated statement of operations. Buildings and improvements are depreciated over fifteen to forty years and machinery and equipment over three to ten years. The straight-line method of depreciation is used for all property, plant and equipment.

Capitalized software.    We capitalize certain internal and external costs incurred to acquire or create internal use software in accordance with AICPA Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Capitalized software is included in property, plant and equipment and is depreciated over three to five years when development is complete.

Impairment of long-lived assets.    We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets, including intangible assets, may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Foreign currency translation.    The functional currency for many of our subsidiaries outside the U.S is local currency based on the criteria of SFAS No. 52 “Foreign Currency Translation”. For those subsidiaries that operate in a local currency functional environment, all assets and liabilities are translated into U.S. dollars using current exchange rates; revenue and expenses are translated using average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of accumulated comprehensive income (loss) in stockholders’ equity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For those subsidiaries that operate in a U.S. dollar functional environment, foreign currency assets and liabilities are remeasured into U.S. dollars at current exchange rates except for inventory, property, plant and equipment, other assets and deferred revenue, which are remeasured at historical exchange rates. Revenue and expenses are generally translated at average exchange rates in effect during each period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in consolidated net income (loss).

3.    New Accounting Pronouncements

Adoption of New Pronouncements.

In January 2003 the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) which was amended by FIN 46R issued in December 2003. FIN 46 addresses consolidation by business enterprises of variable interest entities (“VIE’s”) that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) for which the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires consolidation of VIE’s for which Agilent is the primary beneficiary and disclosure of a significant interest in a VIE for which Agilent is not the primary beneficiary. As a result of our review, no entities were identified requiring disclosure or consolidation under FIN 46.

In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” (“SAB No. 104”). SAB No. 104 rescinds certain sections of SAB No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”), related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). The revenue recognition principles of SAB No. 101 remain largely unchanged by the issuance of SAB No. 104. The adoption of this standard did not affect our financial condition, results of operations or cash flows.

In December 2003, the FASB issued a revision SFAS No. 132 (the “revision”), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. The revision requires additional disclosures relating to the description of the types of plan assets, investment strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans recognized during interim periods. We adopted the disclosure requirements beginning with the first quarter of 2004 and the standard is effective for all future quarterly and annual reports; see Note 14 for such disclosures.

In March 2004, the FASB issued EITF No. 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments,” which provides new guidance for assessing impairment losses on debt and equity investments. The new impairment model applies to investments accounted for under the cost or equity method and investments accounted for under FAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” EITF No. 03-01 also includes new disclosure requirements for cost method investments and for all investments that are in an unrealized loss position. In September 2004, the FASB delayed the accounting provisions of EITF No. 03-01; however the disclosure requirements remain effective and the applicable ones have been adopted for our year-end 2004. We will evaluate the effect, if any, of EITF 03-01 when final guidance is issued.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In March 2004, the EITF reached a consensus on EITF Issue No. 03-16, “Accounting for Investments in Limited Liability Companies” (“EITF 03-16”). The EITF concluded that if investors in a limited liability company have specific ownership accounts, they should follow the guidance prescribed in Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures, and EITF Topic No. D-46, Accounting for Limited Partnership Investments.” Otherwise, investors should follow the significant influence model prescribed in Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” The adoption of this Issue did not have a material impact on the company’s financial condition, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R addresses all forms of share-based payment (“SBP”) awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R will require Agilent to expense SBP awards with compensation cost for SBP transactions measured at fair value. The FASB originally stated a preference for a lattice model because it believed that a lattice model more fully captures the unique characteristics of employee stock options in the estimate of fair value, as compared to the Black-Scholes model which Agilent currently uses for its footnote disclosure. The FASB decided to remove its explicit preference for a lattice model and not require a single valuation methodology. SFAS No. 123R requires Agilent to adopt the new accounting provisions beginning in our fourth quarter of 2005. Agilent has not yet determined the impact of applying the various provisions of SFAS No. 123R.

In May 2004, the FASB issued a FASB Staff Position (“FSP”) regarding SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. FSP No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” discusses the effect of the Medicare Prescription Drug, Improvement and Modernization Act (the “Act”) enacted in December 2003 and supersedes FSP No. 106-1, which was issued in January 2004. FSP No. 106-2 considers the effect of the two new features introduced in the Act in determining our accumulated postretirement benefit obligation (“APBO”) and net periodic postretirement benefit cost. The effect on the APBO will be accounted for as an actuarial experience gain to be amortized into income over the average remaining service period of plan participants. Companies may elect to defer accounting for this benefit or may attempt to reflect the best estimate of the impact of the Act on their net periodic costs currently. The adoption of FSP No. 106-2 in the fourth quarter of 2004 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2004, the FASB issued FASB Statement No. 151, “Inventory Costs — an amendment of ARB No. 43” (“FAS 151”), which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. FAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are evaluating the impact of this standard on our consolidated financial statements.

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AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2004, the FASB issued an FSP regarding “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (“AJCA”), FSP 109-b. FSP 109-b allows Agilent time beyond the fourth quarter of 2004, the period of enactment, to evaluate the effect of the AJCA on our plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 “Accounting of Income Taxes.” See the discussion of the potential impact on Agilent in Note 4 below.

4.    Tax Valuation Allowance and Provision (Benefit) for Taxes

The provision (benefit) for income taxes is comprised of:

	Years Ended October 31,
	2004			2003		2002
	(in millions)
U.S. federal taxes from continuing operations:
Current	$	—		$	—	$	—
Deferred		(16	)		876		(501	)
Non-U.S. taxes from continuing operations:
Current		122			84		142
Deferred		(17	)		64		(113	)
State taxes from continuing operations, net of federal benefit		2			76		(53	)
Total from continuing operations:	$	91		$	1,100	$	(525	)

The significant components of deferred tax assets and deferred tax liabilities included on the consolidated balance sheet are:

	October 31,
	2004					2003
	Deferred Tax Assets			Deferred Tax Liabilities		Deferred Tax Assets			Deferred Tax Liabilities
	(in millions)
Inventory	$	191		$	—	$	192		$	—
Property, plant and equipment		25			122		55			76
Warranty reserves		25			—		26			—
Retiree medical benefits		52			—		33			—
Other retirement benefits		—			75		40			45
Employee benefits, other than retirement		221			1		132			15
Net operating losses and credit carryforwards		1,151			—		1,236			—
Unremitted earnings of foreign subsidiaries		—			273		—			200
Convertible interest		—			76		—			48
Other		89			95		140			—
Subtotal		1,754			642		1,854			384
Tax valuation allowance		(1,121	)		—		(1,456	)		—
	$	633		$	642	$	398		$	384

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AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the third quarter of 2003, we recorded a non-cash charge to establish a valuation allowance of $1.4 billion, which included approximately $0.4 billion of tax benefits recorded during the first six months of 2003 resulting in an approximately $1.0 billion net tax provision recorded within provision for taxes for 2003. The valuation allowance was determined in accordance with the provisions of SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”), which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. Cumulative losses incurred in the U.S. and the U.K. jurisdictions in recent years represented sufficient negative evidence under SFAS No. 109 to require a full valuation allowance in these jurisdictions. Accordingly, a full valuation allowance was recorded. We intend to maintain a full valuation allowance until sufficient positive evidence exists to support reversal of the valuation allowance.

At October 31, 2004, we had federal net operating loss carryforwards of approximately $2,037 million and tax credit carryforwards of approximately $316 million. An immaterial amount of net operating losses will expire in 2005 with the remainder expiring in tax years through 2024, if not utilized. The tax credit carryforwards will expire beginning in 2007 through 2024, if not utilized. In addition, the company has California net operating loss carryforwards of approximately $395 million. An immaterial amount of California net operating losses will expire in 2005 with the remainder expiring in tax years through 2013, if not utilized. Included in the total net operating loss carryforwards are net operating losses of $50 million related to employee stock option exercises, the benefits of which will increase additional paid in capital when realized.

The differences between the U.S. federal statutory income tax rate and our effective tax rate are:

	Years Ended October 31,
	2004		2003		2002
U.S. federal statutory income tax rate	35.0	%	(35.0	)%	(35.0	)%
State income taxes, net of federal benefit	.5		(3.1	)	(3.5	)
Non-U.S. income taxed at different rates	(3.9	)	(3.6	)	(.2	)
Nondeductible goodwill	1.8		2.7		9.1
R&D credits	(2.8	)	(2.2	)	(4.1	)
Extraterritorial income exclusion	(5.7	)	(4.3	)	(.8	)
Other, net	1.7		(.2	)	.5
Valuation allowance	(5.9	)	205.2		—
	20.7	%	159.5	%	(34.0	)%

The domestic and foreign components of income (loss) earnings from continuing operations before taxes are:

	Years Ended October 31,
	2004			2003			2002
	(in millions)
U.S. continuing operations	$	(178	)	$	(522	)	$	(1,804	)
Non-U.S. continuing operations		618			(168	)		257
	$	440		$	(690	)	$	(1,547	)

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AGILENT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We consider the operating income of non-United States subsidiaries to be indefinitely invested outside the United States. No provision has been made for United States federal and state, or foreign taxes that may result from future remittances of undistributed earnings of foreign subsidiaries, the cumulative amount of which is approximately $1,179 million as of October 31, 2004. If management decides to remit this income to the U.S. in a future period, our provision for income taxes may increase materially in that period.

On October 22, 2004, the AJCA was signed into law. The AJCA includes a deduction for 85 percent of certain foreign earnings that are repatriated, as defined in the AJCA, at an effective tax cost of 5.25 percent on any such repatriated foreign earnings. Agilent may elect to apply this provision to qualifying earnings repatriations in fiscal 2005. Agilent has begun an evaluation of the effects of the repatriation provision; however, we do not expect to be able to complete this evaluation until after Congress or the Treasury Department provide additional clarifying language on key elements of the provision. We expect to complete our evaluation of the effects of the repatriation provision within a reasonable period of time following the publication of the additional clarifying language. The range of possible amounts that Agilent is considering for repatriation under this provision is between zero and $970 million. The related potential range of income tax is between zero and $51 million.

We are subject to ongoing tax examinations of our tax returns by the Internal Revenue Service and other tax authorities in various jurisdictions. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

5.    Stock-Based Compensation

We follow the accounting provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) for stock-based compensation granted to employees. Accordingly, compensation expense is recognized in our consolidated statement of operations only when options are granted at an exercise price that is less than the market price of the underlying stock on the date of the grant. Any compensation expense is recognized ratably over the associated service period, which is generally the option vesting term.

Employee stock purchase plans.    In February 2000, we implemented the Agilent Technologies, Inc. Employee Stock Purchase Plan (the “Legacy Plan”) that allowed eligible employees to contribute up to ten percent of their base compensation to the purchase of our common stock. Under the provisions of the Legacy Plan, employee contributions were partially matched with shares contributed by us. These matching shares also generally vested over two years. Compensation expense for the matching provision for the Legacy Plan was measured using the fair value of shares on the date of purchase by Agilent for the Legacy Plan and was recognized over the two-year vesting period.

Effective October 31, 2000, purchases and contributions under the Legacy Plan ceased. All unvested matching shares under the Legacy Plan maintained their original vesting terms based on the employee’s continued employment. Vesting of these matching shares was completed by October 31, 2002. Compensation expense under the Legacy Plan was nil in 2004 and 2003 and $16 million in 2002. At October 31, 2004, 9,802,100 shares of our common stock had been authorized for issuance under the Legacy Plan and 3,426,716 of these shares had been issued. The remainder of the authorized shares are not expected to be issued, as the Legacy Plan is no longer functioning.

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Effective November 1, 2000, we adopted a new plan, the 423(b) Plan. Under the provisions of the 423(b) Plan, eligible employees may contribute up to ten percent of their base compensation to purchase shares of our common stock at 85 percent of the lower of the fair market value at the entry date or the purchase date as defined by the 423(b) Plan. As of October 31, 2004, 39,868,411 shares of our common stock were authorized for issuance under the 423(b) Plan and 20,595,128 of these shares have been issued.

Incentive compensation plans.    On September 17, 1999, we adopted the Agilent Technologies, Inc. 1999 Stock Plan (the “Stock Plan”) and subsequently reserved 67,800,000 shares of our common stock for issuance under the Stock Plan. In addition, on May 31, 2000, 19,000,000 shares of our common stock were registered pursuant to converted stock options previously granted by Hewlett-Packard Company. In February 2001, our stockholders approved an additional 45,000,000 shares of our common stock for issuance under the Stock Plan. These shares were subsequently registered in May 2002. Stock options, stock appreciation rights, stock awards and cash awards may be granted under the Stock Plan. Options granted under the Stock Plan may be either “incentive stock options,” as defined in section 422 of the Internal Revenue Code, or non-statutory. Options generally vest at a rate of 25 percent per year over a period of four years from the date of grant and have a maximum term of ten years. The exercise price for incentive stock options is generally not less than 100 percent of the fair market value of our common stock on the date the stock award is granted.

On March 4, 2003, our stockholders approved an amendment to the Stock Plan. The amendment permits the company to offer a one-time exchange of options issued under the Stock Plan having an exercise price greater than $25 for a lesser number of options to be granted at least six months and one day from the cancellation of surrendered options (the “Option Exchange Program”). On May 20, 2003, we implemented the Option Exchange Program by filing a Tender Offer Statement with the SEC, which allowed eligible employees a one-time opportunity to exchange options to purchase shares of the company’s common stock, whether vested or unvested, which were granted under our Stock Plan, with exercise prices greater than $25 per share. The Option Exchange Program was offered from May 20, 2003 to June 18, 2003 and options to purchase approximately 26 million shares were exchanged, with an average exercise price of $51. As a result, the company issued options to purchase approximately 13.8 million shares at a weighted-average exercise price of $28 per share during the first quarter of 2004. Under the provisions of APB 25 no compensation expense has been, or will be, recognized in our consolidated statement of operations for the issuance of the replacement options.

Effective November 1, 2003, the Compensation Committee of the Board of Directors approved the LTPP for the company’s executive officers. Participants in this program are entitled to receive unrestricted shares of the company’s stock after the end of a three-year period, if specified performance targets are met. On November 18, 2003 the Compensation Committee approved approximately 322,000 shares to be issued to the company’s executive officers. We include the dilutive impact of this program in our diluted net income per share calculation. The amount of compensation expense, using the variable accounting method pursuant to APB No. 25, was not material for the year ended October 31, 2004. The stock will be awarded in fiscal 2007, and the final award may vary as it is based on certain performance metrics. On November 16, 2004, the Compensation Committee approved approximately 419,000 shares to be issued for the company’s executive officers in connection with the LTPP. The shares will be awarded in fiscal year 2008, and the final award may vary as it is based on certain performance metrics.

At October 31, 2004, shares registered and available for option and restricted stock grants were 61,945,186. Compensation expense for discounted options, stock appreciation rights and restricted

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stock is recognized based on the intrinsic value method defined by APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Any compensation expense is recognized ratably over the associated service period, which is generally the vesting period. The compensation expense related to discounted options, stock appreciation rights and restricted stock was $4 million in 2004, $6 million in 2003 and $7 million in 2002.

The following table summarizes option activity for the years ended October 31, 2004, 2003 and 2002:

	Shares		Weighted Average Exercise Price
	(in thousands)
Outstanding as of October 31, 2001	63,955		$	46
Granted	20,152		$	25
Exercised	(1,128	)	$	12
Cancelled	(9,140	)	$	51
Outstanding as of October 31, 2002	73,839		$	40
Granted	13,152		$	16
Exercised	(1,768	)	$	12
Cancelled under Option Exchange Program	(25,882	)	$	51
Other Cancellations	(7,975	)	$	41
Outstanding as of October 31, 2003	51,366		$	29
Granted	12,136		$	32
Exercised	(2,859	)	$	19
Granted under Option Exchange Program	13,797		$	28
Other Cancellations	(3,464	)	$	38
Outstanding as of October 31, 2004	70,976		$	29

The following table summarizes options exercisable and the fair value of options granted:

	Shares	Weighted Average Exercise Price		Value using Black-Scholes model
	(in thousands)
Options exercisable as of October 31, 2002	31,501	$	41
Black-Scholes value of options granted during 2002				$	15
Options exercisable as of October 31, 2003	26,141	$	35
Black-Scholes value of options granted during 2003				$	9
Options exercisable as of October 31, 2004	31,023	$	32
Black-Scholes value of options granted during 2004				$	14

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The following table summarizes information about all options outstanding at October 31, 2004:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
					Number Exercisable	Weighted Average Exercise Price
	(in thousands)				(in thousands)
$       0 – 15	2,093	6.0 years	$	13	1,772	$	13
$15.01 – 25	14,382	8.0 years	$	18	4,611	$	19
$25.01 – 30	31,564	7.5 years	$	27	12,418	$	27
$30.01 – 40	16,509	7.4 years	$	34	6,084	$	35
$40.01 – 50	3,586	4.5 years	$	44	3,574	$	44
$50 and over	2,842	5.6 years	$	68	2,564	$	69
	70,976		$	29	31,023	$	32

6.    Net Income (Loss) Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations for the periods presented below.

	For the Years Ended October 31,
	2004		2003			2002
	(in millions)
Numerator:
Income (loss) from continuing operations	$	349	$	(1,790	)	$	(1,022	)
Loss from the sale of discontinued operations, net of taxes		—		—			(10	)
Income (loss) before cumulative effect of accounting changes		349		(1,790	)		(1,032	)
Cumulative effect of adopting SFAS No. 142		—		(268	)		—
Net income (loss)	$	349	$	(2,058	)	$	(1,032	)
Denominators:
Basic weighted average shares		483		473			465
Diluted weighted average shares		490		473			465

Options to purchase 41 million shares of common stock at a weighted average exercise price of $35 per share were outstanding in 2004, but were not included in the computation of diluted net income per share because the options were antidilutive for 2004. Options to purchase 51 million shares of common stock at a weighted average exercise price of $29 per share were outstanding in 2003, but were not included in the computation of diluted net loss per share because the options were antidilutive for 2003. The options, which expire no later than 2014, were still outstanding at the end of 2004. Options to purchase 74 million shares of common stock at a weighted average exercise price of $40 per share were outstanding in 2002, but were not included in the computation of diluted net loss per share because the options were antidilutive in that year.

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Our senior convertible debentures were also antidilutive during 2004, 2003 and 2002. Income from continuing operations for 2004, 2003 and 2002 included approximately $35 million in interest expense associated with the senior convertible debentures. If the shares had been dilutive, then this amount would have been added back to income from operations, and approximately 36 million of shares would have been added to the weighted average number of shares for the purposes of calculating diluted income per share. See Note 16, “Senior Convertible Debentures and Lines of Credit.”

7.    Supplemental Cash Flow Information

Cash paid for income taxes was $149 million in 2004, $122 million in 2003 and $160 million in 2002. Cash paid for interest was approximately $36 million in 2004, $36 million in 2003 and $36 million in 2002.

Non-cash transactions in 2004 related primarily to an acquisition in October 2004. We issued approximately 772 thousand shares with an approximate value of $18 million. We issued the final block of common stock under The Legacy Plan in the amount of $23 million in 2002.

8.    Inventory

	October 31,
	2004		2003
	(in millions)
Finished goods	$	293	$	356
Work in progress		113		85
Raw materials		620		554
	$	1,026	$	995

Inventory-related charges of $45 million, $11 million and $74 million were recorded in total cost of products in 2004, 2003 and 2002, respectively. We record excess and obsolete inventory charges for both inventory on our site as well as inventory at our contract manufacturers and suppliers where we have non-cancelable purchase commitments.

9.    Property, Plant and Equipment, Net

	October 31
	2004			2003
	(in millions)
Land	$	97		$	106
Buildings and leasehold improvements		1,684			1,838
Software		430			404
Machinery and equipment		1,804			1,923
Total property, plant and equipment		4,015			4,271
Accumulated depreciation and amortization		(2,757	)		(2,824	)
	$	1,258		$	1,447

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We have sold substantially all of our portfolio of operating leases to CIT. Equipment under operating leases was $7 million at October 31, 2004 and $10 million at October 31, 2003 and was included in machinery and equipment. Accumulated depreciation related to equipment under operating leases was $5 million at October 31, 2004 and $8 million at October 31, 2003.

We sold assets related to portions of our businesses to third parties during 2004, 2003 and 2002. Gross proceeds from these dispositions were zero in 2004 and 2003 and $31 million in 2002. (Loss) gains from the dispositions, included in other income (expense), net in the consolidated statement of operations, were ($1 million) in 2004, $5 million in 2003 and $18 million in 2002.

10.    Investments

Investments in cost basis and equity method investments and securities classified as trading securities or available-for-sale were as follows at October 31, 2004 and 2003 (net book value):

	October 31
	2004		2003
	(in millions)
Investments in and advances to equity method investees	$	99	$	69
Cost method investments		64		67
Trading securities		45		36
Available-for-sale investments (original cost was $16 million)		8		8
Total	$	216	$	180

Cost method investments consist of non-marketable equity securities and are accounted for at historical cost. For investments where we have significant influence over the investee, the equity method of accounting is used. Agilent’s proportionate share of income or loss for equity method investments is recorded currently in earnings. Trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized currently in earnings. Investments designated as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, included in stockholders’ equity.

All of our investments (excluding trading securities) are subject to periodic impairment review. However, the impairment analysis requires significant judgment to identify events or circumstances that would likely have significant adverse effect on the future use of the investment.

Charges related to other than temporary impairments were $15 million for 2004, $15 million in 2003 and $9 million in 2002. These impairment charges were recorded in other income (expense), net in the consolidated statement of operations.

Agilent’s share of income (loss) from equity investments was $29 million in 2004, $5 million in 2003, and ($11 million) in 2002. Realized gains and losses on Agilent’s trading securities portfolio were $5 million gain in 2004 and 2003 and $5 million loss in 2002. These amounts have been included in other income (expense), net in the consolidated statement of operations.

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11.    Goodwill and Other Intangible Assets

The goodwill balances as of October 31, 2004 and 2003 and the movements in the year ended October 31, 2004 for each of our reportable segments are shown in the table below:

	Test and Measurement			Automated Test		Semiconductor Products		Life Sciences and Chemical Analysis		Total
	(in millions)
Goodwill at October 31, 2002	$	434		$	74	$	85	$	23	$	616
Adoption of SFAS No. 142 goodwill impairment		(268	)		—		—		—		(268	)
Foreign currency translation impact		17			11		10		1		39
Goodwill arising from acquisitions		—			—		1		—		1
Goodwill at October 31, 2003		183			85		96		24		388
Foreign currency translation impact		8			3		2		—		13
Goodwill arising from acquisitions		—			5		—		16		21
Goodwill at October 31, 2004	$	191		$	93	$	98	$	40	$	422

The component parts of other intangibles as of October 31, 2004 and October 31, 2003 are shown in the table below:

	Other Intangible Assets
	Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
As of October 31, 2004:
Purchased technology	$	143	$	128	$	15
Customer relationships		29		23		6
Total	$	172	$	151	$	21
As of October 31, 2003:
Purchased technology	$	122	$	110	$	12
Customer relationships		23		21		2
Total	$	145	$	131	$	14

The net book value of other intangibles includes a $5 million favorable impact related to currency during 2004. We purchased $22 million of other intangibles during 2004, which was primarily related to two acquisitions. These acquisitions also resulted in additional goodwill of $21 million. Pro-forma disclosures are not required for these acquisitions as they were immaterial.

Amortization for intangible assets was $20 million in 2004, $45 million in 2003 and $52 million in 2002. Future amortization expense related to existing intangible assets is estimated to be $8 million for 2005, $5 million for 2006, $3 million for 2007 and $5 million thereafter.

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During 2003, we recognized an impairment charge pursuant to SFAS No. 144 of approximately $10 million for intangible assets (representing developed technology and customer relationships) in our test and measurement business as a result of a decline in the projected future cash flows. The impairment charge was recorded in cost of sales ($8 million) and selling, general, and administrative ($2 million) in the consolidated statement of operations.

12.    Guarantees

Standard Warranty

A summary of the standard warranty accrual activity for October 31, 2004 and 2003 is shown in the table below:

	For the Years Ended October 31,
	2004			2003
	(in millions)
Balance at October 31, 2003 and 2002	$	71		$	72
Accruals for warranties issued during the period		68			70
Accruals related to pre-existing warranties (including changes in estimates)		(2	)		5
Settlements made during the period		(78	)		(76	)
Balance at October 31, 2004 and 2003	$	59		$	71

Extended Warranty

Revenue for our extended warranty contracts with terms beyond one year is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. Amounts recorded for extended warranty contracts are included in deferred revenue on the consolidated balance sheet.

	For the Year Ended October 31, 2004
	(in millions)
Balance at October 31, 2003	$	33
Recognition of revenue		(19	)
Deferral of revenue for new contracts		38
Balance at October 31, 2004	$	52

Lease Guarantees

As of October 31, 2004, we have issued credit guarantees to CIT Group Inc. with an aggregate maximum exposure of $13 million that has been fully accrued as a component of other accrued liabilities. In addition to the credit guarantees, we gave CIT Group Inc. guarantees that could require us to repurchase individual leases if, for example, the documentation we provided to support the lease was not materially accurate. In our opinion, the fair value of these additional guarantees is not material.

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We have evaluated our relationship with the CIT Group Inc. and have determined that CIT is not a variable interest entity under FIN 46.

Indemnifications to Hewlett-Packard Company

We have given multiple indemnities to Hewlett-Packard Company in connection with our activities prior to our spin-off from Hewlett-Packard for the businesses that constituted Agilent prior to the spin-off. These indemnifications cover a variety of aspects of our business, including, but not limited to, employee, tax, intellectual property and environmental matters. The agreements containing these indemnifications have been previously disclosed as exhibits to our registration statement on Form S-1 filed on August 16, 1999. In our opinion, the fair value of these indemnifications is not material.

Indemnifications to Koninklijke Philips Electronics, N.V. (“Philips”)

In connection with the sale of our healthcare solutions business to Philips on August 1, 2001, we indemnified Philips for various matters, including product liability issues arising within two years of the sale agreement. In our opinion, the fair value of these indemnifications is not material.

Indemnifications to Officers and Directors

Our corporate by-laws require that we indemnify our officers and directors, as well as those who act as directors and officers of other entities at our request, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to Agilent. In addition, we have entered into separate indemnification agreements with each director and each board-appointed officer of Agilent, which provides for indemnification of these directors and officers under similar circumstances and under additional circumstances. The indemnification obligations are more fully described in the by-laws and the indemnification agreements. See Exhibits 3.2 and 10.6 of this document. We purchase standard insurance to cover claims or a portion of the claims made against our directors and officers. Since a maximum obligation is not explicitly stated in our by-laws or in our indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, we have not made payments related to these obligations, and the fair value for these obligations is zero on the consolidated balance sheet as of October 31, 2004.

Other Indemnifications

As is customary in our industry and as provided for in local law in the U.S. and other jurisdictions, many of our standard contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and the use of our products and services, the use of their goods and services, the use of facilities and state of our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts, usually up to a specified maximum amount. In addition, from time to time we also provide protection to these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

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13.    Restructuring and Asset Impairment

Summary

We currently have three restructuring plans — one initiated in the fourth quarter of 2001 (the “2001 Plan”), a second initiated in the fourth quarter of 2002 (the “2002 Plan”), and a third initiated in the first quarter of 2003 (the “2003 Plan”) after it became clear that the actions taken in fiscal 2001 and fiscal 2002 would not be sufficient to return the company to profitability.

All of our plans were designed to reduce costs and expenses in order to return the company to profitability. As of the end of 2004, we have reduced our workforce by approximately 16,700 people (approximately 15,100 from involuntary terminations and approximately 1,600 from net attrition) to 28,000 employees.

Our plans to consolidate excess facilities resulted in charges for lease termination fees and losses anticipated from sub-lease agreements. We have exited more than 115 production, support and sales facilities in the U.S., Korea, Japan, U.K. and other countries, representing more than 4.6 million square feet, or about 24 percent of our worldwide property. We will continue to make lease payments on some of this space over the next five years. We lease most of these buildings from third parties, and the closures impacted all segments. In most cases, we are exiting administrative office buildings, which house sales and administrative employees. However, a small number of production facilities were closed as a result of our plans to consolidate manufacturing into fewer sites.

Actions for all plans have been focused on segments that were impacted most severely by the market downturn – primarily our test and measurement and semiconductor products businesses – but actions have also been taken to reduce the costs associated with support services such as finance, information technology, workplace services and to a lesser extent our other business segments. Cost reductions were initiated by moving manufacturing and some of our global shared services operations sites to lower cost regions, reducing the number of properties, particularly sales and administrative sites, and by reducing our workforce through involuntary terminations and selected outsourcing of manufacturing and administrative functions. Our strategy is to move towards a more variable operating cost structure.

We have executed all key actions under our 2001 Plan, although there may be changes in estimates for the consolidation of excess facilities due to changes in market conditions from those originally expected at the time the charges were recorded. Our 2002 Plan is complete. Our 2003 Plan is substantially complete, although we anticipate some charges in the first half of 2005 as we complete the Plan.

The 2001 Plan

The 2001 plan impacted the test and measurement business and the semiconductor products business and had little direct impact on the automated test and life sciences and chemical analysis businesses except as the plan related to support services reductions across all of our businesses.

We have executed all key actions under this plan, however we will continue to make lease payments over the next five years.

We continue to carry out our plan to consolidate excess facilities. During 2004 we recorded an additional $7 million in net charges and adjustments due primarily to reductions in our estimate of

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expected sublease income. Due to the length of some of the lease terms and the uncertainty of the real estate market, we expect to make periodic adjustments to the accrual balance to reflect changes in our estimates, and to reflect actual events as they occur.

The cost of the 2001 Plan through October 31, 2004 was $533 million: $154 million in 2001, $357 million in 2002, $15 million in 2003 and $7 million in 2004.

A summary of restructuring activity for the 2001 Plan through October 31, 2004 is shown in the table below:

	Workforce Reduction			Consolidation of Excess Facilities			Impairment of Assets, Property, Plant and Equipment			Total
				(in millions)
Balance at October 31, 2001	$	52		$	20		$	17		$	89
Total charge		175			53			129			357
Asset impairment		—			—			(146	)		(146	)
Cash payments		(210	)		(10	)		—			(220	)
Balance at October 31, 2002		17			63			—			80
Total charge and adjustment (a)		—			24			(9	)		15
Asset impairment		—			—			9			9
Cash payments		(17	)		(25	)		—			(42	)
Balance at October 31, 2003		—			62			—			62
Total charge		—			7			—			7
Cash payments		—			(26	)		—			(26	)
Balance at October 31, 2004	$	—		$	43		$	—		$	43

(a) Represents primarily changes in estimates relating to consolidation of excess facilities arising from a decline in real estate market conditions and an adjustment recorded within property, plant and equipment, net.

The 2002 Plan

On August 19, 2002, we announced our intention to further reduce our workforce by 2,500 to achieve a quarterly operating cost structure of approximately $1.6 billion. This plan primarily affected the manufacturing and field operations serving the wireline markets that are components of our test and measurement business as well as information technology support services.

Our workforce reductions impacted all regions, all expense categories and most of our segments, particularly our test and measurement and semiconductor products segments. We reduced the number of employees at production facilities that experienced declining demand, outsourced selective operations and also reduced the number of employees that provided information technology support services as we streamlined our operations with the implementation of our new information systems.

Our 2002 Plan is complete. The cost of the 2002 Plan through October 31, 2004 totaled $166 million: $117 million in 2002, $49 million in 2003 and zero in 2004.

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A summary of restructuring activity for the 2002 Plan through October 31, 2004 is shown in the table below:

	Workforce Reduction			Impairment of Assets, Property, Plant and Equipment			Total
	(in millions)
Balance at July 31, 2002	$	—		$	—		$	—
Total charge		83			34			117
Asset impairment		—			(34	)		(34	)
Cash payments		(15	)		—			(15	)
Balance at October 31, 2002		68			—			68
Total charge		44			5			49
Asset impairment		—			(5	)		(5	)
Cash payments		(98	)		—			(98	)
Balance at October 31, 2003		14			—			14
Cash payments		(14	)		—			(14	)
Balance at October 31, 2004	$	—		$	—		$	—

The 2003 Plan

On February 21, 2003, we announced our intention to further reduce our quarterly operational costs to a level of $1.45 billion as part of the 2003 Plan. In order to accomplish this, we announced a workforce reduction of approximately 4,000 jobs in addition to previously announced cuts.

In order to achieve the goals of the 2003 Plan we have reduced our workforce by approximately 5,800 as of October 31, 2004, primarily in our U.S. operations. Reductions were made across all businesses with significant reductions in our test and measurement and semiconductor products businesses. We continued to reduce the number of employees at production facilities and employees that provide support services across all businesses. We have also reduced the number of research and development employees as we continue to look for opportunities to align our business with available markets.

With respect to the 2003 plan, we have continued to consolidate excess facilities. We have exited administrative office buildings, research and development facilities, and moved manufacturing to lower cost regions. Our plan to consolidate excess facilities resulted in increased charges of $28 million in 2004 and $13 million in 2003 for lease termination fees and losses estimated from sub-lease agreements.

During 2004, we incurred asset impairment charges of $25 million, primarily related to a manufacturing site in California. We announced our plans to exit this site, used primarily by the test and measurement business, during the second quarter of 2004. We may incur some additional asset impairment charges upon the sale of this site. In 2003 we incurred asset impairment charges of $57 million for fixed assets primarily owned by our semiconductor products segment.

As of October 31, 2004, the cost of the 2003 Plan totaled $462 million: $308 million in 2003 and $154 million in 2004.

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A summary of restructuring activity for the 2003 Plan through October 31, 2004 is shown in the table below:

	Workforce Reduction			Consolidation of Excess Facilities			Impairment of Assets, Property, Plant and Equipment			Total
	(in millions)
Balance at October 31, 2002	$	—		$	—		$	—		$	—
Total charge		238			13			57			308
Asset impairments		—			—			(57	)		(57	)
Cash payments		(234	)		(4	)		—			(238	)
Balance at October 31, 2003		4			9			—			13
Total charge		101			28			25			154
Asset impairments		—			—			(25	)		(25	)
Cash payments		(84	)		(14	)		—			(98	)
Balance at October 31, 2004	$	21		$	23		$	—		$	44

Summary information for combined plans

The restructuring accrual for all plans, which totaled $87 million as of October 31, 2004 and $89 million as of October 31, 2003, is recorded in other accrued liabilities on the consolidated balance sheet and represents estimated future cash outlays. Lease payments are expected over the next five years. Other payments, primarily severance, are expected within a one-year period.

A summary of the statement of operations impact of the charges resulting from all restructuring plans is shown below.

	Years Ended October 31,
	2004		2003		2002
	(in millions)
Cost of products and services	$	54	$	111	$	210
Research and development		16		66		56
Selling, general and administrative		91		195		208
Total restructuring and asset impairment charges	$	161	$	372	$	474

14.    Retirement Plans and Post-retirement Benefits

General.    Substantially all of our employees are covered under various defined benefit and/or defined contribution plans. Additionally, we sponsor post-retirement health care benefits and a death benefit under the Agilent Survivor Protection Plan for our eligible U.S. employees.

Retirement, deferred profit-sharing, and post-retirement plans.    Worldwide costs included in net income (loss) from continuing operations were $142 million in 2004, $187 million in 2003 and $122 million in 2002.

Agilent provides U.S. employees, who meet eligibility criteria under the retirement and deferred profit-sharing plans, defined benefits which are generally based on an employee’s highest five

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consecutive years’ average pay during the years of employment and on length of service. For eligible service through October 31, 1993, the benefit payable under the Agilent Retirement Plan is reduced by any amounts due to the eligible employee under our fixed and frozen defined contribution Deferred Profit-Sharing Plan (“DPSP”), which was closed to new participants in November 1993.

As of October 31, 2004 and 2003, the status of the Agilent Retirement Plan and DPSP for U.S. Agilent Employees follows.

	Agilent Retirement Plan				DPSP
	2004		2003		2004		2003
	(in millions)
Fair value of plan assets	$	564	$	488	$	847	$	863
Retirement benefit obligation	$	718	$	660	$	847	$	863

Eligible employees outside the U.S. generally receive retirement benefits under various retirement plans based upon factors such as years of service and employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements.

401(k) defined contribution plan.    Our U.S. eligible employees may participate in the Agilent Technologies, Inc. 401(k) Plan (“the 401(k) Plan”). Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) Plan, we provide matching contributions to employees up to a maximum of 4 percent of an employee’s annual eligible compensation. The maximum contribution to the 401(k) Plan is 50 percent of an employee’s annual eligible compensation, subject to regulatory and plan limitations. The 401(k) Plan expense included in income (loss) from continuing operations was $36 million in 2004, $41 million in 2003 and $48 million in 2002.

Post-retirement benefit plans.    In addition to receiving pension benefits, our U.S. employees who meet retirement eligibility requirements as of their termination dates may participate in our Continued Group Medical or SeniorMed Plans (the “Post-retirement Medical Plans”). Our current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees. Once participating in a medical plan, retirees may choose from managed-care and indemnity options, with their contributions dependent on the options chosen and length of service. Our U.S. retirees are also covered by a lump sum death benefit that is part of the Agilent Survivor Protection Plan.

Plan amendments.    In July 2004, the Compensation Committee of the Board of Directors approved design changes to Agilent’s Post-retirement Medical Plans and the Survivor Protection Plan. In addition, the Compensation Committee delegated certain authority to the Benefits Committee to amend plans as necessary to effectuate these design changes. The existing post-65 retirees are expected to be covered by a new Medicare Supplement Plan in 2005. The Medicare Supplement Plan will supplement Medicare coverage by reimbursing Medicare Parts A and B deductibles at 100 percent after Medicare pays its portion of the retiree’s expenses. No changes were made to the Post-retirement Medical Plans for current pre-65 retirees. The Post-retirement Medical Plans for certain future pre-65 retirees will be revised to establish retiree medical accounts for the benefit of such retirees, and will be funded with amounts as determined by Agilent, in lieu of the managed care and indemnity options currently offered under the Post-retirement Medical Plans.

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Finally, the Agilent Survivor Protection Plan was revised to eliminate the $5,000 Retiree Survivor Benefit for all U.S. retirees who retire on or after January 1, 2005. None of these design changes had a material impact on the financial statements as of and for the year ended October 31, 2004.

Components of net periodic cost.    For the years ended October 31, 2004, 2003 and 2002, our net pension and post-retirement benefit costs were comprised of:

	Pensions																		U.S. Post Retirement Benefit Plans
	U.S. Plans									Non-U.S. Plans
	2004			2003			2002			2004			2003			2002			2004			2003			2002
	(in millions)
Service cost — benefits earned during the period	$	63		$	70		$	83		$	41		$	44		$	42		$	12		$	13		$	13
Interest cost on benefit obligation		39			44			46			52			46			41			32			30			27
Expected return on plan assets		(45	)		(39	)		(41	)		(65	)		(53	)		(59	)		(25	)		(22	)		(28	)
Amortization and deferrals:
Actuarial loss (gain)		3			14			10			33			33			13			6			1			(8	)
Prior service cost		1			1			1			—			—			—			(5	)		—			—
Net plan costs		61			90			99			61			70			37			20			22			4
Curtailment loss (gain)		—			—			1			—			—			(1	)		—			—			(41	)
Settlement loss		—			—			5			—			4			7			—			—			—
Special termination benefits		—			—			—			—			1			1			—			—			—
Total net plan costs (income)	$	61		$	90		$	105		$	61		$	75		$	44		$	20		$	22		$	(37	)
Distribution of net plan costs (income):
Continuing operations	$	61		$	90		$	105		$	61		$	75		$	44		$	20		$	22		$	(27	)
Discontinued operations		—			—			—			—			—			—			—			—			(10	)
Total net plan costs (income)	$	61		$	90		$	105		$	61		$	75		$	44		$	20		$	22		$	(37	)

Measurement date.    Agilent uses an October 31 measurement date for the U.S. plans and a September 30 measurement date for non-U.S. plans.

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Funded status.    As of October 31, 2004 and 2003, the funded status of the defined benefit and post-retirement benefit plans was:

	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						U.S. Post Retirement Benefit Plans
	2004			2003			2004			2003			2004			2003
	(in millions)
Change in fair value of plan assets:
Fair value — beginning of year	$	488		$	407		$	928		$	657		$	290		$	256
Actual return on plan assets		49			89			72			95			26			49
Employer contributions		63			91			83			127			—			—
Participants’ contributions		—			—			6			8			—			—
Benefits paid		(40	)		(100	)		(36	)		(35	)		(16	)		(15	)
Transfer from DPSP		4			1			—			—			—			—
Special termination benefits		—			—			—			1			—			—
Currency impact		—			—			56			83			—			—
Curtailment/settlement impact — restructuring		—			—			—			(8	)		—			—
Fair value — end of year	$	564		$	488		$	1,109		$	928		$	300		$	290
Change in benefit obligation:
Benefit obligation — beginning of year	$	660		$	761		$	1,095		$	957		$	539		$	437
Service cost		63			70			41			44			12			13
Interest cost		39			44			52			46			32			30
Participants’ contributions		—			—			6			8			—			—
Plan amendment		—			—			—			—			(123	)		(25	)
Actuarial (gain) loss		(9	)		(88	)		(37	)		(8	)		59			122
Benefits paid		(39	)		(100	)		(36	)		(35	)		(16	)		(14	)
Transfer from DPSP		4			1			—			—			—			—
Special termination benefits		—			—			—			1			—			—
Currency impact		—			—			68			102			—			—
Curtailment/settlement impact — restructuring		—			(28	)		—			(20	)		__—			(24	)
Benefit obligation — end of year	$	718		$	660		$	1,189		$	1,095		$	503		$	539
Plan assets less than benefit obligation	$	(154	)	$	(172	)	$	(80	)	$	(167	)	$	(203	)	$	(249	)
Unrecognized net actuarial loss		19			34			374			425			172			120
Unrecognized prior service cost (benefit) related to plan changes		2			3			(5	)		(5	)		(141	)		(23	)
Net (accrued) prepaid costs	$	(133	)	$	(135	)	$	289		$	253		$	(172	)	$	(152	)
Amounts recognized in the consolidated balance sheet consist of:
Prepaid defined benefit plan costs	$	—		$	—		$	290		$	253		$	—		$	—
Accrued defined benefit plan costs		(133	)		(135	)		(1	)		(136	)		—			—
Intangible assets		—			—			—			4			—			—
Additional minimum pension liability		—			—			—			132			—			—
Accrued post-retirement benefits costs		—			—			—			—			(172	)		(152	)
Net (accrued) prepaid costs	$	(133	)	$	(135	)	$	289		$	253		$	(172	)	$	(152	)

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Investment policies and strategies.    Plan assets consist primarily of listed stocks and bonds. In the U.S. our Agilent Retirement Plan and post-retirement benefit assets are allocated approximately 80 percent to equities and approximately 20 percent to fixed income investments. Our DPSP assets are allocated approximately 60 percent to equities and approximately 40 percent to fixed income investments. Approximately 10 percent of our U.S. equity portfolio consists of alternative investments consisting largely of private equity partnerships. We desire to obtain the optimum rate of investment return on the total investment portfolio consistent with the assumption of a reasonable level of risk. The safety and protection of principal is a primary concern and we believe that a well-diversified investment portfolio will result in the highest attainable investment return (income plus capital appreciation) with the lowest overall risk. Specific investment objectives for the plans are: maintain and enhance the purchasing power of the plans’ assets; achieve investment returns consistent with the level of risk being taken; and earn performance rates of return in accordance with the benchmarks adopted for each asset class. Outside the U.S., our assets are allocated between 50-75 percent to equities and 25-50 percent to fixed income investments depending on the plan. All plans’ assets are broadly diversified.

As of October 31, 2004 and October 31, 2003, our defined benefit plans in aggregate had projected benefit obligations (“PBO”) that were in excess of the fair value of the plan assets. The amounts of the obligations and assets for the plans were:

	U.S. Defined Benefit Plans October 31,						Non-U.S. Defined Benefit Plans October 31,
	2004			2003			2004			2003
	(in millions)
Aggregate projected benefit obligation (“PBO”)	$	(718	)	$	(660	)	$	(1,189	)	$	(1,095	)
Aggregate accumulated benefit obligation (“ABO”)	$	(481	)	$	(422	)	$	(1,009	)	$	(924	)
Aggregate fair value of plan assets	$	564		$	488		$	1,109		$	928

Contributions and estimated future benefit payments.    During fiscal year 2005, we expect to contribute $40 million to the Agilent Retirement Plan, $44 million to plans outside the U.S., and zero to the Post-retirement Medical Plans. We expect to pay the following benefit payments, which include expected future service.

	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans		U.S. Post Retirement Benefit Plans
	(in millions)
2005	$	37	$	23	$	18
2006	$	54	$	26	$	20
2007	$	54	$	29	$	22
2008	$	59	$	33	$	24
2009	$	65	$	37	$	26
2010-2014	$	368	$	257	$	158

No additional minimum pension liability was required for 2004 due to improved investment performance and employer contributions. For 2003, an additional minimum pension liability adjustment was required for our pension plans in Germany, Japan and the United Kingdom as the

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accumulated benefit obligation of $439 million for those plans exceeded the $408 million of pension plan assets for those plans as of the measurement date. The $31 million difference was increased by $105 million for net prepaid pension costs for all of the affected plans and reduced by $4 million for intangible assets in the United Kingdom’s plan and one of the Japanese plans, resulting in a gross additional minimum pension liability of $132 million. Of this amount, $92 million impacted accumulated comprehensive loss in 2003, offset by $40 million applied to deferred tax assets. For 2002, an additional minimum pension liability adjustment was required for our pension plans in Germany, Japan and the United Kingdom as the accumulated benefit obligation of $529 million for those plans exceeded the $441 million of pension plan assets for those plans as of the measurement date. The $88 million difference was increased by $142 million for net prepaid pension costs for all of the affected plans and reduced by $6 million for intangible assets in the United Kingdom’s plan and one of the Japanese plans, resulting in a gross additional minimum pension liability of $224 million. Of this amount, $146 million impacted accumulated comprehensive loss in 2002, offset by $78 million applied to deferred tax assets.

Assumptions.    The assumptions used to determine the benefit obligations and expense for our defined benefit and post-retirement benefit plans are presented in the table below. The impacts of the assumptions listed for the years 2004, 2003 and 2002 have already been recognized in our consolidated statement of operations. The assumptions for the year 2005 were used to determine the obligations presented as of October 31, 2004 in the funded status table above, and their impacts will be recognized in our consolidated statements of operations during 2005. The expected long-term return on assets of 8.50 percent is based on the historical rate of return for our chosen asset mix of equities and fixed income investments adjusted for anticipated future movements.

	Years Ended October 31,
	2005	2004	2003	2002
U.S. defined benefit plans:
Discount rate	5.75%	6.25%	6.75%	7.0%
Average increase in compensation levels	4.25%	4.25%	5.25%	5.5%
Expected long-term return on assets	8.50%	8.75%	8.75%	9.0%
Non-U.S. defined benefit plans:
Discount rate	2.25-5.75%	2.0-5.5%	2.25-6.0%	2.5-6.5%
Average increase in compensation levels	2.5-4.25%	2.5-4.0%	3.5-4.25%	3.5-5.5%
Expected long-term return on assets	4.5-7.5%	5.0-7.5%	5.5-7.75%	6.5-8.5%
U.S. post-retirement benefits plans:
Discount rate	5.75%	6.25%	6.75%	7.0%
Expected long-term return on assets	8.50%	8.75%	8.75%	9.0%
Current medical cost trend rate	10.0%	10.0%	9.0%	7.75%
Ultimate medical cost trend rate	5.0%	5.0%	5.5%	5.5%
Medical cost trend rate decreases to ultimate rate in year	2010	2009	2007	2007

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Assumed health care trend rates could have a significant effect on the amounts reported for Post-retirement Medical Plans. A one percentage point change in the assumed health care cost trend rates for the year ended October 31, 2005 would have the following effects:

	One Percentage Point Increase		One Percentage Point Decrease
	(in millions)
Effect on total service and interest cost components	$	8	$	(8	)
Effect on post-retirement benefit obligations	$	74	$	(53	)

15.    Other Accrued Liabilities and Other Long-Term Liabilities

Other accrued liabilities and other long-term liabilities at October 31, 2004 and 2003 were as follows:

	October 31,
	2004		2003
	(in millions)
Other accrued liabilities
Accrued expenses	$	77	$	114
Restructuring		87		89
Warranty accruals		49		57
Lease guarantees		13		31
Other		35		20
Total other accrued liabilities	$	261	$	311
Other long-term liabilities
Retirement plans	$	303	$	285
Deferred compensation		46		37
Minority interest		28		25
Warranty accruals		10		14
Other		79		56
Total other long-term liabilities	$	466	$	417

Our accrued vacation balance totaled $201 million and $193 million at October 31, 2004 and 2003, respectively, and is recorded in employee compensation and benefits in the consolidated balance sheet.

16.    Senior Convertible Debentures and Lines of Credit

Senior convertible debentures.    On November 27, 2001, we completed a private offering of $1.15 billion aggregate principal amount of three percent senior convertible debentures (the “debentures”) due 2021 and generated net proceeds of $1.12 billion after deducting fees and expenses. The debentures are convertible at any time into our common stock at an initial conversion price of $32.22 per share (approximately 36 million shares), subject to adjustment (as defined in the related Indenture dated November 27, 2001). They are redeemable for cash at the company’s option

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beginning at any time on or after December 6, 2004 at a price equal to 100 percent of the principal amount plus interest. Holders of the debentures have the ability to require us to repurchase the debentures, in whole or in part, on December 1 in each of 2006, 2011 and 2016. Holders also have the right to require us to repurchase all or a portion of the outstanding debentures if the company undergoes a Fundamental Change (as defined in the Indenture). The debentures bear interest at an annual rate of three percent, which is payable on June 1 and December 1 of each year beginning June 1, 2002. The interest rate will reset (as defined in the Indenture) in June 2006, June 2011 and June 2016, but in no event will it be reset below three percent or above five percent per annum. To date there have been no adjustments to the conversion price of the debentures.

Lines of credit.    Effective November 1, 2002, we terminated our $250 million five-year revolving credit facility that was due to expire on November 5, 2005 and did not extend the $250 million 364-day revolving credit facility that expired on November 1, 2002. There were no balances outstanding under either facility at October 31, 2004.

17.    Commitments

Operating Lease Commitments:    Agilent Technologies leases certain real and personal property from unrelated third parties under non-cancelable operating leases. Future minimum lease payments under leases at October 31, 2004 were $108 million for 2005, $87 million for 2006, $67 million for 2007, $55 million for 2008, $46 million for 2009 and $ 81 million thereafter. Certain leases require Agilent Technologies to pay property taxes, insurance and routine maintenance, and include escalation clauses. Rent expense was $116 million in 2004, $126 million in 2003 and $177 million in 2002.

18.    Contingencies

We are involved in lawsuits, claims, investigations and proceedings, including patent, commercial and environmental matters that arise in the ordinary course of business. There are no such matters pending that we expect to be material in relation to our business, consolidated financial condition, results of operations or cash flows.

19.    Segment Information

Description of segments.    We are a diversified technology company that provides enabling solutions to customers in markets within the communications, electronics, life sciences and chemical analysis industries.

We organize our business operations into four major businesses — test and measurement, automated test, semiconductor products, and life sciences and chemical analysis — each of which comprises a reportable segment. The segments were determined based primarily on how the chief operating decision maker views and evaluates our operations. Other factors, including customer base, homogeneity of products, technology and delivery channels, were also considered in determining our reportable segments.

Our four reportable segments are as follows:

• test and measurement business provides standard and customized solutions that are used in the design, development, manufacture, installation, deployment and operation of electronic equipment and systems and communications networks and services. These solutions include test and measurement instruments and systems, communications service and network monitoring, management, and optimization tools and software design tools and associated services;

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• automated test business provides test system solutions that are used in the manufacture of semiconductor devices, electronics (primarily printed circuit-board assemblies) and flat panel displays. Our test solutions enable electronics designers and manufacturers to shorten the design-to-production cycle, lower manufacturing cost of test, confirm the functional quality of their devices and of their manufacturing processes, and accelerate the high-volume delivery of their products;

• semiconductor products business is a leading supplier of semiconductor components, modules and assemblies for consumer and commercial electronics applications. We design, develop and manufacture products for the networking and personal systems markets. Our networking products include fiber optic transceivers for sending and receiving data over high-speed networks and ICs for enterprise storage and networking; and

• life sciences and chemical analysis business provides application-focused solutions that include instruments, software, consumables and services that enable customers to identify, quantify and analyze the physical and biological properties of substances and products. Our seven key product categories include: microarrays, microfluidics, gas chromatography, liquid chromatography, mass spectrometry, software and informatics, and related consumables, reagents and services.

Segment revenue and profit.    The accounting policies used to derive reportable segment results are generally the same as those described in Note 2, “Summary of Significant Accounting Policies.”

A significant portion of the segments’ expenses arise from shared services and infrastructure that we have historically provided to the segments in order to realize economies of scale and to efficiently use resources. These expenses, collectively called corporate charges, include costs of centralized research and development, legal, accounting, employee benefits, real estate, insurance services, information technology services, treasury and other corporate infrastructure expenses. Charges are allocated to the segments and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the segments.

The following tables reflect the results of our reportable segments under our management reporting system. These results are not necessarily a depiction that is in conformity with accounting principles generally accepted in the U.S. The performance of each segment is measured based on several metrics, including income (loss) from operations. These results are used, in part, by the chief operating decision maker in evaluating the performance of, and in allocating resources to, each of the segments.

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The profitability of each of the segments is measured after excluding amortization of goodwill, amortization and impairment of other intangibles, restructuring and asset impairment charges and other items as noted in the reconciliation below.

	Test and Measurement			Automated Test			Semiconductor Products			Life Sciences and Chemical Analysis		Total Segments
	(in millions)
Year Ended October 31, 2004:
Total net revenue	$	2,903		$	924		$	2,021		$	1,333	$	7,181
Income from operations	$	219		$	66		$	166		$	192	$	643
Depreciation Expense	$	103		$	30		$	94		$	39	$	266
Year Ended October 31, 2003:
Total net revenue	$	2,529		$	755		$	1,586		$	1,186	$	6,056
(Loss) income from operations	$	(315	)	$	(34	)	$	(59	)	$	148	$	(260	)
Depreciation Expense	$	128		$	30		$	118		$	35	$	311
Year Ended October 31, 2002:
Total net revenue	$	2,612		$	706		$	1,559		$	1,133	$	6,010
(Loss) income from operations	$	(710	)	$	(70	)	$	(115	)	$	140	$	(755	)
Depreciation Expense	$	121		$	30		$	176		$	30	$	357

The following table reconciles segment results to Agilent’s total enterprise results from continuing operations before taxes:

	Years Ended October 31,
	2004			2003			2002
	(in millions)
Total reportable segments’ income (loss) from operations	$	643		$	(260	)	$	(755	)
Amortization of goodwill		—			—			(326	)
Amortization and impairment of intangibles		(20	)		(55	)		(52	)
Restructuring and asset impairment		(161	)		(372	)		(474	)
Other asset impairment		(15	)		(15	)		(13	)
Retirement plans net curtailment and settlement (loss) gain		—			(5	)		19
Unallocated corporate charges and other		(7	)		17			54
Income (loss) from continuing operations before taxes, as reported	$	440		$	(690	)	$	(1,547	)
Depreciation and amortization expense:
Total reportable segments’ depreciation	$	266		$	311		$	357
Corporate amortization expense		26			51			378
Total depreciation and amortization expense, as reported	$	292		$	362		$	735

Major customers.    No customer represented 10 percent or more of our total net revenue in 2004, 2003 or 2002.

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During 2004, we changed the basis by which segment assets are measured and reported to the chief operating decision maker to include allocated corporate assets, the largest component of which relates to deferred tax assets before the valuation adjustment. Unallocated assets primarily consist of cash and cash equivalents, accumulated amortization of goodwill and other intangibles, the valuation allowance relating to deferred tax assets and other assets. The following table reflects the updated measure of segment assets, capital expenditures and investments in equity-method investees and capital expenditures directly managed by each segment. All amounts have been reclassified to conform to the current period presentation:

	Test and Measurement		Automated Test		Semiconductor Products		Life Sciences and Chemical Analysis		Total Segments
	(in millions)
As of October 31, 2004:
Assets	$	2,148	$	718	$	1,434	$	725	$	5,025
Capital expenditures	$	43	$	14	$	47	$	14	$	118
Investments in and advances to equity-method investees	$	23	$	—	$	103	$	—	$	126
As of October 31, 2003:
Assets	$	2,268	$	804	$	1,420	$	680	$	5,172
Capital expenditures	$	85	$	23	$	70	$	27	$	205
Investments in and advances to equity-method investees	$	25	$	—	$	75	$	—	$	100

The following table reconciles segment assets to Agilent’s total assets:

	October 31
	2004			2003
	(in millions)
Total reportable segments’ assets	$	5,025		$	5,172
Cash and cash equivalents		2,315			1,607
Other		(284	)		(482	)
Total assets	$	7,056		$	6,297

Geographic Information

	United States		Japan		Rest of the World		Total
	(in millions)
Net revenue:
Year ended October 31, 2004	$	2,213	$	834	$	4,134	$	7,181
Year ended October 31, 2003	$	2,203	$	657	$	3,196	$	6,056
Year ended October 31, 2002	$	2,355	$	597	$	3,058	$	6,010
Long-lived assets:
October 31, 2004	$	936	$	240	$	830	$	2,006
October 31, 2003	$	1,030	$	270	$	654	$	1,954

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QUARTERLY SUMMARY

(Unaudited)

	Three Months Ended
	January 31			April 30			July 31			October 31
	(in millions, except per share data)
2004	(1)			(2)			(3)			(4)
Net revenue	$	1,643		$	1,831		$	1,885		$	1,822
Cost of products and services and other		904			1,023			1,089			1,042
Income from operations		79			111			107			89
Net income	$	71		$	104		$	100		$	74
Net income per share:
Basic	$	0.15		$	0.22		$	0.21		$	0.15
Diluted	$	0.14		$	0.21		$	0.20		$	0.15
Weighted average shares used in computing net income per share:
Basic		480			481			485			486
Diluted		490			495			491			490
Range of stock prices on NYSE	$	24.97-38.80		$	26.91-37.62		$	22.63-29.68		$	19.51-25.31
2003	(5)			(6)			(7)			(8)
Net revenue	$	1,412		$	1,467		$	1,502		$	1,675
Cost of products and services and other		880			958			951			961
Income (loss) from operations		(256	)		(335	)		(190	)		56
Income (loss) from continuing operations		(112	)		(146	)		(1,545	)		13
Cumulative effect of adopting SFAS No. 142		(257	)		—			(11	)		—
Net income (loss)	$	(369	)	$	(146	)	$	(1,556	)	$	13
Net income (loss) per share — Basic and Diluted:
Net income (loss) from continuing operations	$	(0.24	)	$	(0.31	)	$	(3.25	)	$	0.03
Cumulative effect of adopting SFAS No. 142		(0.54	)		—			(0.03	)		—
Net income (loss)	$	(0.78	)	$	(0.31	)	$	(3.28	)	$	0.03
Weighted average shares used in computing net income (loss) per share:
Basic		471			471			475			476
Diluted		471			471			475			481
Range of stock prices on NYSE	$	13.19-20.30		$	11.30-16.82		$	15.48-22.64		$	20.31-26.48

112

NOTES:

(1) Includes pre-tax restructuring and asset impairment charges of $45 million primarily relating to severance expenses

(2) Includes pre-tax restructuring and asset impairment charges of $20 million primarily relating to severance expenses

(3) Includes pre-tax restructuring and asset impairment charges of $42 million primarily relating to severance expenses

(4) Includes pre-tax restructuring and asset impairment charges of $54 million primarily relating to severance expenses

(5) Includes pre-tax restructuring and asset impairment charges of $42 million primarily relating to severance expenses

(6) Includes pre-tax restructuring and asset impairment charges of $131 million primarily relating to severance expenses

(7) Includes pre-tax restructuring and asset impairment charges of $141 million primarily relating to severance expenses and a non-cash charge to establish a tax valuation allowance of $1.4 billion

(8) Includes pre-tax restructuring and asset impairment charges of $58 million primarily relating to severance expenses

113

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AGILENT TECHNOLOGIES, INC.
BY	/s/    D. CRAIG NORDLUND
	D. Craig Nordlund Senior Vice President, General Counsel and Secretary

Date:  December 21, 2004

114

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints D. Craig Nordlund and Marie Oh Huber, or either of them, his or her attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    EDWARD W. BARNHOLT         Edward W. Barnholt	Chairman, President and Chief Executive Officer (Principal Executive Officer)	December 21, 2004
/s/    ADRIAN T. DILLON       Adrian T. Dillon	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	December 21, 2004
/s/    DIDIER HIRSCH         Didier Hirsch	Vice President and Corporate Controller (Principal Accounting Officer)	December 21, 2004
/s/    KOH BOON HWEE         Koh Boon Hwee	Director	December 21, 2004
/s/    JAMES G. CULLEN         James G. Cullen	Director	December 21, 2004
/s/    ROBERT J. HERBOLD         Robert J. Herbold	Director	December 21, 2004
/s/    WALTER B. HEWLETT         Walter B. Hewlett	Director	December 21, 2004
/s/    ROBERT L. JOSS         Robert L. Joss	Director	December 21, 2004
/s/    HEIDI KUNZ         Heidi Kunz	Director	December 21, 2004
/s/    DAVID M. LAWRENCE, M.D.         David M. Lawrence, M.D.	Director	December 21, 2004
/s/    A. BARRY RAND         A. Barry Rand	Director	December 21, 2004

115

AGILENT TECHNOLOGIES, INC.

EXHIBIT INDEX

Exhibit Number	Description
1.	Not applicable.
2.1	Master Separation and Distribution Agreement between Hewlett-Packard and the Company effective as of August 12, 1999. Incorporated by reference from Exhibit 2.1 of the Company’s Registration Statement on Form S-1, Registration No. 333-85249 (“S-1”).
2.2	General Assignment and Assumption Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.2 of the Company’s S-1.
2.3	Master Technology Ownership and License Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.3 of the Company’s S-1.
2.4	Master Patent Ownership and License Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.4 of the Company’s S-1.
2.5	Master Trademark Ownership and License Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.5 of the Company’s S-1.
2.6	ICBD Technology Ownership and License Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.6 of the Company’s S-1.
2.7	Employee Matters Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.7 of the Company’s S-1.
2.8	Tax Sharing Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.8 of the Company’s S-1.
2.9	Master IT Service Level Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.9 of the Company’s S-1.
2.10	Real Estate Matters Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.10 of the Company’s S-1.
2.11	Environmental Matters Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.11 of the Company’s S-1.
2.12	Master Confidential Disclosure Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.12 of the Company’s S-1.
2.13	Indemnification and Insurance Matters Agreement between Hewlett-Packard and the Company. Incorporated by reference from Exhibit 2.13 of the Company’s S-1.
2.14	Non U.S. Plan. Incorporated by reference from Exhibit 2.14 of the Company’s S-1.
2.15	Agreement and Plan of Merger, dated as of November 24, 2000, by and among Agilent Technologies, Inc., Tahoe Acquisition Corp. and Objective Systems Integrators, Inc. Incorporated by reference from Exhibit 99.1(A) of the Schedule 13D filed by Agilent Technologies, Inc. on December 4, 2000.
2.16	Tender and Voting Agreement, dated as of November 24, 2000, by and among Agilent Technologies, Inc., Tahoe Acquisition Corp. and Objective Systems Integrators, Inc. Incorporated by reference from Exhibit 99.1(B) of the Schedule 13D filed by Agilent Technologies, Inc. on December 4, 2000.
2.17	Asset Purchase Agreement between the Company and Philips dated as of November 17, 2000. Incorporated by reference from Exhibit 2.17 of the Company’s 10-Q filed on March 19, 2001.

116

Exhibit Number	Description
2.18	Amendment and Supplemental Agreement dated as of August 1, 2001 between Agilent Technologies, Inc. and Koninklijke Philips Electronics N.V. Incorporated by reference from Exhibit 2.2 of the Company’s Form 8-K filed August 15, 2001.
2.19	Master Service Level Agreement dated as of August 1, 2001 between Agilent Technologies, Inc. and Koninklijke Philips Electronics N.V. Incorporated by reference from Exhibit 2.3 of the Company’s Form 8-K filed August 15, 2001.
3.1	Amended and Restated Certificate of Incorporation. Incorporated by reference from Exhibit 3.1 of the Company’s S-1.
3.2	Amended and Restated Bylaws. Incorporated by reference from Exhibit 4.2 of the Company’s S-3/A filed April 10, 2002.
4.1	Preferred Stock Rights Agreement between the Company and Harris Trust and Savings Bank dated as of May 12, 2000. Incorporated by reference from Exhibit 1 of the Company’s Form 8-A, filed on May 17, 2000.
4.2	Indenture between the Company and Citibank, N.A., dated November 27, 2001. Incorporated by reference from Exhibit 99.2 of the Company’s Form 8-K filed on November 27, 2001.
4.3	Registration Rights Agreement between the Company and Credit Suisse First Boston Corporation, J.P. Morgan Securities, Inc. and Salomon Smith Barney, Inc, dated November 27, 2001. Incorporated by reference from Exhibit 99.3 of the Company’s Form 8-K filed on November 27, 2001.
5-8.	Not applicable.
9.	None.
10.1	Agilent Technologies, Inc. 1999 Stock Plan. Incorporated by reference from Exhibit 10.2 of the Company’s S-1.*
10.2	Agilent Technologies, Inc. 1999 Stock Plan (restatement, effective September 17, 2001). Incorporated by reference from Exhibit 10.13 of the Company’s Form 10-K/A filed on February 1, 2002.*
10.3	Agilent Technologies, Inc. 1999 Stock Plan (Amended and Restated Effective May 21, 2002). Incorporated by reference from the Company’s Form S-8 filed May 23, 2002.*
10.4	Agilent Technologies, Inc. Employee Stock Purchase Plan. Incorporated by reference from Exhibit 4.1 of the Company’s Form S-8 filed September 29, 2000.*
10.5	1999 Non-Employee Director Stock Plan. Incorporated by reference from Exhibit 10.3 of the Company’s S-1.*
10.6	Form of Indemnification Agreement entered into by the Company with each of its directors and board-appointed officers. Incorporated by reference from Exhibit 10.5 of the Company’s S-1.*
10.7	Agilent Technologies, Inc. Excess Benefit Retirement Plan. Incorporated by reference from Exhibit 10.7 of the Company’s Form 10-K filed January 22, 2002. Amendment to the Agilent Technologies, Inc. Excess Benefit Retirement Plan adopted effective May 1, 2000.*
10.8	Agilent Technologies, Inc. Deferred Compensation Plan (amended and restated as of March 19, 2002). Incorporated by reference from the Company’s Form 10-K filed December 20, 2002.*

117

Exhibit Number	Description
10.9	Asset Purchase Agreement, dated September 29, 2000, between Agilent Technologies, Inc. and CIT Group/Equipment Financing, Inc. Incorporated by reference from Exhibit 10.10 of the Company’s 10-Q filed on March 19, 2001.
10.10	Purchase and Sale Agreement dated February 1, 2001, between Agilent Technologies, Inc. and BEA Systems, Inc. Incorporated by reference from Exhibit 10.11 of the Company’s Form 10-Q filed on June 14, 2001.
10.11	Offer letter from the Company to Adrian T. Dillon as incoming Executive Vice President and Chief Financial Officer, dated November 6, 2001. Incorporated by reference from Exhibit 10.15 of the Company’s Form 10-Q filed on March 6, 2002.
10.12	Letter Agreement between Alain Couder and Ned Barnholt, dated February 26, 2002. Incorporated by reference from Exhibit 10.17 of the Company’s Form 10-Q filed June 5, 2002.
10.13	Form of Change of Control Severance Agreement entered into by the Company with Byron J. Anderson, Dick M. Chang, Adrian T. Dillon, Jean M. Halloran, D. Craig Nordlund, Young K. Sohn, William P. Sullivan, Jack P. Trautman, Chris van Ingen and Thomas E. White. Incorporated by reference from Exhibit 10.15 of the Company’s Form 10-Q filed March 12, 2003.*
10.14	Change of Control Severance Agreement dated November 27, 2002 entered into by the Company with its Chief Executive Officer. Incorporated by reference from Exhibit 10.16 of the Company’s Form 10-Q filed March 12, 2003.*
10.15	Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated, and Amendment No. 1 thereto dated March 5, 2003. Incorporated by reference from Exhibit (d)(1) of the Company’s Schedule TO filed on May 20, 2003.*
10.16	Amendment No. 2 to Agilent Technologies, Inc. 1999 Stock Plan dated May 20, 2003. Incorporated by reference from Exhibit 10.18 of the Company’s Form 10-Q filed June 4, 2003.*
10.17	English summary of lease between Shanghai WaiGaoQiao Free Trade Zone Dev. Co. Ltd. and Agilent dated June 29, 2001. Incorporated by reference from Exhibit 10.19 of the Company’s Form 10-K filed December 22, 2003.
10.18	Agilent Technologies, Inc. Long-Term Performance Program Description for Section 16 Officers, effective November 1, 2003. Incorporated by reference from Exhibit 10.18 of the Company’s Form 10-Q filed March 4, 2004.*
10.19	Agilent Technologies, Inc. 1999 Stock Plan (Amendment and Restatement, Effective November 18, 2003). Incorporated by reference from Exhibit 10.19 of the Company’s Form 10-Q filed March 4, 2004.*
10.20	1999 Non-Employee Director Stock Plan (Amended and Restated Effective January 20, 2004). Incorporated by reference from Exhibit 10.19 of the Company’s Form 10-Q filed June 3, 2004.*
10.21	Form of Amendment #1 to Change of Control Severance Agreement dated April 2, 2004, entered into by the Company with Adrian T. Dillon, Jean M. Halloran, D. Craig Nordlund, Young K. Sohn, William P. Sullivan, Jack P. Trautman, Chris van Ingen, Thomas E. White and with its Chief Executive Officer. Incorporated by reference from Exhibit 10.20 of the Company’s Form 10-Q filed June 3, 2004.*

118

Exhibit Number	Description
10.22	Agilent Technologies, Inc. Deferred Compensation Plan for Non-Employee Directors (Effective as of March 1, 2004). Incorporated by reference from Exhibit 10.21 of the Company’s Form 10-Q filed June 3, 2004.*
10.23	Agilent Technologies, Inc. Deferred Compensation Plan (Amended and Restated as of March 1, 2004). Incorporated by reference from Exhibit 10.22 of the Company’s Form 10-Q filed June 3, 2004.*
10.24	Agilent Technologies, Inc. Employee Stock Purchase Plan (Amended and Restated, Effective November 1, 2004). Incorporated by reference from Exhibit 10.23 of the Company’s Form 10-Q filed September 2, 2004. *
10.25	Agilent Technologies, Inc. Non-Employee Director Stock Plan (Amended and Restated, Effective July 20, 2004). Incorporated by reference from Exhibit 10.24 of the Company’s 10-Q filed September 2, 2004.*
10.26	Form of Award Agreement (U.S.) for grants under the Agilent Technologies, Inc. 1999 Stock Plan. Incorporated by reference from Exhibit 10.1 of the Company’s 8-K filed November 12, 2004.*
10.27	Form of Award Agreement (Non-U.S.) for grants under the Agilent Technologies, Inc. 1999 Stock Plan. Incorporated by reference from Exhibit 10.2 of the Company’s 8-K filed November 12, 2004.*
10.28	Form of Stock Option Agreement for grants under the Agilent Technologies, Inc. 1999 Non-Employee Director Stock Plan. Incorporated by reference from Exhibit 10.3 of the Company’s 8-K filed November 12, 2004.*
10.29	Form of Award Agreement (Belgium) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.30	Form of Award Agreement (Brazil) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.31	Form of Award Agreement (China) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.32	Form of Award Agreement (France) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.33	Form of Award Agreement (Germany) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.34	Form of Award Agreement (India) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.35	Form of Award Agreement (Italy) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.36	Form of Award Agreement (Japan) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.37	Form of Award Agreement (SAR) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.38	Form of Award Agreement (Switzerland) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*
10.39	Form of Award Agreement (restricted stock) for grants under the Agilent Technologies, Inc. 1999 Stock Plan.*

119

Exhibit Number	Description
10.40	Asset Purchase Agreement dated October 27, 2004 between Flextronics Sales and Marketing (A-P) Ltd. and Agilent Technologies, Inc.
10.42	Agilent Technologies, Inc. 2005 Deferred Compensation Plan. Incorporated by reference from Exhibit 10.1 of the Company’s 8-K filed November 19, 2004.*
10.43	Agilent Technologies, Inc. 2005 Deferred Compensation Plan for Non-Employee Directors. Incorporated by reference from Exhibit 10.2 of the Company’s 8-K filed November 19, 2004.*
11.1	See Note 6, “Net Income (Loss) Per Share” in Notes to Consolidated Financial Statements on page 92.
12.1	Statement of ratio of earnings to fixed charges.
13.	None.
14.1	See Investor Information in Item 1: Business, p. 26 of this Annual Report on Form 10-K.
15.	Not applicable.
16.	None.
17.	Not applicable.
18.	None.
19-20.	Not applicable
21.1	Significant subsidiaries of Agilent Technologies, Inc. as of October 31, 2004.
22.	None.
23.1	Consent of Independent Registered Public Accounting Firm.
24.1	Powers of Attorney. Contained in the signature page of this Annual Report on Form 10-K.
25-30.	Not applicable.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
33-98.	Not applicable.
99.	None.

* Indicates management contract or compensatory plan, contract or arrangement.

120

EX-10.29

Exhibit 10.29

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR BELGIUM

THIS AGREEMENT, dated                      (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     ,                      (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus, Grant Notification and the Belgian Tax Undertaking Agreement is available at http://stockoptions.corporate.agilent.com. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase                      shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price shall be              per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:             .

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before                     .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full Option price for the underlying shares, including applicable taxes. Payment may be in cash or shares of the Company’s Common Stock or a combination thereof, provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee or its authorized delegate(s). In some instances, the Committee or its authorized delegate(s) may also permit payment using a cashless method of exercise. The Company reserves the right to limit availability of certain methods of exercise as it deems necessary.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

GRANT Belgium (hc)

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee		Agilent Technologies, Inc.
		By
	«FIRST_NM» «LAST_NM»		Edward W. Barnholt
	«EMPL_NR»		Chairman, President and Chief Executive Officer
		By
			D. Craig Nordlund Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Belgium (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Belgium (hc)

EX-10.30

Exhibit 10.30

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR BRAZIL

THIS AGREEMENT, dated                      (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     ,                      (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase                      shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price shall be                      per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:                     .

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before                      .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

Notwithstanding the information on the exercise methods set forth in the Prospectus, the cash exercise method is not available in Brazil. The Awardee must contact Smith Barney and request a cashless method of exercise. The Awardee will receive his or her proceeds in cash only.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

GRANT Brazil (hc)

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee		Agilent Technologies, Inc.
		By
	«FIRST_NM» «LAST_NM» «EMPL_NR»		Edward W. Barnholt Chairman, President and Chief Executive Officer
		By
			D. Craig Nordlund Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Brazil (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Brazil (hc)

EX-10.31

Exhibit 10.31

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR CHINA

THIS AGREEMENT, dated as of the date of grant indicated in your Smith Barney account the (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and you as an individual who has been granted a stock option pursuant to the Agilent Technologies, Inc. 1999 Stock Plan (the “Awardee”) is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) relating to the number of shares of the Company’s $0.01 par value voting common stock indicated in the Awardee’s Smith Barney account.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price for this grant is indicated in the Awardee’s Smith Barney account.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before the expiration date. This expiration date is indicated in the Awardee’s Smith Barney account. The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. Notwithstanding the information on the exercise methods set forth in the Prospectus, the cash exercise method is not available in China. This Option may only be exercised using the cashless method. The Option may be exercised by contacting Smith Barney and following the procedures established by Smith Barney. The Awardee will receive his or her proceeds in cash only.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any

GRANT CHINA

such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that by clicking on the “Accept” button on the screen titled “Step 3: Confirm the Review/Acceptance of your Award,” the Awardee agrees to be bound by the electronic execution of this Award Agreement.

Agilent Technologies, Inc.
By
	Edward W. Barnholt
	Chairman, President and Chief Executive Officer
By
	D. Craig Nordlund
	Senior Vice President, General Counsel and Secretary

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT CHINA

EX-10.32

Exhibit 10.32

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR FRANCE

THIS AGREEMENT, dated                      (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     ,                      (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) adopted the Agilent Technologies, Inc 1999 Stock Option Plan for French Employees (the “Sub-Plan”) as amended and restated September 2001 for the purpose of granting options to employees in France. A copy of the Sub-Plan is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website; and

WHEREAS, the Committee determined that the Awardee shall be granted an option under the Plan and Sub-Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase                      shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and Sub-Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and Sub-Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan and Sub-Plan shall prevail.

2. The Option price shall be                      per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan and the Sub-Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule: 100% per year after 4 years.

The Committee may, in its sole discretion, reduce the vesting period in accordance with future changes in French tax law, if any. An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan and the Sub-Plan. This means that the Option must be exercised, if at all, on or before                     .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full Option price for the underlying shares, including applicable taxes. Payment may be in cash or shares of the Company’s Common Stock or a combination thereof, provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee or its authorized delegate(s). In some instances, the Committee or its authorized delegate(s) may also permit payment using a cashless method of exercise. The Company reserves the right to limit availability of certain methods of exercise as it deems necessary.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or

GRANT France (hc)

permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan and Sub-Plan are incorporated herein by reference. The Plan, Sub-Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan, the Sub-Plan nor this Award Agreement, nor any provision under these documents, shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan, Sub-Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan, Sub-Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee	Agilent Technologies, Inc.
	By
«FIRST_NM» «LAST_NM»		Edward W. Barnholt
«EMPL_NR»		Chairman, President and Chief Executive Officer

Please fax all pages to Shareholder Records,	By
fax number: (650) 752-5734 or (650) 752-5741		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT France (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT France (hc)

EX-10.33

Exhibit 10.33

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR GERMANY

THIS AGREEMENT, dated                     (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     ,                     (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase                      shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price shall be              per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before ______________.

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full Option price for the underlying shares, including applicable taxes. Payment may be in cash or shares of the Company’s Common Stock or a combination thereof, provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee or its authorized delegate(s). In some instances, the Committee or its authorized delegate(s) may also permit payment using a cashless method of exercise. The Company reserves the right to limit availability of certain methods of exercise as it deems necessary.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

GRANT Germany (hc)

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee		Agilent Technologies, Inc.
	By
«FIRST_NM» «LAST_NM»		Edward W. Barnholt
«EMPL_NR»		Chairman, President and Chief Executive Officer
	By
		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

Cross-border payments in excess of EUR 12,500 must be reported monthly to a State Central Bank (“Deutsche Bundesbank”). If you use a German commercial bank to effect a cross-border payment in excess of EUR 12,500 in connection with the purchase or sale of securities, the bank will make the report for you.

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Germany (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Germany (hc)

EX-10.34

Exhibit 10.34

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR INDIA

THIS AGREEMENT, dated as of the date of grant indicated in your Smith Barney account the (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and you as an individual who has been granted a stock option pursuant to the Agilent Technologies, Inc. 1999 Stock Plan (the “Awardee”) is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) adopted the Agilent Technologies, Inc. India Cashless Stock Option Sub-Plan (the “Sub-Plan”) for the purpose of granting options in India; and

WHEREAS, the Committee or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan and Sub-Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase the number of shares of the Company’s $0.01 par value voting common stock indicated in the Awardee’s Smith Barney account.

1. This Option is granted under and pursuant to the Plan and Sub-Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and Sub-Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan and Sub-Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price for this grant is indicated in the Awardee’s Smith Barney account.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before the expiration date. This expiration date is indicated in the Awardee’s Smith Barney account. The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. Notwithstanding the information on the exercise methods set forth in the Prospectus, the cash exercise method is not available in India. This Option may only be exercised using the cashless method. The Option may be exercised by contacting Smith Barney and following the procedures established by Smith Barney. The Awardee will receive his or her proceeds in cash only.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

(GRANT INDIA)

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan and Sub-Plan are incorporated herein by reference. The Plan, the Sub-Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. The Plan, the Sub-Plan or this Award Agreement, or any provision under any of these documents, shall not be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan, the Sub-Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan, the Sub-Plan and the Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that by clicking on the “Accept” button on the screen titled “Step 3: Confirm the Review/Acceptance of your Award,” the Awardee agrees to be bound by the electronic execution of this Award Agreement.

Agilent Technologies, Inc.
By
	Edward W.Barnholt
	Chairman, President and Chief Executive Officer
By:
	D. Craig Nordlund
	Senior Vice President, General Counsel and Secretary

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT INDIA

EX-10.35

Exhibit 10.35

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR ITALY

THIS AGREEMENT, dated                     (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     ,                      the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase                      shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the higher of (i) the average of the official stock exchange price over the month preceding the grant date (i.e., the average price during the period ending on the day of the grant of the options to the employees and starting on the same day of the preceding calendar month) or (ii) the                      per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before                                 .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

Notwithstanding the information on the exercise methods set forth in the Prospectus, the cash exercise method is not available in Italy. The Awardee must contact Smith Barney and request a cashless method of exercise. The Awardee will receive his or her proceeds in cash only.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

GRANT Italy (hc)

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee	Agilent Technologies, Inc.
	By
«FIRST_NM» «LAST_NM»		Edward W. Barnholt
«EMPL_NR»		Chairman, President and Chief Executive Officer
	By
		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Italy (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT Italy (hc)

EX-10.36

Exhibit 10.36

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR JAPAN

THIS AGREEMENT, dated as of the date of grant indicated in your Smith Barney account the (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and you as an individual who has been granted a stock option pursuant to the Agilent Technologies, Inc. 1999 Stock Plan (the “Awardee”) is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). In addition, country-specific information is provided to you in the form of a Japanese Prospectus. A copy of the Prospectus and the Japanese Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Japanese effective date is                     ; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase the number of shares of the Company’s $0.01 par value voting common stock indicated in the Awardee’s Smith Barney account.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price for this grant is indicated in the Awardee’s Smith Barney account.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before the expiration date. This expiration date is indicated in the Awardee’s Smith Barney account. The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be exercised by following the steps indicated in the Awardee’s Smith Barney account. In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full Option price for the underlying shares, including applicable taxes. Payment may be in cash or shares of the Company’s Common Stock or a combination thereof, provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee or its authorized delegate(s). In some instances, the Committee or its authorized delegate(s) may also permit payment using a cashless method of exercise. The Company reserves the right to limit availability of certain methods of exercise as it deems necessary.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

GRANT JAPAN

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that by clicking on the “Accept” button on the screen titled “Step 3: Confirm the Review/Acceptance of your Award,” the Awardee agrees to be bound by the electronic execution of this Award Agreement.

Agilent Technologies, Inc.
By
	Edward W. Barnholt
	Chairman, President and Chief Executive Officer
By
	D. Craig Nordlund
	Senior Vice President, General Counsel and Secretary

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT JAPAN

EX-10.37

Exhibit 10.37

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR STOCK APPRECIATION RIGHTS

THIS AGREEMENT, dated              (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and             ,             , (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective

November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted a stock appreciation right (“SAR”) under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee             SAR(s) upon the terms and conditions set forth herein.

1. This SAR is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The exercise price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The exercise price shall be              per SAR.

3. This SAR is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this SAR. This SAR may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this SAR will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to termination of employment with the Company or transfer of employment from the Company.

5. This SAR will expire ten (10) years from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the SAR must be exercised, if at all, on or before                                 .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this SAR may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s SAR will not be exercisable until the Company receives this signed Award Agreement.

In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full SAR price for the underlying shares, including applicable taxes. Upon exercise, the Awardee will receive a cash payment equivalent to the appreciation in value, if any, of a fixed number of shares of Company common stock.

7. All rights of the Awardee in this SAR, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this SAR, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this SAR. The representative or designee must exercise the SAR before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this SAR until the earlier of the expiration date or three (3) years from the date thereof.

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this SAR.

9. By accepting the grant of this SAR, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of a SAR is a one-time benefit which does not create any

GRANT SAR (hc)

contractual or other right to receive future grants of SARs, or benefits in lieu of SARs; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when SARs shall be granted, the number of SARs and the exercise price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the SAR is outside the scope of Awardee’s employment contract, if any; (vi) the SAR is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any SAR ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this SAR will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the SAR does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s SARs, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s SARs and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s SAR. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this SAR evidenced hereby, the Awardee and the Company agree that this SAR is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the SAR and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee	Agilent Technologies, Inc.
	By
«FIRST_NM»«LAST_NM»		Edward W. Barnholt
«EMPL_NR»		Chairman, President and Chief Executive Officer
	By
		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT SAR (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT SAR (hc)

EX-10.38

Exhibit 10.38

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT FOR SWITZERLAND

THIS AGREEMENT, dated              (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and             ,             , (the “Awardee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is available at http://stockoptions.corporate.agilent.com and also on your Smith Barney website. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com and will also be made available upon request; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted an option under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee an option (“Option”) to purchase              shares of the Company’s $0.01 par value voting Common Stock upon the terms and conditions set forth herein.

1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Option price shall be equal to the Fair Market Value (as defined in the Plan document) of the underlying shares on the Grant Date. The Option price shall be              per share.

3. This Option is not transferable by the Awardee except by will or the laws of descent and distribution. During the Awardee’s lifetime, only the Awardee can exercise this Option. This Option may not be transferred, assigned, pledged or hypothecated by the Awardee during his or her lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, this Option will vest in whole or in part, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to, termination of employment with the Company or transfer of employment from the Company.

5. This Option will expire ten (10) years and six (6) months from the Grant Date, unless sooner terminated, forfeited, or canceled in accordance with the provisions of the Plan. This means that the Option must be exercised, if at all, on or before                         .

The Awardee is responsible for keeping track of this date and will not receive any prior notification of the expiration date from the Company.

6. As set forth in the Prospectus, this Option may be accepted by signing this Award Agreement and returning it to the Company. The Awardee’s shares will not be exercisable until the Company receives this signed Award Agreement.

In addition, Smith Barney must receive an executed authorization form accompanied by payment of the full Option price for the underlying shares, including applicable taxes. Payment may be in cash or shares of the Company’s Common Stock or a combination thereof, provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee or its authorized delegate(s). In some instances, the Committee or its authorized delegate(s) may also permit payment using a cashless method of exercise. The Company reserves the right to limit availability of certain methods of exercise as it deems necessary.

7. All rights of the Awardee in this Option, to the extent that it has not vested, shall terminate when Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to the occurrence of certain events as set forth in the Plan. For example, if status as an Awardee Eligible to Vest is lost because of death, retirement due to age or permanent and total disability, the vesting of unvested Awards will accelerate.

All rights of the Awardee in this Option, to the extent that it has vested but has not been exercised, shall terminate on the earlier of the expiration date or three (3) months after the Awardee loses status as an Awardee Eligible to Vest, except where the Awardee loses such status because of death, retirement due to age or permanent and total disability. In the event of the Awardee’s death, his or her legal representative or designated beneficiary shall have the right to exercise all or a portion of the Awardee’s right under this Option. The representative or designee must exercise the Option before the earlier of the expiration date or one (1) year after the death of the Awardee, and shall be bound by the provisions of the Plan. In case of retirement due to age or permanent and total disability, the Awardee retains rights in this Option until the earlier of the expiration date or three (3) years from the date thereof.

GRANT SWITZERLAND (hc)

8. The Awardee shall remit to the Company payment for all applicable withholding taxes and required social security contributions at the time the Awardee exercises any portion of this Option.

9. By accepting the grant of this Option, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of an option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the maximum number of shares subject to each option and the option price, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the option is outside the scope of Awardee’s employment contract, if any; (vi) the value of the option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of any Option ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, this Option will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Option does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

10. For the exclusive purpose of implementing, administering and managing Awardee’s stock options, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s stock option. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

11. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

12. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

13. By accepting the grant of this Option evidenced hereby, the Awardee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Option and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

14. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

15. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

16. The Awardee acknowledges that he or she must sign and return this Award Agreement in order for it to be effective.

Awardee	Agilent Technologies, Inc.
	By
«FIRST_NM» «LAST_NM»		Edward W. Barnholt
«EMPL_NR»		Chairman, President and Chief Executive Officer
	By
		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT SWITZERLAND (hc)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT SWITZERLAND (hc)

EX-10.39

Exhibit 10.39

AGILENT TECHNOLOGIES, INC.

1999 STOCK PLAN

AWARD AGREEMENT (RESTRICTED STOCK)

THIS AGREEMENT, dated                     , the (“Grant Date”) between Agilent Technologies, Inc., a Delaware corporation (the “Company”), and                     , employee number                      (the “Awardee”) is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Agilent Technologies, Inc. 1999 Stock Plan, as amended and restated effective November 18, 2003, (the “Plan”), and a description of the terms and conditions of the Plan is set forth in the U.S. Plan prospectus (the “Prospectus”). A copy of the Prospectus is attached, and is also available at http://stockoptions.corporate.agilent.com. A copy of the Plan document can be viewed at http://stockoptions.corporate.agilent.com. Both the Plan and the Plan prospectus will also be available upon request ; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) or its authorized delegate(s) determined that the Awardee shall be granted restricted stock under the Plan as hereinafter set forth;

NOW THEREFORE, the parties hereby agree that the Company grants the Awardee                      shares of the Company’s $0.01 par value voting common stock (the “Stock”), subject to the restrictions stated below and in accordance with the terms and conditions of the Plan.

1. This Stock is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan shall prevail.

2. The Stock or rights awarded hereunder may not be be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process until the Stock becomes vested in accordance with the vesting schedule set forth below.

3. The period of time between the date hereof and the date that the Stock becomes vested is referred to herein as the “Restriction Period.” If the Awardee’s employment with the Company is terminated for any reason other than retirement due to age or permanent and total disability prior to the lapse of the Restriction Period, all unvested Stock granted hereunder shall be forfeited by the Awardee, and ownership transferred back to the Company.

4. Subject to accelerated vesting upon the occurrence of certain events as set forth in the Plan, and so long as the Awardee retains status as an Awardee Eligible to Vest as such term is defined in the Plan, the Stock will vest in whole or in part, and accordingly the Restriction Period will lapse, in accordance with the following vesting schedule:

An Awardee loses status as an Awardee Eligible to Vest when certain events occur, including but not limited to termination of employment with the Company or transfer of employment from the Company.

5. All rights of the Awardee in the Stock, to the extent that it has not vested and the Restriction Period has not lapsed, shall terminate when the Awardee loses status as an Awardee Eligible to Vest, except where such status is lost due to retirement due to age or permanent and total disability.

6. If the Awardee ceases to be an Awardee Eligible to Vest as a result of his retirement due to age, in accordance with the Company’s U.S. retirement policy, or total and permanent disability the Stock shall continue to vest, provided the following conditions are met:

(i) Awardee shall not render services for any organization or engage directly or indirectly in any business, which, in the opinion of the Plan Administrator, competes with, or is in conflict with the interest of, the Company;

(ii) Awardee shall not, without prior written authorization from the Company, use in other than the Company’s business, any confidential information or material relating to the business of the Company, either during or after employment with the Company;

(iii) Awardee shall disclose promptly and assign to the Company all right, title and interest in any invention or idea, patentable or not, made or conceived by Awardee during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company and shall do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in foreign countries; and

(iv) Awardee shall render, as an independent contractor and not as an employee, such advisory or consultative services to the Company as shall be reasonably requested by the Company, consistent with the Awardee’s health and any employment or other activities in which the Awardee may be engaged.

GRANT (RESTRICTED STOCK)

7. All certificates representing any shares of Stock of the Company subject to the provisions of Award Agreement shall have endorsed thereon the following legend: “The shares represented by this certificate are subject to an agreement between the Corporation and the registered holder, a copy of which is on file at the principal office of the Corporation.”

8. The certificates representing any shares of Stock of the Company subject to the provisions of this Award Agreement shall be held by the Company as Escrow Agent in this transaction. Alternatively, the Stock may be held in a restricted book entry account in the name of the Awardee. Such certificate or such book entry shares are to be held by the Escrow Agent until the expiration of the Restriction Period.

9. During the Restriction Period, the Awardee shall have all the rights of a shareholder with respect to the Stock except for the right to transfer the Stock as set forth in paragraph 2 herein. Accordingly, the Awardee shall have the right to vote the Stock and to receive any cash dividends paid to or made with respect to the Stock.

10. Awardee shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Stock hereunder.

11. By accepting the grant of Stock, Awardee acknowledges and agrees that: (i) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) the grant of the Stock is a one-time benefit which does not create any contractual or other right to receive future grants of stock, stock options, or benefits in lieu thereof; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when stock or stock options shall be granted, the maximum number of shares subject to each grant, the option price and the time or times when each Award shall vest or be exerciseable, will be at the sole discretion of the Company; (iv) participation in the Plan is voluntary; (v) the value of the Stock is outside the scope of Awardee’s employment contract, if any; (vi) the value of the Stock is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) the vesting of Stock ceases upon termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility to vest for any reason, except as may otherwise be explicitly provided in the Plan document or this Agreement; (viii) if the underlying stock does not increase in value, the Stock will have no value, nor does the Company guarantee any future value; (ix) no claim or entitlement to compensation or damages arises if the Stock does not increase in value and Awardee irrevocably releases the Company and its subsidiaries from any such claim that does arise.

12. For the exclusive purpose of implementing, administering and managing Awardee’s Stock, Awardee consents to the collection, receipt, use, retention and transfer, in electronic or other form, of his or her personal data by and among the Company, its subsidiaries, affiliates and third party vendors. Awardee understands that personal data, including but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number, job and payroll location, data for tax withholding purposes and shares of stocks awarded, cancelled, exercised, vested and unvested) may be transferred to third parties assisting in the implementation, administration and management of Awardee’s stock options and Awardee expressly authorizes such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). Awardee understands that these recipients may be located in Awardee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Awardee’s country. Awardee understands that data will be held only as long as is necessary to implement, administer and manage Awardee’s Stock. Awardee understands that he or she may, at any time, request a list with the names and addresses of any potential recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s legal department representative. Awardee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to accept an Award under the Plan. For more information on the consequences of Awardee’s refusal to consent or withdrawal of consent, Awardee may contact the Company’s local legal department representative.

13. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Awardee with respect to the subject matter hereof, and may not be modified adversely to the Awardee’s interest except by means of a writing signed by the Company and the Awardee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the state of Delaware. Any proceeding arising out of or relating to this Award Agreement or the Plan may be brought only in the state or federal courts located in the Northern District of California.

14. Neither the Plan nor this Award Agreement nor any provision under either shall be construed so as to grant the Awardee any right to remain in the employ of the Company or any of its subsidiaries, and it is expressly agreed and understood that employment is terminable at the will of either party.

15. By accepting the grant of Stock evidenced hereby, the Awardee and the Company agree that the Stock is granted under and governed by the terms and conditions of the Plan and this Award Agreement. Awardee has reviewed the Prospectus and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting the Stock and fully understands all provisions of the Prospectus and Award Agreement. Awardee agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement.

16. The Awardee acknowledges that this Award Agreement is between the Awardee and the Company, and that the Awardee’s local employer is not a party to this Award Agreement.

17. The Awardee acknowledges that he or she may be executing part or all of the Award Agreement in English and agrees to be bound accordingly.

GRANT (RESTRICTED STOCK)

	Agilent Technologies, Inc.
	By
Awardee		Edward W. Barnholt
«FIRST_NM» «LAST_NM»		Chairman, President and Chief Executive Officer
«EMPL NUM»
	By
		D. Craig Nordlund
		Senior Vice President, General Counsel and Secretary

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT (RESTRICTED STOCK)

Award Rejection

(Sign and send this only if you wish to reject your Award)

I do not want to receive this Award and hereby reject it.

Awardee

«FIRST_NM» «LAST_NM»

«EMPL_NR»

Please fax all pages to Shareholder Records, fax number: (650) 752-5734 or (650) 752-5741

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS

GRANT (RESTRICTED STOCK)

EX-10.40

Exhibit 10.40

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4),

200.83 and 240.24b-2

ASSET PURCHASE AGREEMENT

among

FLEXTRONICS SALES AND MARKETING (A-P) LTD.

and

AGILENT TECHNOLOGIES, INC.

Dated October 27, 2004

Omitted portions of this document are marked with a [*].

TABLE OF CONTENTS

			Page
1.	DEFINITIONS
2.	SALE OF ASSETS; RELATED TRANSACTIONS
	2.1	Sale of Assets	7
	2.2	Assumption of and Retention of Liabilities	9
3.	PURCHASE PRICE; CLOSING; DELIVERY
	3.1	Purchase Price	11
	3.2	Adjustment Based on Closing Date Audit	12
	3.3	Contingent Consideration	13
	3.4	Sales Taxes; VAT	15
	3.5	Allocation	15
	3.6	Closing	16
	3.7	Currency	16
4.	REPRESENTATIONS AND WARRANTIES OF THE SELLING ENTITIES
	4.1	Organization, Good Standing and Qualification	17
	4.2	Authorization	17
	4.3	Consents	17
	4.4	Litigation	17
	4.5	Intellectual Property	18
	4.6	Non-Contravention	19
	4.7	Contracts; Action	19
	4.8	Related-Party Transactions	20
	4.9	Tax Matters	20
	4.10	Governmental Authorizations	20
	4.11	Corporate Documents	20
	4.12	Inventory	20
	4.13	Title to Property and Assets	20
	4.14	Employment Matters	20
	4.15	Compliance With Laws	21
	4.16	Sale of Products; Warranties	21
	4.17	Certain Payments	21

-i-

Confidential Treatment Requested

TABLE OF CONTENTS

(continued)

			Page
	4.18	Finders and Brokers	21
5.	REPRESENTATIONS AND WARRANTIES OF THE BUYER
	5.1	Organization, Good Standing and Qualification	22
	5.2	Authorization	22
	5.3	Consents	22
	5.4	Litigation	22
	5.5	Non-Contravention	22
	5.6	Finders and Brokers	22
6.	COVENANTS OF THE SELLER AND THE BUYER
	6.1	Access and Investigation	23
	6.2	Operation of Business	23
	6.3	Filings and Consents	23
	6.4	Notification	24
	6.5	Commercially Reasonable Efforts	25
	6.6	Confidentiality; No Shop	25
	6.7	Bulk Transfer Laws	25
	6.8	Employees	25
	6.9	Communications Received After Closing	27
	6.10	Asset Returns	27
	6.11	Removal of Assets	27
	6.12	Consents	27
	6.13	Supply Contracts	28
	6.14	[  *  ] Agreement	28
	6.15	Warranty and Return Liabilities	28
7.	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
	7.1	Representations and Warranties	29
	7.2	Consents and Approvals	29
	7.3	Performance	29
	7.4	No Material Adverse Change	29
	7.5	Execution of Transaction Agreements	30

*

-ii-

TABLE OF CONTENTS

(continued)

			Page
	7.6	Antitrust Laws; Governmental Approvals	30
	7.7	Identified Employees	30
	7.8	Supply Contract	30
	7.9	Delivery of Legal Opinion	30
	7.10	Compliance Certificate	30
8.	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
	8.1	Representations and Warranties	30
	8.2	Purchase Price	30
	8.3	Performance	30
	8.4	Execution of Transaction Agreements	30
	8.5	Antitrust Laws	31
	8.6	Compliance Certificate	31
9.	INDEMNIFICATION, ETC
	9.1	Survival of Representations and Covenants	31
	9.2	Indemnification	31
	9.3	Indemnification Procedures	33
	9.4	Non-Compete; Non-Solicitation	35
10.	TERMINATION
	10.1	Termination	36
	10.2	Effect of Termination	37
11.	MISCELLANEOUS
	11.1	Transaction Expenses	37
	11.2	Successors and Assigns	37
	11.3	Governing Law	37
	11.4	Disputes Resolution; Waiver of Jury Trial	37
	11.5	Titles and Subtitles	40
	11.6	Notices	40
	11.7	Amendments and Waivers	40
	11.8	Severability	40
	11.9	Entire Agreement	40

-iii-

TABLE OF CONTENTS

(continued)

		Page
11.10	Public Disclosures	40
11.11	Counterparts; Facsimile	41
11.12	Further Assurances	41

-iv-

Confidential Treatment Requested

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (“Agreement”) is entered into as of October 27, 2004, by and among Flextronics Sales and Marketing (A-P) Ltd., a Mauritius corporation (“Buyer”) and Agilent Technologies, Inc., a Delaware corporation (“Seller”). The Buyer and the Seller may be referred to herein individually as a “Party” and collectively as the “Parties.”

R E C I T A L S

WHEREAS, the Seller and its subsidiaries own and operate a business which develops, manufactures and markets camera module products within its Sensor Solutions Division of its Semiconductor Products Group; and

WHEREAS, the Seller and certain of its subsidiaries (collectively, the “Selling Entities”) wish to sell to the Buyer and/or certain of its Affiliates (such entities to be collectively referred to as the “Buying Entities”), and the Buying Entities wish to purchase from the Selling Entities, certain assets of such business and in connection therewith the Buying Entities are willing to assume certain specified liabilities of the Selling Entities relating thereto, all upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

AGREEMENT

1. DEFINITIONS

Capitalized terms in this Agreement are used as defined in this Article 1 or elsewhere in this Agreement (such terms to be equally applicable to the singular and plural forms thereof):

“Affiliate” means, with respect to any Person, a Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person.

“Agilent Intellectual Property” means the Intellectual Property licensed to the Buying Entity designated in the License Agreement by the Selling Entities designated under the License Agreement.

“[    *    ] Agreement” means the Manufacturing Agreement between [ * ] and Agilent Technologies (M) Sdn. Bhd., dated as of February 1, 2004.

“Assumed Contracts” has the meaning set forth in Section 2.1(a)(iii).

“Assumed Liabilities” has the meaning set forth in Section 2.2(a).

*

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“Books and Records” shall mean (i) current equipment manuals, technical bulletins, application notes, project history files and decision point check-in presentations, (ii) current sales and promotional literature used by Seller or its Subsidiaries within the 12-month period prior to the date of this Agreement and (iii) written customer service records related to open escalations received or sent by Seller or its Subsidiaries within the 12-month period prior to the date of this Agreement, in each case of clauses (i) through (iii) to the extent such items relate exclusively to the Products, the Purchased Assets or the Assumed Liabilities and to the extent each of such items are in the possession of Seller or its Subsidiaries.

“Benefit Plan” means any bonus, incentive compensation, deferred compensation, material consulting or other personal services arrangement, any flexible time off arrangement, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, leave of absence, layoff, vacation, day or dependent care, cafeteria, life, health, accident, disability, workmen’s compensation or other insurance, severance, separation, employment agreement (other than employment agreements in non-U.S. countries entered into in the Ordinary Course of Business), or other employee benefit plan, of any kind, or policies establishing plans described above, whether written or oral, in each case (i) which has been established by a Selling Entity or Affiliate thereof, or any predecessor of any Selling Entity or Affiliate thereof, and exists at the Closing Date, and (ii) to which any Selling Entity or any Affiliate thereof contributes or has contributed on behalf of any employee, under which any employee or any beneficiary thereof is covered, is eligible for coverage or has benefit rights.

“Business” means the Camera Module business which develops, manufactures and markets the Products as conducted within the Mobile Imaging Business of the Sensor Solutions Division of the Seller and its Subsidiaries’ Semiconductor Products Group, excluding the Image Sensor Business.

“Business Day” means every day, except Saturday, Sunday and any United States federal holiday.

“Buyer Parent” means Flextronics International Ltd., a corporation incorporated under the laws of Singapore.

“Buying Indemnitee(s)” has the meaning set forth in Section 9.2(a).

“Camera Module” means a module for capturing images primarily for human viewing. A Camera Module includes an Image Sensor, a lens, and an aperture and may include an IR filter and other additional components. For the avoidance of doubt, the combination of an Image Sensor and a lens and aperture is defined as a Camera Module regardless of the method of integration or combination.

“Cause“ means only the following: (1) an employee’s failure to perform his/her duties and responsibilities at an acceptable level and such failure continues without improvement as required by and set forth in a probation notice addressed to the employee by his/her management; (2) an employee’s acts of misconduct that involve or affect his/her employer or occur on the employer’s property which include (a) involvement with illegal drugs or controlled substances;

-2-

(b) unauthorized use or possession of alcohol or being under the influence of alcohol; (c) physical violence, threats, intimidation, harassment or coercion; or (d) other circumstances constituting “cause” under an employer’s employment policies.

“Closing” has the meaning set forth in Section 3.6.

“Closing Date” has the meaning set forth in Section 3.6.

“Closing Statement” has the meaning set forth in Section 3.2.

“Code” means the Internal Revenue Code of 1986, as amended.

“Consent” means any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

“Contract” means, with respect to any Person, any written or oral agreement, contract, lease, license, understanding, arrangement, instrument, note, guaranty, deed, assignment, power of attorney, certificate, purchase order, work order, commitment, covenant, assurance or undertaking of any nature to which such Person is a party or by which its properties or assets are bound.

“Damages” shall include any loss, damage, injury, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including any reasonable legal fee, expert fee, accounting fee or advisory fee), charge, cost (including any reasonable cost of investigation) or expense of any nature.

“Disclosure Schedule” means the schedule (dated as of the date of this Agreement), and as defined in Article 4, delivered to the Seller, a copy of which is attached to this Agreement and incorporated in this Agreement by reference.

“Disputes” has the meaning set forth in Section 11.4(a).

“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, equity, trust, equitable interest, claim, preference, right of possession, lease, tenancy, license, encroachment, covenant, Order, proxy, option, right of first refusal, community property interest, legend, defect, impediment, exception, impairment, imperfection of title, condition or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, limited liability limited partnership, joint venture, estate, trust, cooperative, foundation, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or other entity.

-3-

“Excluded Assets” has the meaning set forth in Section 2.1(c).

“Fixed Assets” has the meaning set forth in Section 2.1(a)(ii).

“GAAP” means United States generally accepted accounting principles, consistently applied.

“Governmental Authorization” means any: (a) Permit, license, certificate, franchise, concession, approval, Consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization that is or has been issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law; or (b) right under any Contract with any Governmental Body.

“Governmental Body” shall mean any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); (d) international, multi-national organization or body; or (e) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

“Image Processor” means a processor for correcting the output signal from an Image Sensor such as, for example, to demosaic, color balance, gamma correct or otherwise compensate the signal.

“Image Sensor” means a photosensitive silicon array having an analog or digital output. An Image Sensor may also include an on-board A/D converter and an Image Processor that is either on-board or separate.

“Image Sensor Business” shall mean the business of developing, manufacturing and marketing of Image Sensors as conducted within the Mobile Imaging Business of the Sensor Solutions Division of the Seller and its Subsidiaries’ Semiconductor Products Group.

“Intellectual Property” means all patents, and invention registrations of any type, trademarks, trade names, brand names, logos, slogans, inventions, processes, formulae, copyrights, trade dress, product names, trade secrets, mask works, industrial models, processes, designs, plans, proposals, methodologies, invention proposals, computer programs (including all source codes) and related documentation, technical data and information, manufacturing, engineering and technical drawings, know-how, all pending applications for and registrations of patents, trademarks, service marks and copyrights, and all other intellectual property, licenses and proprietary rights with respect to any of the foregoing, whether or not subject to statutory registration or protection. For the avoidance of doubt, Intellectual Property does not include and Internet domain names, web sites or meta tags.

-4-

“Indemnified Party” has the meaning set forth in Section 9.3(a).

“Indemnifying Party” has the meaning set forth in Section 9.3(a).

“Inventory” shall mean inventories, raw materials, work-in-process, parts, packaging materials and other accessories, finished goods and products related thereto.

“Knowledge of the Seller” or “Seller’s Knowledge” shall mean those facts and circumstances actually known by Young Sohn, Jason Hartlove, Jeff Henderson, Jack Wenstrand, Doug Kundrat, Floyd Anderson, Kathie Lee, Roger Katz, Linda Luckay and Nadine Melanson and facts and circumstances of which such person in his or her reasonably prudent exercise of his or her duties in the ordinary course of business, should be aware, without any obligation to make investigation or inquiry beyond the prudent exercise of his or her duties in the ordinary course of business.

“Law” means any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation that is or has been issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“Liability” means any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability).

“License Agreement” means that certain License Agreement substantially in the form attached hereto as Exhibit A.

“Material Adverse Effect on Buyer” shall be deemed to occur if any event, change or effect, individually or in the aggregate with such other events, changes or effects, has occurred which has had, or would reasonably be expected to have, a material adverse effect on the ability of any Buying Entities to consummate the Transactions.

“Material Adverse Effect on Seller” shall be deemed to occur if any event, change or effect, individually or in the aggregate with such other events, changes or effects, has occurred which has had, or would reasonably be expected to have, a material adverse effect (i) on the Purchased Assets, (ii) on the Business, or (iii) on the ability of any Selling Entities to consummate the Transactions.

“Net Book Value” as of any given time means the book value of the asset minus the book value of any related Liability as of such time, determined in accordance with GAAP consistently applied by the Seller in accordance with Seller’s accounting policies. For avoidance of doubt, obsolete Inventory and Fixed Assets as determined in accordance with GAAP consistently applied by the Seller shall be attributed no Net Book Value.

-5-

“Order” means any: (a) order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, subpoena, writ or award that is or has been issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Body or any arbitrator or arbitration panel; or (b) Contract with any Governmental Body that is or has been entered into in connection with any Proceeding.

“Ordinary Course Of Business” means an action taken by or on behalf of a Person that: (a) is consistent with such Person’s past practices and is taken in the ordinary course of such Person’s normal day-to-day operations; and (b) is not required to be authorized by such Person’s owners or board of directors or any committee thereof.

“Patents” has the meaning set forth in Section 4.5(c).

“Permits” mean any permits issued by a Governmental Body or other Governmental Authorization relating to the conduct of business or ownership, possession, occupation or use of assets or properties.

“Permitted Encumbrance” means (i) Encumbrances for Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which there are adequate reserves on the books, and (ii) mechanic’s, materialman’s, supplier’s, vendor’s or similar Encumbrances arising in the Ordinary Course of Business securing amounts that are not delinquent.

“Person” means any individual, Entity or Governmental Body.

“Pre-Closing Period” means the period commencing as of the date of this Agreement and ending on the Closing Date.

“Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation that is or has been commenced, brought, conducted or heard by or before, or that otherwise has involved or may involve, any Governmental Body or any arbitrator or arbitration panel.

“Products” means those set forth on Schedule 1.1(a) of this Agreement.

“Purchase Price” has the meaning set forth in Section 3.1.

“Purchased Assets” has the meaning set forth in Section 2.1(a).

“Purchased Inventory” has the meaning set forth in Section 2.1(a)(i).

“Representatives” means as to any particular party, the officers, directors, employees, attorneys, accountants, advisors and representatives of such party.

“Required Consents” has the meaning set forth in Section 7.2.

-6-

“Retained Liabilities” has the meaning set forth in Section 2.2(b).

“Selling Indemnitee(s)” has the meaning set forth in Section 9.2(b).

“Subsidiary” of any Person means any Entity of which such Person owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such Entity.

“Tax” means any tax (including any income tax, franchise tax, capital gains tax, estimated tax, gross receipts tax, value added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax), levy, assessment, tariff, impost, imposition, toll, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty, additional tax or interest).

“Tax Return” means any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information that is or has been filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

“Third Party Claims” has the meaning set forth in Section 9.3(b).

“Threshold” has the meaning set forth in Section 9.2(c).

“Trade Secret” has the meaning set forth in Section 4.5(e).

“Transaction Agreements” means, collectively, this Agreement, the License Agreement, Transition Services Agreement, the Local Asset Transfer Agreements and the Supply Agreement in a form reasonably satisfactory to Buyer and Seller.

“Transactions” means all of the transactions contemplated by the Transaction Agreements.

“Transferred Employees” has the meaning set forth in Section 6.8(a).

“Transition Services Agreement” means a Transition Services Agreement in a form reasonably satisfactory to Buyer and Seller, which will provide for agreed upon transition services to be provided to Buyer and/or certain of its Subsidiaries by Seller and/or certain of its Subsidiaries at cost.

-7-

Confidential Treatment Requested

2. SALE OF ASSETS; RELATED TRANSACTIONS

2.1 Sale of Assets.

(a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Seller hereby agrees to, and shall cause the Selling Entities to, sell, transfer, convey, assign and deliver to the Buying Entities designated by Buyer, free and clear of all Encumbrances, and the Buyer hereby agrees to cause the Buying Entities designated by Buyer to, purchase the following, and only the following, properties and assets (collectively, the “Purchased Assets”):

(i) The Inventory that is initially set forth on Schedule 2.1(a)(i), as the same may be augmented or depleted in the Ordinary Course of Business prior to the Closing Date and as will be amended in accordance with Section 2.1(d), and all warranties and licenses issued to the Seller and its Subsidiaries in connection with the foregoing (collectively, the “Purchased Inventory”);

(ii) The computer hardware, equipment, supplies, machinery, tools, prototypes, and other tangible personal property set forth on Schedule 2.1(a)(ii), as the same will be amended in accordance with Section 2.1(e) (collectively, the “Fixed Assets”);

(iii) All rights of the Seller and its Subsidiaries under the Contracts set forth on Schedule 2.1(a)(iii) (collectively, the “Assumed Contracts”);

(iv) A copy of the Books and Records;

(v) All rights under the [    *    ] Agreement related exclusively to the Business as such will be reflected in the agreement to be negotiated in accordance with Section 6.14 of this Agreement between the Buying Entities and [    *    ]; and

(vi) All warranty rights and associated claims of the Seller and its Subsidiaries with respect to all manufacturers’ warranties covering the applicable Fixed Assets.

(b) Licensed Assets. At the Closing, the Seller shall, and/or shall cause the relevant Selling Entities to, and the Buyer shall, and/or shall cause the relevant Buying Entities to, enter into the License Agreement.

(c) Excluded Assets. Notwithstanding anything in this Agreement to the contrary, all of the assets not specifically identified in Section 2.1(a) shall be retained by the Seller and its Subsidiaries and shall be excluded from and shall not constitute Purchased Assets (all such assets being referred to collectively as the “Excluded Assets”). For avoidance of doubt, all assets related to or used by the Image Sensor Business or any other business of the Seller and its Subsidiaries not specifically identified in Section 2.1(a) shall be retained by the Seller and its Subsidiaries and shall be excluded from and shall not constitute Purchased Assets.

(d) Section 2.1 Schedules Update. Between the date hereof and November 9, 2004, pursuant to Section 6.1, at Buyer’s request, Buyer and Seller shall conduct meetings with Seller’s customers, and Buyer shall review Schedule 2.1(a)(i) delivered as of the date hereof (the “Original Schedule 2.1(a)(i)”) and shall make reasonable determinations of whether any

*

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Confidential Treatment Requested

Inventory on Schedule 2.1(a)(i) is not saleable solely based on the customer’s feedback from such meetings. No later than noon PST on November 9, 2004, the Buyer shall deliver proposed edits to the Original Schedule 2.1(a)(i) based on such feedback. All of the Inventory set forth on Schedule 2.1(a)(i) as agreed upon by the Parties as of November 9, 2004 (the “Updated Schedule 2.1(a)(i)”) shall be deemed saleable. At the close of four (4) business days prior to the Closing, the Seller shall propose and deliver updates to the Section 2.1 Schedules as of the Closing Date; provided, however, that Schedule 2.1(a)(i) shall only be updated from the Updated Schedule 2.1(a)(i) to the extent depleted in the Ordinary Course of Business and shall not be augmented except for the Inventory acquired after the date of the Original Schedule 2.1(a)(i) and specifically designated for the Products or the Business. The Parties shall agree on the amended Section 2.1 Schedules, and such amended Section 2.1 Schedules agreed upon by Seller and Buyer shall constitute the definitive Section 2.1 Schedules for purposes of Section 2.1. Buyer agrees that its approval shall not be unreasonably withheld with respect to any Inventory that have been acquired after the date of such schedules and specifically designated for the Products or the Business in compliance with Section 6.2, including all Inventory acquired in accordance with Section 6.2 after the date set forth on the Original Schedule specifically designated for the Products or the Business that are saleable as supported, in Buyer’s reasonable discretion, by purchase orders or demand forecasts.

(e) Based on Buyer’s review of Fixed Assets during the pre-Closing Period, following delivery of the Section 2.1 Schedules, the Parties shall mutually agree on an amended and restated Schedule 2.1(a)(ii) which shall constitute the definitive Schedule 2.1(a)(ii) for purposes of Section 2.1.

(f) Between the date hereof and November 9, 2004, the Buyer shall have the opportunity to review and edit Schedule 2.1(a)(iii) as delivered on the date hereof; provided, however, the Buyer may not delete the following Assumed Contracts set forth on such Schedule 2.1(a)(iii): (i) the Assumed Contracts set forth on Schedule 7.2 and the [  *    ] Contract; and (ii) Assumed Contracts related exclusively to the Business, unless the obligations the Buying Entities would be required to assume under such Assumed Contract would, in Buyer’s good faith determination, likely result in a material breach of performance by, or other material penalty assessed against, the Buying Entities.

2.2 Assumption of and Retention of Liabilities.

(a) In connection with the sale of the Purchased Assets pursuant to this Agreement, at Closing, the Buyer shall cause certain designated Buying Entities to assume, and agree to pay, perform and discharge when due, the following, and only the following, Liabilities of the Seller and its Subsidiaries, as the same shall exist on the Closing Date (the “Assumed Liabilities”):

(i) all Liabilities to the extent they accrue and arise out of ownership, use and operation of the Purchased Assets or the sale or manufacture of the Products by the Buyer Parent and its Subsidiaries after the Closing Date, and for avoidance of doubt, accrual for Tax Liabilities shall be accrual under GAAP;

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Confidential Treatment Requested

(ii) the limited Employee Assumed Liabilities as defined and set forth in Section 6.8 and all Liabilities relating to the employment of the Transferred Employees by the Buyer Parent and its Subsidiaries;

(iii) (x) except as set forth in Section 6.15, the warranty, support, repair, return and upgrade Liabilities of the Products sold prior to or on the Closing Date and (y) the warranty, support, repair, return and upgrade Liabilities of the Products sold after the Closing Date;

(iv) the Liabilities of the Seller and its Subsidiaries under the Assumed Contracts, but only to the extent such Liabilities (A) do not arise from or relate to any pre-Closing breach, violation or default by the Seller and its Subsidiaries of any provision of any of the Assumed Contracts, (B) do not arise from or relate to any event, circumstance or condition occurring or existing on or prior to the Closing Date that, with notice or lapse of time, would constitute or result in a breach, violation or default of Assumed Contracts, and (C) are ascertainable (in nature and form) solely by reference to the express terms of the Assumed Contracts;

(v) except for Liabilities that are not assumed under Assumed Contracts in (iv) above, the Liabilities under the [  *    ] Agreement to the extent they relate exclusively to the Business, including amortization per unit for the [    *    ] clean room while Buying Entities use such clean room, and are reflected in the agreement to be negotiated in accordance with Section 6.14 of this Agreement between the Buying Entities and [  *  ]; and

(vi) any replacement costs for warranty, support, repair, return and upgrade obligations (a “Warranty Obligation”) of Products sold prior to or on the Closing Date, up to $150,000.00.

(b) Notwithstanding the foregoing, and notwithstanding anything to the contrary contained in this Agreement, the Assumed Liabilities shall not include, and the Buyer and its Subsidiaries shall not be required to assume or to perform or discharge any Liabilities of the Seller and its Subsidiaries not included as an Assumed Liability, including, but not limited to, the following all of which shall be retained by the Seller and its Subsidiaries following the Closing (“Retained Liabilities”):

(i) other than as specifically set forth in Sections 2.2(a)(iii) and 2.2(a)(iv), all Liabilities to the extent they accrue and arise out of ownership, use and operation of the Purchased Assets or the manufacture or sale of Products on or prior to the Closing Date, and for avoidance of doubt, accrual for Tax Liabilities shall be accrual under GAAP;

(ii) any Liability of any stockholders of the Seller;

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Confidential Treatment Requested

(iii) any pre-payment penalties, premiums on debt, and any other Liability of the Seller and its Subsidiaries arising out of or relating to the execution, delivery or performance of any of the Transaction Agreements;

(iv) any Liability of the Seller and its Subsidiaries for any fees, costs or expenses of the type referred to in Section 11.1 of this Agreement;

(v) any Liability of the Seller and its Subsidiaries arising from or relating to any action taken by the Seller and its Subsidiaries at any time after the Closing Date;

(vi) any Liability of the Seller and its Subsidiaries arising from or relating to any claim or Proceeding against the Seller and its Subsidiaries (other than claims or Proceedings arising and accruing post-Closing out of the Assumed Liabilities);

(vii) other than as set forth in Section 3.3, any Liability of the Seller and its Subsidiaries for the payment of any Tax (other than Taxes accruing and related to the ownership, use or operation of the Purchased Assets by the Buyer Parent and its Subsidiaries solely after the Closing Date);

(viii) other than as set forth in Section 2.2(a)(ii), any Liability of the Seller and its Subsidiaries (a) to any employee or former employee of the Seller and its Subsidiaries under or with respect to any Benefit Plan or for severance pay, (b) under any Benefit Plan, including, without limitation, all contributions and insurance premiums relating thereto and any Liability under Title IV of ERISA or foreign equivalent, or (c) arising from any employee’s employment with the Seller and its Subsidiaries prior to the Closing Date;

(ix) all Warranty Obligations of Products sold prior to or on the Closing Date in excess of $150,000.00;

(x) the Liabilities under the [  *  ] Agreement, except Liabilities to the extent they relate exclusively to the Business, including amortization per unit for the [  * ] clean room while Buying Entities use such clean room, and are reflected in the agreement to be negotiated in accordance with Section 6.14 of this Agreement between the Buying Entities and [  *    ]; provided, in any event, Seller retains all Liability for amortization per unit for the [  *    ] clean room upon and after Buying Entities’ discontinued use of such clean room; and

(xi) any other Liability that is not referred to specifically in Section 2.2(a).

3. PURCHASE PRICE; CLOSING; DELIVERY

3.1 Purchase Price. As consideration for the Purchased Assets, the Buyer shall, and/or shall cause the relevant Buying Entities to, (a) assume the Assumed Liabilities, and (b) pay to the Seller the aggregate purchase price of (i) $12,000,000.00 plus (ii) the Net Book Value of the

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Purchased Inventory and Fixed Assets at the Closing Date, subject to adjustments set forth in Section 3.2 (the “Purchase Price”). The Purchase Price shall be allocated among the Purchased Assets in accordance with Section 3.5 and shall be payable as follows:

(a) Within fifteen (15) calendar days following the end of each of the twelve (12) fiscal quarters of the Buyer Parent following the Closing Date, the Buying Entities designated by Buyer will pay to the Seller, in cash or by wire transfer, $1,000,000.00, as may be adjusted pursuant to Section 3.2(d).

(b) At the Closing, the Buyer shall pay, or shall cause its designated Buying Entities to pay, to Seller (where it is acting as Seller) and otherwise as agent for each of the relevant other Selling Entities, in cash or by wire transfer, a total of the estimated Net Book Value of the Fixed Assets as of the last day of the month immediately preceding the Closing Date as provided by the Seller to the Buyer four (4) business days prior to the Closing and as calculated in accordance with Section 3.2(a) (“Estimated Fixed Assets Value”).

(c) Within fifteen (15) calendar days following the end of each fiscal quarter following the Closing, the Buying Entities designated by Buyer shall pay to the Seller or the Selling Entities designated by Seller, in cash or by wire transfer, an amount equal to the Net Book Value of the Purchased Inventory measured as of the Closing Date in accordance with Section 3.2(a) (“Closing Date Inventory Amount”) that is sold by the Buying Entities’ to its customers or otherwise used by the Buying Entities during such fiscal quarter, as may be adjusted pursuant to Section 3.2(d).; provided, however, any portion of the Closing Date Inventory Amount that has not been paid by the Buying Entities prior to December 31, 2005, shall be fully payable on December 31, 2005. Until the Closing Statement is finally determined in accordance with Section 3.2(a), any payments due hereunder shall be made based on the estimated Net Book Value of Purchased Inventory as of the last day of the month immediately preceding the Closing Date as provided by the Seller to the Buyer four (4) business days prior to the Closing and as calculated in accordance with Section 3.2(a) and any resulting adjustments shall be made in the next quarter payment after the final determination of the Net Book Value of Purchased Inventory in accordance with Section 3.2(a).

3.2 Adjustment Based on Closing Date Audit.

(a) Within thirty (30) days following Closing, a Representative of the Buyer and a Representative of the Seller shall calculate the amount of the Net Book Value of the Purchased Inventory and the Fixed Assets as of the Closing which shall be prepared in accordance with GAAP and on a basis consistent with the Net Book Value of Purchased Inventory and Fixed Assets as of the last day of the month immediately preceding the Closing Date (the “Closing Statement”). Promptly after completing the Closing Statement, the Representatives shall deliver the Closing Statement to the Parties for their review and approval within seven (7) days of delivery. If either Party does not provide written notice of any objection to the Closing Statement within such 7-day period, such Party shall be deemed to accept the Closing Statement. If the Representatives (during their 30-day period) or Parties (within their 7-day period) have provided a written objection or otherwise do not agree on the Closing Statement, the Parties shall attempt to resolve their differences with respect thereto within thirty

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(30) days after either Party provides written notice of their disagreement. Any disputes not resolved within such thirty (30) day period regarding the Closing Statement shall be resolved by a major accounting firm jointly selected by Seller and Buyer and with no prior or current service to either Buyer or Seller (the “Firm”). The Firm shall make a determination in accordance with this Agreement on the disputes so submitted as well as such modifications, if any, to the Closing Statement as reflect such determination, and the same shall be conclusive and binding upon the Parties. The determination of the Firm for any item in dispute cannot, however, be in excess of, nor less than, the greatest or lowest value, respectively, claimed by the Parties for that particular item in the Closing Statement. The Seller shall bear and pay 50% of the fees and other amounts payable in connection with the foregoing, and the Buyer shall bear and pay the remaining 50% of such fees and other amounts. Notwithstanding anything in the foregoing, the Net Book Value of the Inventory set forth on the Updated Schedule 2.1(a)(i) as set forth on such schedule shall be binding and shall not be subject to adjustment.

(b) If the Net Book Value of the Fixed Assets on the Closing Statement (“Actual Fixed Assets Value”) is less than the Estimated Fixed Assets Value, then, within ten (10) days after the final determination of the Closing Statement, the Seller shall pay to the Buying Entities designated by Buyer, in cash or by wire transfer, the amount by which the Estimated Fixed Assets Value exceeds the Actual Fixed Assets Value. If the Actual Fixed Assets Value is greater than the Estimated Fixed Assets Value, then, within ten (10) days after the final determination of the Closing Statement, the Buying Entities designated by Buyer shall pay to the Seller, in cash or by wire transfer, the amount by which the Actual Fixed Assets Value exceeds the Estimated Actual Fixed Assets Value.

(c) The Net Book Value of the Purchased Inventory on the Closing Statement shall be the Closing Date Inventory Amount.

(d) Notwithstanding anything to the contrary herein, in the event that the aggregate cost of the Purchased Inventory as reflected on the definitive Schedule 2.1(a)(i) exceeds the aggregate market value of such Purchased Inventory as of the Closing Date by $2,000,000 or more, Seller shall pay to Buyer such excess amount, or at the Buying Entities election, the Buying Entities may make deduction of such excess amount against the amount payable by Buying Entities under pursuant Section 3.1(a) and Section 3.1(c). Within thirty (30) days after the Closing, the Buyer shall provide the Seller a statement setting forth the market value of each item of the Inventory on the definitive Schedule 2.1(a)(i) (“Market Value Statement”). If the Seller does not provide written notice of any objection to the Market Value Statement within ten (10) days, Seller shall be deemed to accept the Market Value Statement. If the Seller provides a written objection to the Market Value Statement, the Parties shall attempt to resolve their differences with respect thereto within thirty (30) days after Seller provides written notice of its disagreement. Any disputes not resolved within such thirty (30) day period regarding the Market Value Statement shall be determined in accordance with Section 11.4.

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Confidential Treatment Requested

3.3 Contingent Consideration. In addition to the Purchase Price, the Selling Entities shall be eligible for, and if certain thresholds are satisfied, the Buyer shall cause the applicable Buying Entities to pay contingent consideration (“Contingent Consideration”) up to a maximum of $13,000,000.00, as follows:

(a) For purposes of the Contingent Consideration calculations, revenue shall be based on GAAP and shall include the revenue of Buyer’s Parent and its consolidated Affiliates from its camera module business, which shall include revenue attributable to the Purchased Assets following Closing as calculated on GAAP (“Combined CM Business Revenue”). The Combined CM Business Revenue shall be calculated each year over a three-year period following Closing. “Year 1” shall be the Closing Date through October 31, 2005, with any Year 1 payment earned being due and payable by within 15 days of the final determination of the Year 1 Contingent Consideration pursuant to Section 3.3(e). “Year 2” shall be November 1, 2005 through October 31, 2006, with any Year 2 payment earned being due and payable within 15 days of the final determination of the Year 2 Contingent Consideration pursuant to Section 3.3(e). “Year 3 shall be November 1, 2006 through October 31, 2007, with any Year 3 payment earned being due and payable within 15 days of the final determination of the Year 3 Contingent Consideration pursuant to Section 3.3(e).

(b) The “Year 1 Contingent Consideration” shall be determined in the following manner:

(i) If the Combined CM Business Revenue for Year 1 is greater than [ *  ] (“Year 1 Base Threshold”), then the Buying Entities designated by Buyer shall pay three percent (3%) of the Combined CM Business Revenue that exceeds [  *  ] but only up to a maximum payment of $3 million (“Maximum Year 1 Base Contingent Consideration”).

(ii) In year 1, if the Combined CM Business Revenue is greater than [ *    ] (“Year 1 Stretch Threshold”), then in addition to the payment in (i) above, the Buying Entities designated by Buyer shall pay two percent (2%) of the Combined CM Business Revenue that exceeds [  *    ] but only up to a maximum payment of $2 million (“Maximum Year 1 Stretch Contingent Consideration”).

(iii) If the Year 1 Base Threshold is not met in Year 1, no Contingent Consideration will be earned in Year 1. The amount by which the actual Year 1 revenue is less than the Year 1 Base Threshold shall be referred to as the “Year 1 Deficit Amount.”

(c) The “Year 2 Contingent Consideration” shall be determined in the following manner:

(i) If the Combined CM Business Revenue for Year 2 is equal to or greater than [    *    ] (“Year 2 Base Threshold”), then the Buying Entities shall pay $3 million (“Maximum Year 2 Base Contingent Consideration”).

(ii) If the Year 1 Base Threshold is met in Year 1 and the Year 2 Base Threshold was met, then the Buying Entities designated by Buyer shall pay 1.43% of the Combined CM Business Revenue that exceeds [        *    ] but only up to a maximum payment of $2 million (“Maximum Year 2 Stretch Contingent Consideration”).

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Confidential Treatment Requested

(iii) If the Year 1 Base Threshold is not met in Year 1, then 50% of the Year 1 Deficit Amount (“Year 2 Additional Amount”) shall be added to the Year 2 Base Threshold to total the “Year 2 Adjusted Base Revenue Threshold.” If in Year 2, the Year 2 Base Threshold is met, then the Buying Entities designated by Buyer shall pay an amount equal to the lesser of (x) $1.5 million and (y) $1.5 million multiplied by (A) the Combined CM Business Revenue less Year 2 Base Threshold divided by (B) Year 2 Additional Amount. If in Year 2, the Year 2 Adjusted Base Revenue Threshold is met, then the Buying Entities designated by Buyer shall pay an amount equal to the lesser of (a) $2.0 million and (b) $2.0 million multiplied by (1) the Combined CM Business Revenue less Year 2 Adjusted Base Revenue Threshold divided by (2) [  *    ] less Year 2 Adjusted Base Revenue Threshold.

(d) The “Year 3 Contingent Consideration” shall be determined in the following manner:

(i) If the Combined CM Business Revenue for Year 3 is equal to or greater than [  *    ] (“Year 3 Base Threshold”), then the Buying Entities designated by Buyer shall pay $2 million (“Maximum Year 3 Base Contingent Consideration”).

(ii) If Year 1 Base Threshold is met and the Year 3 Base Threshold was met, then Buying Entities designated by Buyer shall pay 0.53% of the Combined CM Business Revenue that exceeds [    *    ] but only up to a maximum payment of $1 million (“Maximum Year 3 Stretch Contingent Consideration”).

(iii) If the Year 1 Base Threshold is not met in Year 1, then 50% of the Year 1 Deficit Amount (“Year 3 Additional Amount”) shall be added to the Year 3 Base Threshold to total the “Year 3 Adjusted Base Revenue Threshold.” If in Year 3, the Year 3 Base Threshold is met, then the Buying Entities designated by Buyer shall pay an amount equal to the lesser of (x) $1.5 million and (y) $1.5 million multiplied by (A) the Combined CM Business Revenue less Year 3 Base Threshold divided by (B) Year 3 Additional Amount. If in Year 3, the Year 3 Adjusted Base Revenue Threshold is met, then the Buying Entities designated by Buyer shall pay an amount equal to the lesser of (a) $1.0 million and (b) $1.0 million multiplied by (1) the Combined CM Business Revenue less Year 3 Adjusted Base Revenue Threshold divided by (2) [  *    ] less Year 3 Adjusted Base Revenue Threshold.

(e) Review. Within ninety (90) days following the end of each year, Buyer shall deliver to the Seller a statement setting forth Combined CM Business Revenue for such year and the calculation of the Contingent Consideration for such year (the “Contingent Consideration Statement”). If the Seller does not provide written notice of any objection to the Contingent Consideration Statement within thirty (30) days, Seller shall be deemed to accept the Contingent Consideration Statement. If the Seller provides a written objection to the Contingent Consideration Statement, the Parties shall attempt to resolve their differences with respect thereto within thirty (30) days after Seller provides written notice of its disagreement. Any disputes not resolved within such thirty (30) day period regarding the Contingent Consideration Statement shall be resolved by the Firm. The Firm shall make a determination in accordance with this

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Agreement on the disputes so submitted as well as such modifications, if any, to the Contingent Consideration Statement as reflect such determination, and the same shall be conclusive and binding upon the Parties. The Seller shall bear and pay 50% of the fees and other amounts payable in connection with the foregoing, and the Buyer shall bear and pay the remaining 50% of such fees and other amounts. During the review process, the Buyer shall, and shall cause its Affiliates to: (i) provide commercially reasonable efforts to provide the Seller and its Representatives with reasonable access, during normal business hours and upon reasonable advance notice, to the books and records necessary or useful in reviewing the Contingent Consideration Statement and (ii) reasonably cooperate with Seller and its Representatives, including by providing on a timely basis all information necessary or useful in reviewing the Contingent Consideration Statement.

(f) Buyer agrees that Buyer Parent and its Subsidiaries shall use commercially reasonable efforts in accordance with its normal and ordinary course business practices to achieve maximum Combined CM Business Revenue.

3.4 Sales Taxes; VAT. The Selling Entities shall bear and pay, and the Buying Entities shall reimburse the Selling Entities for fifty percent of any Taxes, documentary charges, recording fees or charges, fees or expenses (the “Transaction Taxes”) that result from the transfer of assets located in the United States. The Buying Entities shall bear and pay all Transaction Taxes that result from transfers of assets located outside the United States unless such Transaction Taxes are not recoverable by the Buying Entities in which case, Selling Entity shall reimburse Buying Entity for 50% of any such non-recoverable Transaction Taxes. The Buying Entities and the Selling Entities shall work together to minimize Transaction Taxes, including non-recoverable Transaction Taxes.

3.5 Allocation. At or prior to the Closing, the Buyer and the Seller shall mutually agree upon a statement setting forth the determination of the manner in which the consideration referred to in Section 3.1 is to be allocated among the Purchased Assets. The allocation prescribed by such statement shall be conclusive and binding upon the Seller for all purposes. The Seller shall not, and shall cause its Subsidiaries not to, file any Tax Return or other document with, or make any statement or declaration to, any Governmental Body that is inconsistent with such allocation.

3.6 Closing.

(a) The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 a.m. on the date on which all of the conditions specified in Article 7 and Article 8 have been satisfied or waived by the applicable Party, and shall occur at the offices of Agilent Technologies, Inc. located at 395 Page Mill Road, Palo Alto, California, or at such other time or places as the Parties may mutually agree (such date is hereinafter referred to as the “Closing Date”).

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(b) At the Closing:

(i) the Selling Entities designated by Seller shall execute and deliver to the Buying Entities designated by Buyer such bills of sale, endorsements, assignments and other documents as may (in the reasonable judgment of the Buying Entities or their counsel) be necessary or appropriate to assign, convey, transfer and deliver to the Buying Entities good and valid title to the Purchased Assets free of any Encumbrances and an assumption of the Assumed Liabilities in the jurisdictions in which such transfers are to be made. Such transfer and assumption agreements shall be in a form satisfactory to both Buyer and Seller (the “Local Asset Transfer Agreement”), with only such deviations therefrom as are required by local law, and shall be executed no later than at or as of the Closing;

(ii) Seller shall deliver to the Buying Entities the original of each of the Assumed Contracts (or counterpart, as appropriate) (other than purchase orders) or copies thereof where originals are not available as duly signed or executed by or behalf of the relevant Selling Entity; and

(iii) the Buying Entities designated by Buyer shall pay to the Selling Entities designated by Seller an amount equal to the Estimated Fixed Assets Value in cash or by wire transfer as contemplated by Section 3.1.

(c) At Closing, the Parties shall have executed and delivered the Transaction Agreements (other than this Agreement) to which they are a party.

3.7 Currency. All payments made hereunder shall be calculated and made in US dollars.

4. REPRESENTATIONS AND WARRANTIES OF THE SELLING ENTITIES

Except as specifically set forth in the disclosure schedules attached hereto (each, a “Schedule” and collectively, the “Disclosure Schedule”), which are numbered to correspond to the Section numbers of this Agreement; provided however, that any matter disclosed in one section or subsection of the Disclosure Schedule shall be deemed disclosed for purposes of the other sections or subsections of the Disclosure Schedule (and shall be deemed to modify the representations and warranties related thereto) if it is reasonably apparent from the text of such disclosure that such matter falls within the scope of such section or subsection, the Seller hereby represents and warrants to the Buyer as follows:

4.1 Organization, Good Standing and Qualification. The Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of the other Selling Entities is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. Each of the Selling Entities is duly qualified to conduct business and is in good standing under the Laws of each jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect on Seller. The Selling Entities have never conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than those set forth on Schedule 4.1.

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4.2 Authorization. All corporate action on the part of each Selling Entity, its officers, directors and the Stockholders necessary for the authorization, execution and delivery of this Agreement and the other Transaction Agreements, and the performance of all obligations of each Selling Entity hereunder and thereunder, has been taken or with respect to the Transaction Agreements, will be taken prior to the execution thereof. This Agreement constitutes, and each Transaction Agreement will constitute, when executed and delivered as provided in this Agreement, the valid and legally binding obligations of each Selling Entity (to the extent such Selling Entity is a party thereto), enforceable in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

4.3 Consents. No Consent, notice, registration, qualification, designation, declaration or filing to or with any third party or any Governmental Body on the part of any Selling Entity is required in connection with the consummation of the Transactions, except for (a) those listed on Schedule 4.3, (b) that of each Selling Entity’s board of directors and stockholders, and (c) any required filings under any applicable foreign antitrust, fair trade or other similar laws and the expiration or termination of waiting periods thereunder.

4.4 Litigation. Except as set forth on Schedule 4.4, there is no pending Proceeding, and, to the Knowledge of the Seller, no Person has threatened to commence any Proceeding: (i) that involves any of the Purchased Assets, Agilent Intellectual Property or the Business; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions. There is no Order to which any of the Purchased Assets or the Business is subject. The Seller has not received any notice of any proposed Order that, if issued or otherwise put into effect, (i) would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on Seller, or (ii) may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the Transactions.

4.5 Intellectual Property.

(a) Except as set forth on Schedule 4.5(a), to the Knowledge of the Seller, the Business as currently operated by the Seller and its Subsidiaries, the Products and the Agilent Intellectual Property are not infringing, misappropriating or making any unlawful use of, and the Business as currently operated by the Seller and its Subsidiaries, the Products and the Agilent Intellectual Property have not at any time infringed, misappropriated or made any unlawful use of, or received any notice or other communication of any actual, alleged, possible or potential infringement, misappropriation or unlawful use of, any Intellectual Property owned or used by any other Person. The Selling Entities have not received any written indication that any other Person is infringing, misappropriating or making any unlawful use of any Agilent Intellectual Property.

(b) The Seller and/or one of its Subsidiaries is the owner of all right, title, and interest in and to each of the Agilent Intellectual Property, free and clear of all Encumbrances (other than Permitted Encumbrances), equities and other adverse claims, and has the right to use all of the Agilent Intellectual Property.

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(c) Schedule 4.5(c) contains a complete and accurate list of all patents and patent applications included in the Agilent Intellectual Property (“Patents”). One or more of the Seller and its Subsidiaries is the owner of all right, title, and interest in and to each of the Patents, free and clear of all Encumbrances, and other adverse claims. All of the issued Patents are currently in compliance with Laws (including payment of filing, examination, and maintenance fees and proofs of working or use) and have been properly maintained. No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding.

(d) Schedule 4.5(d) contains a complete and accurate list and summary description of all registered copyrights and copyright applications included in the Agilent Intellectual Property (“Copyrights”). The Seller and/or one of its Subsidiaries is the owner of all right, title, and interest in and to each of the copyrights and copyright applications included in the Agilent Intellectual Property, free and clear of all Encumbrances (other than Permitted Encumbrances) and other adverse claims. All of the registered Copyrights are currently in compliance with Laws and have been properly maintained.

(e) The documentation relating to each trade secret included in the Agilent Intellectual Property (“Trade Secret”) is current, accurate, and reasonably sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. The Seller and its Subsidiaries have taken all reasonable precautions to protect the secrecy, confidentiality, and value of the Trade Secrets. The Seller and/or one of its Subsidiaries has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not part of the public knowledge or literature, and, to the Knowledge of the Seller, have not been used, divulged, or appropriated either for the benefit of any Person (other than one or more of its Subsidiaries) or to the detriment of the Seller and its Subsidiaries. To the Knowledge of the Seller, no Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. Each employee or consultant of each Selling Entity signs proprietary information agreements to protect the Trade Secrets.

4.6 Non-Contravention. Except as set forth in Schedule 4.6, neither the execution and delivery of this Agreement or the other Transaction Agreements, nor the consummation or performance of any of the Transactions, will directly or indirectly (with or without notice or lapse of time): (a) contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Transactions or to exercise any remedy or obtain any relief under, any Law or any Order to which any Selling Entity, the Business or the Purchased Assets are subject; (b) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is included in the Purchased Assets or the Business, except for such contravention, conflict, or violation that does not have a Material Adverse Effect on Seller; (c) contravene or conflict with the articles of incorporation, by-laws or other constitutive documents of any Selling Entity; (d) materially contravene, materially conflict with or result in a material violation or material breach of, or result in a material default under, any provision of any Assumed Contract; (e) give any Person the right to

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(i) declare a material default or exercise any material remedy under any Assumed Contracts, (ii) accelerate the maturity or performance of any Assumed Contract, or (iii) cancel, terminate or materially modify any Assumed Contract; or (f) result in the imposition or creation of any Encumbrance, other than Permitted Encumbrances, upon or with respect to any of the Purchased Assets.

4.7 Contracts; Action.

(a) Schedule 4.7(a) identifies each Assumed Contract, other than purchase orders, that contemplates or involves: (A) the payment or receipt of cash or other consideration in an amount or having a value in excess of $50,000, (B) indebtedness for borrowed money or Encumbrance of Purchased Assets other than Permitted Encumbrances, (C) guarantee of any obligation for borrowed money or otherwise, (D) lending or investing of funds, (E) lease of any real property, (F) any agreement with any material customer or supplier of the Business or (G) prohibition of a Selling Entity from freely engaging in business anywhere in the world (collectively, the “Material Contracts”).

(b) Each Assumed Contract is valid and in full force and effect, and is enforceable by the applicable Selling Entity in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(c) Except as set forth on Schedule 4.7(c), (i) no Selling Entity has violated or breached, or is in default under, or has received notice that it has breached, violated or defaulted under, any Material Contract and, to the Knowledge of the Seller, no third party has violated or breached, or declared or committed any default under, any Material Contract, (ii) to the Seller’s Knowledge, no event has occurred, and no circumstance or condition exists, that would reasonably be expected (with or without notice or lapse of time) to result in a violation or breach of any of the provisions of any Material Contract, or to give any Person the right to declare a default or exercise any remedy in respect of a default, accelerate the maturity or performance, or cancel, terminate or modify any right under any Material Contract.

(d) No Assumed Contract prohibits a Selling Entity from freely engaging in the Business anywhere in the world.

(e) No Selling Entity has waived any of its material rights under any Material Contract on Seller.

(f) No Person is renegotiating any material amount paid or payable to the Selling Entities under any Assumed Contract or any other material term or provision of any Assumed Contract.

4.8 Related-Party Transactions. The Assumed Contracts do not include any agreements, understandings or proposed transactions between any Selling Entity and any of their Affiliates.

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4.9 Tax Matters. All Taxes required to have been withheld or paid, and Tax Returns filed, by the Seller or any of its Subsidiaries with respect to the Purchased Assets and the Business have been timely paid (or withheld and paid) or extensions for payment have been properly obtained. There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) on the Purchased Assets. None of the Purchased Assets to be transferred by the Selling Entities is a “United States real property interest,” within the meaning of Section 897(c) of the Code.

4.10 Governmental Authorizations. Each Selling Entity has all Governmental Authorizations necessary for the conduct of the Business, the lack of which could reasonably be expected to have a Material Adverse Effect on Seller. No Selling Entity is in default in any material respect under any of such Governmental Authorization.

4.11 Corporate Documents. The certificate or articles of incorporation and bylaws and equivalent charter documents of each Selling Entity are in the form previously provided to counsel for the Buying Entities.

4.12 Inventory. The Net Book Value of the Inventory set forth on Original Schedule 2.1(a)(i) is accurate as of the date hereof. All of the Selling Entities’ Purchased Inventory set forth on Original Schedule 2.1(a)(i) is saleable as of the date hereof. All of Selling Entities Purchased Inventory is free of any material defect or deficiency.

4.13 Title to Property and Assets. The Selling Entities own, and have good, valid and marketable title to, all Purchased Assets free and clear of all Encumbrances (except Permitted Encumbrances). The Fixed Assets are in good operating condition and repair, ordinary wear and tear excepted, and are free of any material defects. Schedule 4.13 set forth the location of all Fixed Assets. The Fixed Assets are used in the Business.

4.14 Employment Matters.

(a) When delivered pursuant to Section 6.8, the Employee List will be accurate.

(b) No Selling Entity is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union relating to the Identified Employees, and no labor union has requested or, to Seller’s Knowledge, has sought to represent any of the Identified Employees. There is no strike or other labor dispute involving any Selling Entity pending, or to the Seller’s Knowledge, threatened, that could have a Material Adverse Effect, nor is Seller aware of any labor organization activity involving the Identified Employees. To the Knowledge of the Seller, no Identified Employee intends to terminate his or her employment with Seller or any of its Subsidiaries, nor does Seller or any of its Subsidiaries have a present intention to terminate any Identified Employee. Each Selling Entity has complied in all material respects with all applicable Laws related to employment of the Identified Employees. The employment of each Identified Employee who is employed in the United States by the Selling Entities is “at will.”

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4.15 Compliance With Laws. Except as set forth in Schedule 4.15: (a) each Selling Entity is in compliance in all material respects with each Law that is applicable to the ownership or use of any of the Purchased Assets and operation of the Business; and (b) no Selling Entity has received any notice or other communication (in writing or otherwise) pending from any Governmental Body or any other Person regarding any actual, alleged, possible or potential material violation of, or material failure to comply with, any Law that is applicable to the ownership or use of any of the Purchased Assets or operation of the Business.

4.16 Sale of Products; Warranties. None of the Products is subject to any guaranty, warranty or other indemnity of a Selling Entity materially beyond the applicable standard terms and conditions of sales agreements or license agreements to which it is a party. Each Product that has been sold by the Selling Entities to any Person and for which any warranty obligations are being assumed by Buyer pursuant to Section 2.2(a)(iii), conformed and complied in all material respects with any applicable specifications which were in effect at the time such Product was sold and did not contain any defects in materials or workmanship. No Product has been the subject of any recall or other similar action, and to the Knowledge of Seller, there is no reasonable basis for the same.

4.17 Certain Payments. With respect to the Business or the Purchased Assets, neither the Selling Entities, nor to the Knowledge of the Seller, any director, officer, agent, or employee thereof, or any other Person associated with or acting for or on behalf of any Selling Entity, has directly or indirectly made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of any Selling Entity or any Affiliate of any Selling Entity, or (iv) in violation of any Law.

4.18 Finders and Brokers. The Selling Entities have not agreed or become obligated to pay, or has taken any action that might result in any Person claiming to be entitled to receive, any brokerage commission, finder’s fee or similar commission or fee in connection with any of the Transactions.

5. REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller as follows:

5.1 Organization, Good Standing and Qualification. The Buyer is a corporation duly organized, validly existing and in good standing under the Laws of Mauritius. Each of the other Selling Entities is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. Each Buying Entity is duly qualified to conduct business and is in good standing under the Laws of each jurisdiction in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect on Buyer.

5.2 Authorization. All corporate action on the part of each Buying Entity, its officers and directors necessary for the authorization, execution and delivery of this Agreement and the

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other Transaction Agreements, and the performance of all obligations of each Buying Entity hereunder and thereunder, has been taken. This Agreement constitutes, and when executed and delivered as provided in this Agreement, each Transaction Agreement (to which a Buying Entity is a party) will constitute, the valid and legally binding obligation of such Buying Entity, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

5.3 Consents. No Consent, notice, registration, qualification, designation, declaration or filing to or with any third party or any Governmental Body on the part of any Buying Entity is required in connection with the consummation of the Transactions, except for (a) those listed on Schedule 5.3, (b) that of each Buying Entity’s board of directors, (c) any required filings under any applicable foreign antitrust, fair trade or other similar laws and the expiration or termination of waiting periods thereunder and (d) those the failure to obtain or file would not have a Material Adverse Effect on Buyer.

5.4 Litigation. There is no pending Proceeding, and, to the knowledge of the Buyer, no Person has threatened to commence any Proceeding that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions. The Buyer Parent and its Subsidiaries have not received any notice of any proposed Order that, if issued or otherwise put into effect, may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the Transactions.

5.5 Non-Contravention. Neither the execution and delivery of this Agreement or the other Transaction Agreements, nor the consummation or performance of any of the Transactions, will directly or indirectly (with or without notice or lapse of time) contravene or conflict with the articles of incorporation, by-laws or other constitutive documents of any Buying Entity.

5.6 Finders and Brokers. The Buying Entities have not agreed and will not become obligated to pay, or has not taken any action that might result in any Person claiming to be entitled to receive, any brokerage commission, finder’ s fee or similar commission or fee in connection with any of the Transactions.

6. COVENANTS OF THE SELLER AND THE BUYER

6.1 Access and Investigation. During the Pre-Closing Period, the Seller shall use commercially reasonable efforts to provide the Buying Entities and their Representatives with reasonable access, during normal business hours and upon reasonable advance notice, to all existing books, records, Tax Returns, work papers and other documents and information relating to the Purchased Assets and Business, as well as permit Buyer to have conversations with the customers of the Business and the Identified Employees so long as such conversations have been specifically coordinated by the Seller and the Seller is permitted to attend all meetings or other conversations with such customers and Identified Employees.

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6.2 Operation of Business. During the Pre-Closing Period, except for actions taken in furtherance of the Transaction Agreements or as otherwise requested and reasonably consented to in writing in advance by the Buyer, the Seller shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to:

(a) conduct the Business in the Ordinary Course of Business and in the same manner as such operations have been conducted prior to the date of this Agreement;

(b) maintain with respect to the Business, their relations and good will with all suppliers, customers and creditors of the Business, the Identified Employees and other Persons having business relationships with the Business;

(c) not make any capital expenditure that would become a Purchased Asset, except for capital expenditures that are made in the Ordinary Course of Business, and that, when added to all other capital expenditures made on behalf of the Seller and its Subsidiaries during the Pre-Closing Period, do not exceed $250,000 in the aggregate;

(d) not permit any of the Purchased Assets to become bound by any Encumbrance, except Permitted Encumbrances, or become bound by a Contract that would become an Assumed Contract other than purchase orders entered into in the Ordinary Course of Business; and

(e) not agree, commit or offer (in writing or otherwise), and not attempt, to take any of the actions described in clauses (a)-(d) of this Section 6.2.

6.3 Filings and Consents. The Parties shall use commercially reasonable efforts to ensure that:

(a) each filing or notice required to be made or given (pursuant to any applicable Law, Order or Assumed Contract, or otherwise, including any filing or notice required under any applicable antitrust Law) by any such Party in connection with the execution and delivery of this Agreement or any of the other Transaction Agreements or in connection with the consummation or performance of any of the transactions contemplated herein or therein is made or given as soon as possible after the date of this Agreement;

(b) each Consent required to be obtained (pursuant to any applicable Law, Order or Assumed Contract, or otherwise) by each such Party in connection with the execution and delivery of this Agreement or any of the Transaction Agreements or in connection with the consummation or performance of any of the transactions contemplated herein or therein is obtained as soon as practicable after the date of this Agreement and remains in full force and effect through the Closing Date;

(c) a copy of each filing made, each notice given and each Consent obtained by such Party during the Pre-Closing Period is promptly made available to the other Parties; and

(d) during the Pre-Closing Period, their respective Representatives cooperate with the other Parties, and prepare and make available such documents and take such other actions as the other Parties may request in good faith, in connection with any filing, notice or Consent that the other Parties are required or elect to make, give or obtain.

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6.4 Notification.

(a) During the Pre-Closing Period, the Seller shall promptly notify the Buyer, and the Buyer shall promptly notify the Seller, in writing of:

(i) the discovery of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a breach of any representation or warranty made by any Party in this Agreement such that the conditions set forth in Sections 7.1 or 8.1, as applicable, would not be satisfied as of the time of such breach;

(ii) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute a breach of any representation or warranty made by a party in this Agreement if (A) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (B) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement such that the conditions set forth in Sections 7.1 or 8.1, as applicable, would not be satisfied as of the time of such breach;

(iii) its or the other Selling Entities or the other Buying Entities, as the case may be, breach of any covenant or obligation set forth in this Agreement such that the conditions set forth in Section 7.2 or 8.3, as applicable, would not be satisfied as of the time of such breach; and

(iv) any event, condition, fact or circumstance that may make the timely satisfaction of any of the conditions set forth in Article 7 or Article 8 impossible or unlikely.

(b) If any event, condition, fact or circumstance that is required to be disclosed pursuant to Section 6.4(a) requires any change in the Disclosure Schedule, or if any such event, condition, fact or circumstance would require such a change assuming the Disclosure Schedule were dated as of the date of the occurrence, existence or discovery of such event, condition, fact or circumstance, then the Seller shall promptly deliver to the Buyer an update to the Disclosure Schedule specifying such change. No such update shall be deemed to supplement or amend the Disclosure Schedule for the purpose of (i) determining the accuracy of any of the representations and warranties made by the Selling Entities in this Agreement, or (ii) determining whether any of the conditions set forth in Article 7 has been satisfied; provided, however, that they shall be deemed an amendment to the Disclosure Schedule for purposes of Article 9 hereof, if the Parties proceed to a Closing notwithstanding such supplement or amendment.

6.5 Commercially Reasonable Efforts. During the Pre-Closing Period, Selling Entities shall use their respective commercially reasonable efforts to cause the conditions set

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forth in Article 7, and Buying Entities shall use its commercially reasonable efforts to cause the conditions set forth in Article 8, to be satisfied on a timely basis, and not intentionally take any action that it actually knew would reasonably be expected to result in any of the representations and warranties made by Seller under this Agreement becoming untrue.

6.6 Confidentiality; No Shop. All Parties to this Agreement shall ensure that, during the Pre-Closing Period:

(a) Each Party and its respective Representatives and Affiliates complies with the Confidentiality Agreement, dated September 14, 2004, which shall continue in full force and effect in accordance with its terms; and

(b) From the date of this Agreement through the earlier of (i) the date that this Agreement is terminated or (ii) the Closing Date, the Seller shall not, and shall cause its Subsidiaries and their Representatives not to, directly or indirectly, encourage, solicit, engage in discussions with or provide any information to any person or group concerning any sale or other disposition of all or a material portion of the Purchased Assets other than inventory sales in the Ordinary Course of Business. The Seller shall promptly communicate to the Buyer any unsolicited offer or proposal concerning any such transaction that it and its Subsidiaries receive.

6.7 Bulk Transfer Laws. Each of the Parties agree to waive compliance by the other with the provisions of the bulk sales law of any jurisdiction.

6.8 Employees.

(a) Buyer and Seller acknowledge and agree that Buyer Parent and/or its Subsidiaries will, by November 9, 2004, make offers of employment to certain employees of the Business to be mutually identified by the Buyer and Seller, and ultimately selected by Buyer (the “Identified Employees”). Promptly after Buyer has selected the Identified Employees, to the extent permitted by applicable Laws (and where not so permitted, after consent for disclosure is solicited by Seller and received from Seller’s Identified Employee(s)), the Seller shall deliver to the Buyer a list (the “Employee List”) that will set forth, with respect to each Identified Employee: (i) the name and title of such employee; (ii) the aggregate dollar amounts (in the local currency for such employee) of the compensation (including wages, salary, commissions, director’s fees, fringe benefits, bonuses, profit-sharing payments and other payments) received by such employee from the Seller and its Subsidiaries as of September 30, 2004; (iii) such employee’s annualized compensation as of the date of this Agreement; (iv) the number of hours of sick-time which such employee has accrued as of the date hereof and the aggregate dollar amount thereof, if applicable; (v) the number of hours of vacation time which such employee has accrued as of the date hereof and the aggregate amount thereof; and (vi) the amount of severance that will be due and payable by the Selling Entities upon termination of the Identified Employees. The Buyer shall, and shall cause its relevant Affiliates to, offer employee benefits and base compensation that are substantially similar in the aggregate to those provided by the Seller and its relevant Subsidiaries to the extent that such employee benefits are not greater or more favorable than the Buyer’s and its relevant Affiliates’ current compensation and benefit package that is generally available for its similarly situated employees in the same geographic market,

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subject to any union or other Laws. The Buyer and its relevant Affiliates will not assume any options of the Seller, but may make option grants in accordance with the Buyer and its relevant Affiliates’ general policies and the terms of the Buyer and its relevant Affiliates’ equity incentive plan, including that the per share exercise price of the options will be equal to the fair market value of Buyer Parent’s ordinary shares on the Closing Date or the date the option is granted, whichever is later. The effective date for participation in the Buyer and its relevant Affiliates’ employee benefit plans shall be the Closing Date, or the earliest practicable date thereafter. Identified Employees of the Seller and its Subsidiaries who become employed by the Buyer Parent and/or its Subsidiaries in connection with this Transaction are referred to as “Transferred Employees.”

(b) Payment of Severance Pay. Each Selling Entity shall make payment in full to all Transferred Employees of all severance pay, bonuses, vacation pay, other accrued employment benefit payments on or before the due date for such payment under applicable Laws, and otherwise in a manner in accordance with applicable Laws. If Buyer Parent and/or any of its Subsidiaries are required to assume any of these amounts, such amount assumed shall be reimbursed by Seller or may be a Purchase Price adjustment or offset at Buyer’s election.

(c) Employee Liabilities. Except for Employee Assumed Liabilities (defined below), the Seller and its Subsidiaries shall be responsible for any Liabilities related to their employees that have accrued prior to the Closing Date, including, but not limited to, any Liabilities associated with the seniority of employees who will become Transferred Employees. For the avoidance of doubt, the Buyer Parent and its Subsidiaries shall not assume, and the Seller and its Subsidiaries shall retain as Liabilities any unpaid salary, accrued severance pay, allowances, bonuses and any other remuneration or monetary benefits, and any other obligations owed to the employees of the Seller and its Subsidiaries, arising from or in connection with their employment by the Seller and its Subsidiaries or any current or former Affiliate of the Seller and its Subsidiaries. The following liabilities with respect to the Transferred Employees will be considered “Employee Assumed Liabilities”: any pre-closing Liability relating to a Transferred Employee that the Buyer Parent and the relevant Subsidiary is required strictly by Law to assume (and not as a result of violation of Law or other contractual or Benefit Plan obligation by Seller). In addition, the Buyer Parent and its Subsidiaries will recognize the Transferred Employee’s term of service with the Seller and its Subsidiaries for the purpose of calculating the eligibility for short term disability benefits under Buyer Parent and its Subsidiaries’ employee Benefit Plans as well as vacation and paid time accrual.

(d) The Parties agree that nothing in this Agreement shall limit the Buying Entities’ ability to terminate the employment of any Transferred Employee; provided however that Buyer shall, and shall cause its Affiliates to, pay a severance payment, to any Transferred Employee whom Buyer or its Affiliates terminates without Cause prior to twelve (12) months from the Closing Date, in the amount of two (2) weeks of base salary per year of service, with a minimum payment of two (2) months of base salary and a maximum payment of six (6) months of base salary per employee (the “Minimum Severance Payment”). Years of service will be calculated based on the combination of Buyer Parent and its Subsidiaries and Seller and its Subsidiaries years of service. In the event that the applicable Buyer Parent and/or its Subsidiaries’ severance payment to the relevant Transferred Employee (which shall be at least as

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much as generally paid to similarly situated employees in the same geographic market, subject to any union or the Laws) is less than the Minimum Severance Amount, Seller promptly shall pay the deficiency within fifteen (15) days following written notice of such deficiency is provided by a Buying Entity.

(e) Nothing in this Section 6.8, express or implied, is intended to confer upon any Person, including without limitation any Identified Employee or Transferred Employee, other than the Parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

6.9 Communications Received After Closing. The Selling Entities authorize and empower Buying Entities on and after the Closing Date to receive and open all mail received by the Buying Entities relating to the Business or the Purchased Assets and to deal with the contents of such communications in any proper manner. Seller shall, and shall cause its Subsidiaries to, promptly deliver to the Buyer any mail or other communication received by them after the Closing Date pertaining to the Business or the Purchased Assets and any cash, checks or other instruments of payment to which the Buying Entities are entitled. Buyer shall, and shall cause its Affiliates and the Buyer Parent to, promptly deliver to Seller any mail or other communication received by it after the Closing Date pertaining to the assets and liabilities not transferred to the Buying Entities, and any cash, checks or other instruments of payment in respect thereof.

6.10 Asset Returns. In the event the Buying Entities receive any assets of the Seller and its Subsidiaries that are not intended to be transferred pursuant to the terms of this Agreement, whether or not related to the Business, Buyer agrees to, and shall cause the Buying Entities to promptly return such assets to Seller or its Subsidiaries at Seller’s direction and expense. In the event that, following the Closing, Seller receives or finds in its or its Subsidiaries’ possession any Purchased Assets that were intended to be, but were not, transferred pursuant to this Agreement at the Closing, Seller shall promptly notify Buyer to such effect and shall comply with its obligations in respect thereof.

6.11 Removal of Assets. The Purchased Assets shall be removed in accordance with the provisions of the Transition Services Agreement.

6.12 Consents. Except for Required Consents which shall not be subject to this Section 6.12 (unless Buyer waives Section 7.2 with respect to a Required Consent):

(a) To the extent that any Consents needed to assign to the Buying Entities any of the Purchased Assets have not been obtained on or prior to the Closing Date despite each Party’s commercially reasonable efforts to obtain such Consents pursuant to Section 6.3 of this Agreement, this Agreement shall not constitute an assignment or attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof. If any Consents shall not be obtained on or prior to the Closing, then Seller and Buyer shall use their commercially reasonable efforts in good faith to obtain such Consent as promptly as practicable thereafter and if in the reasonable judgment of both Buyer and Seller such Consent may not be obtained, the parties shall use commercially reasonable efforts in good faith to cooperate, and to cause each of their respective Subsidiaries to cooperate, in any lawful arrangement designed to provide for the Buying Entities the benefits under any such Purchased Assets.

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Confidential Treatment Requested

(b) If Seller requests, the Buyer shall, and shall cause its Affiliates to, sell Products to Seller or its Subsidiaries at Seller’s list price as of the Closing Date for the shortest period necessary after Closing to enable Seller or its Affiliates to meet its minimum obligations under any Contract or obligation of Seller which requires the delivery of Products but which has not yet been transferred to a Buying Entity despite each Party’s commercially reasonable efforts to obtain such Consents pursuant to Section 6.3 of this Agreement or terminated.

(c) Notwithstanding any other provision of this Agreement, Seller retains the right to terminate any Assumed Contract after Closing if such Contract cannot be transferred to the Buying Entities within a reasonable time frame despite each Party’s commercially reasonable efforts to obtain such Consents of the other parties thereto to transfer such Contract pursuant to Section 6.3 of the Agreement, taking into account the terms of such Contract (including automatic renewal provisions).

6.13 Supply Contracts. Prior to the Closing, the Buyer shall and shall cause its Buying Entities to use commercially reasonable efforts to negotiate in good faith to enter into supply agreements necessary for the Business with [    *    ] and [  *  ]; provided, that in the event that the Buying Entities are not able to reach agreement after good faith negotiations with such Persons, the Buyer and/or its Affiliates agree to negotiate in good faith with Seller for the supply of materials supplied currently by such Persons to the Business.

6.14 [  *  ] agreement. Prior to the Closing, the Buyer shall and shall cause its Buying Entities to use commercially reasonable effort to negotiate in good faith to enter into a manufacturing agreement with [    *    ] or one of its Affiliates, which agreement shall reflect the transfer and assumption of the certain rights and certain Liabilities as set forth in Section 2.1(a)(v) and Section 2.2(a)(v); provided, that in the event that the Buying Entities are not able to reach agreement after good faith negotiations with [*    ], the Buyer and/or its Affiliates agree to negotiate in good faith with Seller for such manufacturing currently provided by [    * ] to the Business.

6.15 Warranty and Return Liabilities.

(a) In the event that any Buying Entity incurs Warranty Obligations of Products sold prior to or on the Closing Date in excess of $150,000, in accordance with Section 2.2(b)(ix), Seller shall be responsible for such Warranty Obligations.

(b) The Buying Entity shall provide written notice to the Selling Entities setting forth in reasonable detail the nature of and the replacement costs incurred for any of the Selling Entities Warranty Obligation under Section 2.2(b)(ix), and Selling Entities shall promptly reimburse for any such Warranty Obligations, unless such reimbursement is subject to dispute in accordance with the following sentence, then any reimbursement due following such dispute resolution shall be paid promptly after the dispute is finally resolved. If Selling Entities dispute the Warranty Obligations under such notice, and the disputes are not resolved within a thirty (30) day period, such disputes shall be resolved in accordance with Section 11.4. During the review process, the Buying Entity shall (i) use commercially reasonable efforts to provide the Seller and their Representatives with reasonable access, during normal business hours and upon reasonable

*

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Confidential Treatment Requested

advance notice, to the books and records related to such Warranty Obligation and (ii) reasonably cooperate with Seller and its Representatives, including by providing on a timely basis all information necessary or useful within its control to such Warranty Obligation.

7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER

The obligation of the Buyer hereunder to consummate the transactions contemplated hereby shall be subject to the satisfaction of the following conditions as of the Closing Date:

7.1 Representations and Warranties. The representations and warranties of the Seller contained in this Agreement which are qualified by materiality shall be true and correct on and as of the Closing Date, and the representations and warranties of the Seller contained in this Agreement which are not qualified by materiality shall be true and correct in all material respects on and as of the Closing Date, except for representations and warranties that are made only as of a specific date, which shall be true and correct as of such specified date.

7.2 Consents and Approvals. All required Consents to the assignment of the Assumed Contracts identified on Schedule 7.2 (“Required Consents”), and board of director and stockholder approvals, if necessary, of the Selling Entities shall have been obtained, and written evidence of the same shall be provided to Buyer.

7.3 Performance. The Selling Entities shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date.

7.4 No Material Adverse Change. There shall not have been a Material Adverse Effect on Seller, whether or not resulting from a breach in any representation, warranty or covenant in this Agreement, except to the extent resulting from: (i) any change resulting from the compliance with the terms and conditions of this Agreement or any of the Transaction Agreements, (ii) any change or effect that results or arises from the announcement or pendency of the transactions contemplated by this Agreement or any of the Transaction Agreements, or (iii) any change or effect that results or arises from changes generally affecting the United States or general worldwide economies or the camera module industry.

7.5 Execution of Transaction Agreements. Each Party to each of the Transaction Agreements shall have executed and delivered the same.

7.6 Antitrust Laws; Governmental Approvals. Any applicable waiting period under any applicable antitrust Laws shall have expired or terminated, and all Governmental Authorization required to consummate the Transaction shall have been received.

7.7 Identified Employees. [    *    ] percent ([*  ]%) of the Identified Employee shall have accepted an offer of employment from the applicable Buying Entities and shall have executed the Buying Entities standard proprietary information and inventions agreement.

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Confidential Treatment Requested

7.8 Supply Contract. One or more Buying Entities shall have entered into supply agreements with [    *    ] and [    *    ] in accordance with Section 6.13 and a manufacturing agreement with [ *  ] in accordance with Section 6.14, or in either case, Seller.

7.9 Delivery of Legal Opinion. Buying Entities shall have received the legal opinion of Seller in a form reasonably acceptable to the Buyer.

7.10 Compliance Certificate. Seller shall have delivered to the Buyer a certificate, executed by an authorized person of Seller, dated as of the Closing Date certifying that each of the conditions set forth in Sections 7.1, 7.3 and 7.4 has been satisfied.

8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER

The obligation of the Seller hereunder to consummate the transactions contemplated hereby shall be subject to the satisfaction of the following conditions as of the Closing Date:

8.1 Representations and Warranties. The representations and warranties of the Buyer contained in this Agreement which are qualified by materiality shall be true and correct on and as of the Closing Date, and the representations and warranties of the Buyer contained in this Agreement which are not qualified by materiality shall be true and correct in all material respects on and as of the Closing Date, except for representations and warranties that are made only as of a specific date, which shall be true and correct as of such specified date.

8.2 Purchase Price. The Buying Entities shall have delivered to the Selling Entities the Purchase Price as specified in Section 3.1.

8.3 Performance. The Buying Entities shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date.

8.4 Execution of Transaction Agreements. Each Party to the Transaction Agreements shall have executed and delivered the same.

8.5 Antitrust Laws. Any applicable waiting period under any applicable antitrust Laws shall have expired or terminated, and all Governmental Authorization required to consummate the Transaction shall have been received.

8.6 Compliance Certificate. Buyer shall have delivered to the Seller a certificate, executed by an authorized person of Buyer, dated as of the Closing Date certifying that each of the conditions set forth in Sections 8.1 and 8.3 has been satisfied

9. INDEMNIFICATION, ETC.

9.1 Survival of Representations and Covenants.

(a) All covenants and obligations of the Parties shall survive and continue until the dates specified therein or, if not so specified, until the applicable statute of limitation

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Confidential Treatment Requested

period or periods legally applicable to them. All representations and warranties made by the Seller and the Buyer in this Agreement and in any certificates delivered pursuant to Section 7.10 and Section 8.6 of this Agreement shall survive the Closing Date for a period of eighteen (18) months following the Closing Date; provided, however, that any representation or warranty set forth in Sections 4.1 and 4.2 shall survive indefinitely, and any representation or warranty set forth in Sections 4.10 and 4.15 shall survive for the applicable statute of limitation period. Any Party’s right to commence a claim for indemnification under Section 9.2 for a breach of any representation or warranty shall be made on or prior to the date, if any, on which the survival period for such representation or warranty expires.

(b) The representations, warranties, covenants and obligations of the respective Parties, and the rights and remedies that may be exercised by any of them, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Parties or any of their Representatives.

9.2 Indemnification.

(a) The Seller shall indemnify, defend and hold harmless Buyer, its Subsidiaries, Buyer Parent and each of their officers, directors, employees, agents and Representatives (collectively, the “Buying Indemnitees” and individually each a “Buying Indemnitee”) from and against, and shall compensate and reimburse each of the Buying Indemnitees for, any Damages which are suffered or incurred by any of the Buying Indemnitees or to which any of the Buying Indemnitees may otherwise become subject at any time (regardless of whether or not such Damages relate to any third party claim) and which arise from or as a direct or indirect result of, or are directly or indirectly connected with:

(i) any breach of any representation or warranty made by the Seller in this Agreement;

(ii) any breach of any covenant or obligation of any Seller in this Agreement;

(iii) any Liability relating to the operation of the Business or ownership of the Purchased Assets prior to the Closing, other than Assumed Liabilities;

(iv) any Liability and Proceedings, but only as to any Liability accruing prior to the Closing Date, with respect to the [    *    ] request for indemnification from Seller, and [    *    ].

(v) payments, if any, required to be made by Selling Entities under Section 3.2(b);

(vi) payments, if any, required to be made by Selling Entities under Section 6.8(b) and (c);

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Confidential Treatment Requested

(vii) any Liability related to Image Sensors (other than as provided in Section 2.2(a)(iii)) and the Agilent Image Sensor Business, including, without limitation, Liability and Proceedings related to [  *]; and

(viii) any Retained Liability.

(b) The Buyer shall defend and hold harmless Seller and its Subsidiaries and each of their officers, directors, employees, agents and Representatives (collectively, the “Selling Indemnitees” and individually each an “Selling Indemnitee”) from and against, and shall compensate and reimburse each of the Selling Indemnitees for, any Damages which are suffered or incurred by any of the Selling Indemnitees or to which any of the Selling Indemnitees may otherwise become subject at any time (regardless of whether or not such Damages relate to any third party claim) and which arise from or as a direct or indirect result of, or are directly or indirectly connected with:

(i) any breach of any representation or warranty made by the Buyer in this Agreement;

(ii) any breach of any covenant or obligation of the Buyer in this Agreement;

(iii) any Liability relating to the operation of the Business or ownership of the Purchased Assets on or after the Closing, including all Liabilities attributable to Assumed Liabilities which were not in existence on the date of Closing;

(iv) payments, if any, required to be made by Buying Entities under Section 3.2(b); and

(v) all Assumed Liabilities.

(c) Notwithstanding the other provisions of this Article 9, in no event shall the Seller be required to indemnify the Buyer for Damages based on Section 9.2(a)(i) and (ii) (or Proceeding related thereto) until the aggregate amount of such Damages sustained by the Buyer exceeds 1% of Purchase Price (“Threshold”), at which point the Seller shall be liable for all Damages sustained by the Indemnitees. For avoidance of doubt, the Threshold shall not apply to the Selling Entities indemnification obligations for Damages based on Section 9.2(a)(iii), (iv), (v) (vi), (vii) and (viii). Except for fraud, the aggregate amount which all Buyer Indemnitees are entitled to recover from the Seller Entities based on Section 9.2(a)(i) and (ii) (or Proceeding related thereto) in the aggregate will not exceed [    *    ] % of Purchase Price (“Cap”). For avoidance of doubt, the Cap shall not apply to the Selling Entities indemnification obligations for Damages based on Section 9.2(a)(iii), (iv), (v), (vi), (vii) and (viii).

(d) Except in the cases of fraud, no Party shall be liable for any special, incidental, consequential or punitive damages hereunder, including, without limitation, lost profits, unless the same are included in a third party claim.

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(e) Except in the cases of fraud, the indemnity provide in Article 9 shall be the sole and exclusive remedy of the Buying Indemnitees and the Selling Indemnitees.

(f) Any payment made pursuant to the indemnification obligations under this Section 9 shall be treated as an adjustment to the Purchase Price.

9.3 Indemnification Procedures.

(a) For purposes of this Section 9.3, “Indemnified Party” shall mean (i) each Selling Indemnitee when being indemnified by any Buying Entity pursuant to Section 9.2(b), and (ii) each Buying Indemnitee when being indemnified by any Selling Entity pursuant to Section 9.2(a), and “Indemnifying Party” shall mean (x) any Selling Entity when indemnifying any Buying Indemnitee pursuant to Section 9.2(a), and (y) any Buying Entity when indemnifying any Selling Indemnitee pursuant to Section 9.2(b).

(b) The obligations and Liabilities of an Indemnifying Party under this Article 9 with respect to Damages arising from claims of any third party which are subject to the indemnification provided for under Section 9.2 (“Third Party Claims”) shall be governed by and contingent upon the following terms and conditions: if an Indemnified Party shall receive notice of any Third Party Claim, the Indemnified Party shall notify each Indemnifying Party promptly of such Third Party Claim, specifying the nature of such claim and the amount or the estimated amount thereof to the extent then feasible (which estimate shall not be conclusive of the final amount of such claim. Notwithstanding the foregoing, a delay or failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article 9 unless (and then solely to the extent) the Indemnifying Party is prejudiced by the delay or failure. Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim so long as the Indemnifying Party notifies the Indemnified Party in writing within thirty (30) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will undertake the defense of such claim and the Indemnifying Party uses its commercially reasonable efforts to conduct the defense of the Third Party Claim in a manner reasonably consistent with its defense of its own direct claims. The Indemnified Party may participate in, but not control, the defense of such claim with counsel of its choice; provided, however, that the fees and expenses of the Indemnified Party’s participation, including of its counsel, shall be at the expense of the Indemnified Party unless (A) the Indemnifying Party has agreed in writing to pay such fees and expenses, (B) the Indemnifying Party has failed to assume the defense as provided herein or (C) a claim shall have been brought or asserted against the Indemnifying Party as well as the Indemnified Party, and such Indemnified Party shall have been advised in writing by counsel that there may be one or more factual or legal defenses available to it that are in conflict with those available to the Indemnifying Party, in which case such counsel shall be at the expense of the Indemnifying Party; provided, however, that the Indemnifying Party will not be required to pay the fees and expenses of more than one separate principal counsel (and one appropriate local counsel) for all Indemnified Parties. If, within such 30-day period, the Indemnifying Party does not assume the defense of such matter or fails to defend the matter in the manner set forth above, the Indemnified Party may defend against the matter in any manner that it reasonably may deem appropriate and the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against such claim

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(including reasonable attorneys’ fees and expenses) and the Indemnifying Party will remain responsible for the Liability the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim to the fullest extent provided herein, provided, however, that the Indemnified Party may not consent to the entry of any judgment with respect to the matter or enter into any settlement with respect to such matter without the written consent of the Indemnifying Party, which consent may not be unreasonably withheld. In the event the Indemnifying Party exercises the right to undertake any defense against any a Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party.

(c) An Indemnified Party shall give each Indemnifying Party notice of any matter (other than a Third Party Claim) which an Indemnified Party has determined has given or would reasonably be expected to give rise to a right of indemnification under Section 9.2, within sixty (60) days of such determination, stating the amount of the Damages, if known, and method of computation thereof, a brief description of the facts upon which such claim is based and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises; provided, however, that the delay or failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article 9 unless (and then solely to the extent) the Indemnifying Party is prejudiced by the delay or failure.

(d) If, after the amount of the claim is specified by the Indemnified Party, the Indemnifying Party objects to any such claim, it may give written notice to the Indemnified Party within thirty (30) days of the later of receipt of the Indemnified Party’s notice of claim or the specification by the Indemnified Party of the amount of the claim, advising the Indemnified Party of its objection. If no such notice is timely received from the Indemnifying Party by the Indemnified Party, the Indemnified Party will be entitled to payment from the Indemnifying Party in the amount of the Damages arising out of the claim specified in its notice of claim. If the Indemnifying Party advises the Indemnified Party within such thirty (30) day period that it objects to such claim, the Indemnified Party and the Indemnifying Party shall promptly meet and attempt in good faith to settle the dispute in writing. Unless both parties waive such timeline, if the Indemnified Party and the Indemnifying Party are unable to reach agreement within sixty (60) days after the Indemnifying Party objects to the claim, then the disputed portion of the claim shall be submitted to arbitration in accordance with Section 11.4. If the arbitrator shall determine that the Indemnified Party is entitled to indemnification with respect to the dispute submitted, the Indemnified Party will be entitled to obtain payment from the Indemnifying Party within thirty (30) days in the amount determined by the arbitrator.

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Confidential Treatment Requested

9.4 Non-Compete; Non-Solicitation.

(a) For a period of [  *  ] following the Closing Date (“Non-Compete Period”), the Seller shall not, and the Seller shall cause its Subsidiaries not to, without the prior written consent of the Buyer, directly or indirectly, own, manage, control, participate in, or in any manner engage in the business of developing, distributing, selling and marketing Camera Module products that are configured and intended for inclusion in a personal, portable, handheld device for human voice communication over a cellular network (a “Competitive Activity”) within any Restricted Territory; provided, however, that notwithstanding the foregoing, the Seller and its Subsidiaries shall be able to engage in the following activities: (i) the acquisition or ownership of securities of no more than five percent (5%) of the outstanding voting power of any competitor which are listed on any national securities exchange or traded in the national over-the-counter market; (ii) the acquisition, merger or any other business combination with or investments in any Person whose primary business is not a Competitive Activity so long as after such acquisition, the Seller and its Subsidiaries shall not engage in the Competitive Activity; (iii) existing or future licenses or other dispositions of Agilent Intellectual Property so long as such licenses and dispositions are in accordance with Section 2.12 of the License Agreement; (iv) Seller’s actions under Contracts pursuant to Section 6.12 hereof, until such Contracts can be transferred to the Buying Entities or terminated; or (v) actions taken pursuant to the Transaction Agreements. For the avoidance of doubt, the Parties agree that this Section 9.4 shall not in any way limit the Seller and its Subsidiaries from engaging in the business of developing, manufacturing or marketing of Imagine Sensors. As used in this Agreement, “Restricted Territory” means the areas in the world in which any Buyer’s Parent or its Affiliates are doing business.

(b) During the Non-Compete Period, the Seller and its Subsidiaries shall refrain from, either alone or in conjunction with any other Person, directly or indirectly, inducing or attempting to induce any Transferred Employee to leave the employ or engagement of the Buyer Parent or its Subsidiaries or induce or attempt to induce any customer, supplier, contractor, licensor or licensee of the Combined CM Business of Buyer Parent or its Subsidiaries to cease doing business with the Buyer Parent or its Subsidiaries as it relates solely to the Combined CM Business. During the Non-Compete Period, the Buyer Parent and its Subsidiaries shall not induce or attempt to induce any employee of Seller’s Sensor Solutions Division of the Semiconductor Products Group of the Seller and its Subsidiaries, including without limitation the employees of the Image Sensor Business, to leave the employ or engagement of any the Seller and its Subsidiaries. Notwithstanding the foregoing, the restrictions set forth in this Section 9.4(b) shall not apply in the event that any employee is involuntarily terminated by a Party.

(c) If any court of competent jurisdiction declares any provision of Section 9.4 invalid or unenforceable, the remainder of this Agreement shall remain fully enforceable. To the extent that any court concludes that any provision of Section 9.4 is void or voidable, the court shall reform such provision(s) to render the provision(s) enforceable, but only to the extent necessary to render the provision(s) enforceable and only in view of the Parties’ express desire that the Buyer and its Affiliates be protected to the greatest extent possible under applicable Law from improper competition and/or the misuse or disclosure of the Purchased Assets. The Parties hereto acknowledge that money damages would be an inadequate remedy for any breach of Section 9.4. Therefore, in the event of a breach or threatened breach of Section 9.4, any Buying Entity or its respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions of Section 9.4 (without posting a bond or other security).

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10. TERMINATION

10.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by either Party if the Closing shall not have occurred by ninety (90) days following the date hereof; provided, however, that the right to terminate this Agreement under this Section 10.1(a) shall not be available to any Party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

(b) by a Party (the “Non-Defaulting Party”) upon a breach of any representation or warranty of the other Party (the “Defaulting Party”) or any covenant or agreement in this Agreement, or if any representation or warranty of the Defaulting Party in this Agreement shall have become untrue, in either case such that the conditions set forth in Section 7.1 or 7.2 or Section 8.1 or 8.3, as the case may be, would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided, that if such inaccuracy in the Defaulting Party’s representations and warranties or breach by the Defaulting Party is curable by the Defaulting Party through the exercise of its commercially reasonable efforts within ten (10) days, then Non-Defaulting Party may not terminate this Agreement under this Section 10.1(b) prior to the tenth (10^th) day following the date on which notice of such breach was provided by the Non-Defaulting Party to the Defaulting Party, provided the Defaulting Party continues to exercise commercially reasonable efforts to cure such breach during such period; provided, further, that the Defaulting Party remains liable following termination for such breach; or

(c) by either Party in the event that any Governmental Body shall have issued an Order or taken any other action restraining, enjoining or otherwise prohibiting the Transactions contemplated by this Agreement and such Order or other action shall have become final and nonappealable; or

(d) by the mutual written consent of both Parties.

10.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith become void and there shall be no Liability on the part of either Party hereto except (i) as set forth in Sections 6.6(a) and 11.1, (ii) that nothing herein shall relieve either Party from Liability for any breach of this Agreement and (iii) that the Buyer shall, and shall cause its Affiliates to, return all materials and medium containing any information of any nature relating to the Seller and its Subsidiaries, including proprietary and confidential information, within five (5) Business Days of termination.

11. MISCELLANEOUS

11.1 Transaction Expenses. Each Party shall bear and pay its own fees, costs and expenses, including but not limited to all legal, accounting, banking, or broker fees,

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commissions, and expenses, that such Party incurs in connection with the negotiation, preparation and review of the Transaction Agreements. Notwithstanding the foregoing, the Buyer and the Seller shall pay for 50% of the total fees and expenses incurred in connection with the preparation and submission of any filing or notice required to be made or given to any Governmental Body (including any filing required by applicable antitrust Laws) in connection with any of the Transactions.

11.2 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Nothing in this Agreement, express or implied, is intended to confer upon any Party, other than the Parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

11.3 Governing Law. This Agreement shall be governed by and construed under the Laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.

11.4 Disputes Resolution; Waiver of Jury Trial.

(a) Except as otherwise provided in this Agreement, the following dispute resolution procedures shall be used by the Parties to resolve all disputes, differences, controversies and claims under this Agreement that arise out of or relate to this Agreement or the interpretation or breach thereof (other than those set forth in Section 11.4(g) hereof) (collectively, “Disputes”). For purposes of this Section 11.4, “Parties” means Buyer, on the one hand, and the Sellers, on the other hand. Either Party may, by written notice to the other Party, refer any Disputes for resolution in the manner set forth below.

(b) Any such Disputes shall be referred to arbitration under the rules of the American Arbitration Association, to the extent such rules are not inconsistent with this Section 11.4. Unless the Parties agree on the name of a single arbitrator, the arbitration panel shall consist of three (3) arbitrators, one of whom shall be appointed by Buyer and one of whom shall be appointed by the Sellers. The two arbitrators thus appointed shall choose the third arbitrator; provided, however, that if the two arbitrators are unable to agree on the appointment of the third arbitrator, either arbitrator may petition the American Arbitration Association to make the appointment. Neither Party nor any arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Buyer and the Seller. The provisions contained in this Section shall survive termination and/or expiration of this Agreement.

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(c) Unless otherwise mutually agreed to by the Parties, the place of arbitration shall be San Jose, California. Unless otherwise mutually agreed to by the parties, for each Dispute referred to arbitration pursuant to this Section 11.4, each Party shall allow and participate in discovery as follows:

(i) Non-Expert Discovery. Each Party may (1) conduct three (3) non-expert depositions of no more than five (5) hours of testimony each, with any deponents employed by any party to appear for deposition in San Jose, California (unless otherwise mutually agreed by the Parties); (2) propound a single set of requests for production of documents containing no more than twenty (20) individual requests; (3) propound up to twenty written interrogatories; and (4) propound up to ten (10) requests for admission.

(ii) Expert Disclosure. If scientific, technical, or other specialized knowledge will assist the arbitrator, each Party may select a single witness who is retained or specially employed to provide such expert testimony. In addition, each Party may select an additional retained or specially employed expert witness to testify with respect to damages issues, if any. Expert discovery shall consist of the following: (1) the Parties shall exchange complete reports on all information to be provided by the expert(s) at the hearing no later than thirty (30) days before the first day of the hearing; (2) the parties shall produce complete rebuttal reports, if any, no later than ten (10) days before the first day of the hearing; and (3) the Parties shall be required to produce any and all documents reviewed by their expert(s) in performing work relating to the arbitration.

(iii) Additional Discovery. The Arbitrator may, on application by either Party, authorize additional discovery only if deemed essential to avoid injustice. In the event that remote witnesses might otherwise be unable to attend the arbitration, arrangements shall be made to allow their live testimony by video conference during the arbitration hearing.

(d) The arbitral tribunal shall render its award within six (6) months after acceptance of its appointment by the third arbitrator. This period may be extended by mutual agreement of the Parties. The decision of the arbitration panel shall be final and binding on all of the Parties hereto and non-appealable, and the Parties hereby waive any right of appeal to any court of any Disputes resolved pursuant to this Section 11.4. However, the provisions of this Section 11.4 may be enforced in any court having jurisdiction over the award or any of the Parties pursuant to Section 11.4(f) hereof, and judgment on the award (including, without limitation, equitable remedies) granted in any Disputes resolution hereunder may be entered in any such court.

(e) Each Party shall pay its own expenses in connection with the resolution of Disputes pursuant to this Section 11.4, including attorneys’ fees. The fees and expenses of the arbitration panel shall be (A) borne equally by the Buyer, on the one hand, and the Seller, on the other hand, if and to the extent that the arbitration panel determines that such result would be fair and equitable under the circumstances, or (B) borne by the Buyer, on the one hand, and the Seller, on the other hand, in inverse proportion to the amount that the arbitration panel’s award in favor of the Buyer, on the one hand, and the Seller, on the other hand, bears to the total amount of the items in dispute (for illustration purposes for this Section 11.4(e) only, (X) if the total amount of items in dispute by the Buying Entities is $1,000,000.00, and the Buying Entities are awarded $500,000.00 by the arbitration panel, the Buying Entities, on the one hand, and the Selling Entities, on the other hand, shall bear the arbitration panel’s fees and expenses equally, or (Y) if the total amount of items in dispute by the Buying Entities is $1,000,000.00, and the Buying Entities are awarded $250,000.00 by the arbitration panel, the Buying Entities shall bear 75% and the Selling Entities shall bear 25% of the arbitration panel’s fees and expenses).

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(f) Any judicial proceeding brought pursuant to Section 11.4(d) or (g) hereof must be brought in any court of competent jurisdiction in the county of Santa Clara, California and, by execution and delivery of this Agreement, each Party (i) accepts, generally and unconditionally, the exclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, (ii) irrevocably waives any objection it may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum and (iii) waives personal service of process and consents to service of process upon it by certified or registered mail, return receipt requested, at its address specified or determined in accordance with Section 11.4 hereof, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail. Nothing in this Section 11.4 shall affect the right of any Party hereto to serve process in any other manner permitted by applicable Law.

(g) The foregoing provisions shall not apply to Disputes as to breaches or threatened breach of Sections 6.6 or 9.4 hereof. The Parties hereto acknowledge that money damages would be an inadequate remedy for any breach of Sections 6.6 or 9.4 and a breach thereof would cause irreparable damage to the Buying Entities. Therefore, in the event of a breach or threatened breach of Sections 6.6 or 9.4, the Buying Entities or their respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions of Sections 6.6 or 9.4.

(h) Notwithstanding anything contained in this Section 11.4 to the contrary, in the event of any Dispute, prior to referring such Dispute to arbitration pursuant to Section 11.4(b) hereof, Seller and Buyer shall attempt in good faith to resolve any and all controversies or claims relating to such Disputes promptly by negotiation commencing within ten (10) calendar days of the written notice of such Disputes by either Party, including referring such matter to Seller’s then-current general manager of its Semiconductor Products Group and Buyer Parent and its Subsidiaries’ then-current President of Design and ODM Business. The representatives of the Parties shall meet at a mutually acceptable time and place and thereafter as often as they reasonably deem necessary to exchange relevant information and to attempt to resolve the Dispute for a period of four (4) weeks. In the event that the parties are unable to resolve such Dispute pursuant to this Section 11.4(h), the provisions of Section 11.4(b) through (f) hereof, inclusive, shall apply.

(i) IN THE EVENT OF ANY JUDICIAL PROCEEDINGS, THE PARTIES KNOWINGLY AND VOLUNTARILY, AND HAVING HAD AN OPPORTUNITY TO CONSULT WITH COUNSEL, WAIVE ALL RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW.

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11.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

11.6 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the Party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day; (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the address as set forth on the signature page hereof or at such other address as such Party may designate by ten days advance written notice to the other Parties hereto.

11.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Seller and Buyer. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Party hereto.

11.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable Law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

11.9 Entire Agreement. This Agreement, including the Exhibits, Schedules and the other Transaction Agreements, constitutes the entire agreement among the Parties and supercedes all prior agreements and understandings, oral and written, between the Parties hereto, including without limitation, the Letter dated October 4, 2004 from Buyer and Seller. No Party shall be liable or bound to any other Party in any manner by any covenants or representations or warranties, express or implied, at common law, by statute or otherwise, except as specifically those representations, warranties and covenant set forth herein or in the Transaction Agreements and the Seller and its Subsidiaries hereby disclaim all implied warranties, including warranties of merchantability or fitness for a particular purpose.

11.10 Public Disclosures. Unless otherwise required by law, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement will be made by or on behalf of any Party without the prior approval of the other party. If in the judgment of either Party such a news release or public announcement is required by law, the Party intending to make such release or announcement shall provide prior notice to the other Party of the contents of such release or announcement and shall consult with the other Party with respect thereto.

11.11 Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement (or any counterpart hereof) may be delivered by a Party by facsimile, which facsimile delivery shall be effective as if the original counterpart had been delivered.

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11.12 Further Assurances. The Parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as of the date first above written.

AGILENT TECHNOLOGIES, INC.			FLEXTRONICS SALES AND MARKETING (A-P) LTD.
By:	/s/ Young Sohn		By:	/s/ Manny A/L Marimuthu
Name:	Young Sohn		Name:	Manny A/L Marimuthu
Title:	President		Title:
Seminconductor Products Group
Address:		Agilent Technologies, Inc.	Address:	Flextronics Sales and Marketing (A-P) Ltd.
		Semiconductor Products Group		Suite 802, St James Court, St. Denis Street,
		350 West Trimble Road MS		Port Louis, Mauritius
		90MG		Attention: Carrie L. Schiff, General Counsel
		San Jose, CA 95131
		Fax No.:
		Attention: General Manager
With a copy to:			With a copy to:
		Agilent Technologies, Inc.		Flextronics International USA, Inc.
		395 Page Mill Road, MS A3-10		2090 Fortune Drive
		Palo Alto, CA 94306		San Jose, California 95131
		United States of America		United States of America
		Fax No.: (650) 752-		Attention: Duncan Robertson
		Attention: General Counsel		Fax No.: (408) 428-0859
				And
				Davis Graham & Stubbs LLP
				1550 17th Street, Suite 500
				Denver, Colorado 80202
				United States of America
				Attention: Ronald R. Levine, II
				Fax No.: (303) 893-1379

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

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Exhibit A

Confidential Treatment Requested

under 17 C.F.R. §§ 200.80(b)(4),

200.83 and 240.24b-2

LICENSE AGREEMENT

This License Agreement (“Agreement”) is entered into and made effective on the Closing Date by and between Agilent Technologies, Inc., a Delaware corporation (“Agilent”) and Flextronics Sales and Mktg (A-P) Ltd., a Mauritius corporation (“Flextronics”). Agilent and Flextronics may each be referred to in this Agreement individually as “Party” and collectively as the “Parties”.

Whereas, in conjunction with this Agreement, Agilent is selling to Flextronics certain assets and IP licenses relating to Agilent’s camera module business under the terms of the separate Asset Purchase Agreement; and

Whereas, Agilent is willing to grant such IP licenses subject to the terms and conditions of this Agreement.

Now Therefore, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, Agilent and Flextronics agree as follows:

1. Definitions. The following capitalized terms shall have the meanings indicated for purposes of this Agreement:

1.1. “Affiliate” means, as to any person or entity, any other person or entity controlling, under common control with or controlled by such first-referenced person or entity. For purposes of this definition, “control” means direct or indirect beneficial ownership of more than 50% of the voting or income interest in the relevant business entity, or the contractual ability to direct the vote of more than 50% of the voting or income interest in such relevant business entity. Such a person or entity will be considered an Affiliate for only as long as such control exists.

1.2. “Agilent Camera Module Patents” means (i) any patents or patent applications listed in the attached Exhibit A, foreign counterparts thereof, any patent applications or patents claiming priority thereto, and any extension of any such patent and (ii) all inventions disclosures prepared on or before the Closing Date that are subsequently filed as patent applications and result in patents having claims that read on Camera Modules.

1.3. “Agilent IP Materials” means the items and materials of the Agilent Camera Module business, as summarized on Exhibit B.

1.4. “Asset Purchase Agreement” means the Asset Purchase Agreement between Agilent and Flextronics, entered into concurrently with this Agreement and to which this Agreement is attached as an exhibit. Any section or exhibit of the Asset Purchase Agreement that is referenced in this Agreement shall be deemed incorporated into this Agreement by reference.

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1.5. “Camera Module” means a module for capturing photographic or video type images. A Camera Module includes an Image Sensor, a lens, and an aperture and may include an IR filter and other additional components. For the avoidance of doubt, the combination of an Image Sensor and a lens and aperture is defined as a Camera Module regardless of the method of integration or combination.

1.6. “Cellular Telephone Handset” means a personal, portable, handheld device for human voice communication over a cellular network.

1.7. “Closing Date” has the meaning set forth in the Asset Purchase Agreement.

1.8. “Flextronics Field of Use” means Camera Module products that are configured and intended for inclusion in Cellular Telephone Handsets. The Flextronics Field Of Use includes Image Sensors only to the extent that they are made for Flextronics and are assembled by Flextronics into Camera Module products that are configured and intended for inclusion in Cellular Telephone Handsets.

1.9. “Image Processor” means a processor for correcting the output signal from an Image Sensor such as, for example, to demosaic, color balance, gamma correct or otherwise compensate the signal.

1.10. “Image Sensor” means a photosensitive silicon array having an analog or digital output. An Image Sensor may also include an on-board A/D converter and an Image Processor that is either on-board or separate.

1.11. “Third Party” means any party other than Flextronics or Agilent or an Affiliate of either of them.

2. Intellectual Property.

2.1. Patents. Agilent hereby grants to Flextronics and its Affiliates a personal, world-wide, non-exclusive, irrevocable (except that this license may be revoked in the event of an uncured breach by Flextronics), on last payment made under the Asset Purchase Agreement, fully paid up and transferable license (but transferable only to an entity that assumes substantially all of the assets of Flextronics’ Camera Module product line, and such assignee agrees to the terms of this agreement) under the Agilent Camera Module Patents to make (including the right to practice methods, processes and procedures), have made, have designed, use, lease, sell, offer to sell, and import products that incorporate a Camera Module.

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2.2. Copyrights. Agilent hereby grants to Flextronics and its Affiliates a personal, world-wide, non-exclusive, irrevocable (except that this license may be revoked in the event of an uncured breach by Flextronics), on last payment made under the Asset Purchase Agreement, fully paid up and transferable license (but transferable only to an entity that assumes substantially all of the assets of Flextronics’ Camera Module product line, and such assignee agrees to the terms of this agreement) under any copyright owned by Agilent or an Agilent Affiliate (whether registered or unregistered) that is embodied in a work of authorship that is included in copyright items delivered to Flextronics in the Agilent IP Materials. For the avoidance of doubt, the copyrights licensed hereunder includes the Agilent software used in the camera module business. Such license grants to Flextronics and its Affiliates the right, within the Flextronics Field Of Use, to use, reproduce, distribute, create derivative works of, and display such work of authorship. Flextronics shall not remove any copyright notices from any materials having a copyright notice thereon without the prior written permission of Agilent.

2.3. Mask Work Registrations. Agilent hereby grants to Flextronics and its Affiliates a personal, world-wide, non-exclusive, irrevocable (except that this license may be revoked in the event of an uncured breach by Flextronics), on last payment made under the Asset Purchase Agreement, fully paid up and transferable license (but transferable only to an entity that assumes substantially all of the assets of Flextronics’ Camera Module product line, and such assignee agrees to the terms of this agreement) under any mask work registration owned by Agilent or an Agilent Affiliate that protects a mask work that is included in the mask works delivered to Flextronics in the Agilent IP Materials. Such license grants to Flextronics and its Affiliates the right, within the Flextronics Field Of Use, to reproduce the mask work and to import or distribute semiconductor chip products in which the mask work is embodied.

2.4. Trade Secrets. Agilent hereby grants to Flextronics and its Affiliates a personal, world-wide, non-exclusive, irrevocable (except that this license may be revoked in the event of an uncured breach by Flextronics), on last payment made under the Asset Purchase Agreement, fully paid up and transferable license (but transferable only to an entity that assumes substantially all of the assets of Flextronics’ Camera Module product line, and such assignee agrees to the terms of this agreement) under any trade secret owned by Agilent or an Agilent Affiliate that is embodied in any item or information that is included in the trade secrets delivered to Flextronics in the Agilent IP Materials. Such license grants to Flextronics and its Affiliates the right to make (including the right to practice methods, processes and procedures), have madehave designed, use, lease, sell, offer to sell, and import products that incorporate a Camera Module.

2.5. Non-assert. In the event that Flextronics should source Image Sensors from Agilent, or an Agilent approved source, Agilent covenants that it will not assert any Agilent Camera Module Patents against Flextronics, its Affiliates, its suppliers, its customers, its distributors, dealers, agents, customers and users (whether direct or indirect).

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2.6. Trademarks. Agilent hereby grants to Flextronics and its Affiliates, for a period of five (5) years from the Closing Date, a personal, worldwide, non-exclusive and transferable license (but transferable only to an entity that assumes substantially all of the assets of Flextronics’ Camera Module product line, and such assignee agrees to the terms of this agreement) under any Agilent name or logo or part numbers (hereinafter “Marks”) in the Flextronics Field of Use, that is currently embodied in any Camera Module, or any portion thereof, or any Image Processor or Image Sensor that was developed by Agilent, or any existing customer documentation and presentation materials, as well as existing internal reference documentation. For the avoidance of doubt, no Internet domain names, web sites, or meta tags are licensed hereunder.

(i) Flextronics acknowledges and agrees that it is not authorized under this Agreement to apply the Marks to any products or parts manufactured with manufacturing equipment or molds not provided to Flextronics by Agilent, or to any documentation not provided by Agilent, or to any advertising, or other materials connected with the Camera Module business.

(ii) Flextronics may distribute documentation that bears the Marks until December 31, 2005 so long as such documentation bears a prominent sticker on the front cover identifying Flextronics as the source of such documentation and stating that references to Agilent in such documentation should be interpreted as references to Flextronics.

Trademark License Restrictions

(iii) Once Flextronics abandons the use of all Marks on a particular product, then Flextronics agrees that the license granted hereunder with respect to that product shall thereupon terminate.

a) Flextronics may not make any use whatsoever, in whole or in part, of the Marks, or any other mark owned by Agilent, in connection with Flextronics corporate, doing business as, or fictitious name without the prior written consent of Agilent.

b) Flextronics may not use any Mark in direct association with another mark such that the two appear to be a single mark or in any other composite manner with any Marks of Flextronics or any Third Party.

c) In all respects, Flextronics’ usage of the Marks pursuant to the license granted hereunder shall be in a manner consistent with the Trademark Usage Guidelines to the extent commercially reasonable, and any usage by Flextronics that is inconsistent with the foregoing shall be deemed to be outside the scope of the license granted hereunder. As a condition to the

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license granted hereunder, Flextronics shall at all times present, position and promote the Camera Modules marked with one or more of the Marks in a manner consistent with the Trademark Usage Guidelines to the extent commercially reasonable.

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(iv) Trademark Usage Guidelines

a) Flextronics shall use the Marks only in a manner that is consistent with the Trademark Usage Guidelines [Agilent Web Site].

c) TRADEMARK REVIEWS. At Agilent’s reasonable request, Flextronics agrees to furnish or make available for inspection to Agilent one or more reasonable number of samples of Camera Modules and collateral materials of Flextronics that are marked with one or more of the Marks If Flextronics is notified or determines that it or any of its Affiliates is not complying with any Trademark Usage Guidelines, it shall notify Agilent in writing.

(v) Trademark Usage Guideline Enforcement. If Agilent becomes aware that Flextronics or any of its Affiliates is not complying with any Trademark Usage Guidelines, Agilent shall notify Flextronics in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Flextronics shall then have thirty (30) days after receipt of such notice to correct such noncompliance or submit to Agilent a commercially reasonable written plan to correct such noncompliance which written plan is reasonably acceptable to Agilent.

(vi) Quality Standards. Flextronics acknowledges Agilent’s representation that the Camera Modules and collateral material permitted by this Agreement to be marked with one or more of the Marks must continue to be of sufficiently high quality as to provide protection of the Marks and the goodwill they symbolize, and Flextronics further acknowledges Agilent’s representation that the maintenance of the high quality standards associated with such products is of the essence of the license to the Marks.

(vii) Quality Control Reviews. At Agilent’s reasonable request, Flextronics agrees to furnish or make available to Agilent for inspection one or more reasonable number of sample Camera Module and collateral materials marked with one or more of the Marks. If Flextronics is notified or determines that it or any of its Affiliates is not complying with any Trademark Usage Guidelines, it shall notify Agilent in writing.

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a) Initial Cure Period. If Agilent becomes aware that Flextronics or any of its Affiliates are not complying with any quality standards consistent with those in the cell phone industry, Agilent shall notify Flextronics in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Following receipt of such notice, Flextronics shall make an inquiry promptly and in good faith concerning each instance of noncompliance described in the notice. Unless Flextronics reasonably determines that the noncompliance described in the notice is not, in fact, a material deviation from the applicable quality standards, and so notifies Agilent in writing within fourteen (14) days of receipt of such notice, Flextronics shall then have thirty (30) days after receipt of such notice to correct such noncompliance or submit to Agilent a reasonable written plan to correct such noncompliance which written plan is reasonably acceptable to Agilent.

(viii) Protection Of Marks

a) OWNERSHIP AND RIGHTS. Flextronics agrees not to challenge the ownership or validity of the Marks. Flextronics shall not disparage, dilute or adversely affect the validity of the Marks. Flextronics’ use of the Marks shall inure exclusively to the benefit of Agilent, and Flextronics shall not acquire or assert any rights therein. Flextronics recognizes Agilent’s representation that the value of the goodwill associated with the Marks, and that the Marks may have acquired secondary meaning in the minds of the public.

b) PROTECTION OF MARKS. Flextronics shall assist Agilent, at Agilent’s request and expense, in the procurement and maintenance of Agilent’s intellectual property rights in the Marks. Flextronics will not grant or attempt to grant a security interest in the Marks, or to record any such security interest in the United States Patent and Trademark Office or elsewhere, against any trademark application or registration belonging to Agilent. Flextronics agrees to, and to cause Affiliates to, execute all documents reasonably requested by Agilent to effect further registration of, maintenance and renewal of the Marks, recordation of the license relationship between Agilent and Flextronics, and recordation of Flextronics as a registered user. Agilent makes no warranty or representation that trademark registrations have been or will be applied for, secured or maintained in the Marks throughout, or anywhere within, the world. Flextronics shall cause to appear on all Camera Modules and collateral materials, such reasonable legends, markings and notices as may be required by applicable law or reasonably requested by Agilent.

d) SIMILAR MARKS. Flextronics agrees not to use or register in any country any Mark that infringes Agilent’s rights in the Marks. If any application for registration is, or has been, filed in any country by Flextronics which relates to any Mark that infringes Agilent’s rights in the Marks, Flextronics shall immediately abandon any

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such application or registration or assign it to Agilent. Flextronics shall not challenge Agilent’s ownership of or the validity of the Marks or any application for registration thereof throughout the world. Flextronics shall not use or register in any country any copyright, domain name, telephone number or any other intellectual property right, whether recognized currently or in the future, or other designation which would affect the ownership or rights of Agilent in and to the Marks, or otherwise to take any action which would adversely affect any of such ownership rights, or assist anyone else in doing so. Flextronics shall cause its Affiliates to comply with the provisions of this Paragraph.

d) Neither party or any of its Affiliates, is obligated to: (a) file any application for registration of any Mark, or to secure any rights in any Marks, (b) to maintain any Mark registrations, or (c) to provide any assistance, except for the obligations expressly assumed in this Agreement.

2.7. Nothing in this agreement shall be construed as imposing on Agilent any obligation to institute any suit or action for infringement of any of the intellectual property licensed hereunder, or to defend any suit or action brought by a third party which challenges or concerns the validity of any of the licensed Intellectual Property, nor impose a requirement that either party file any patent or copyright application or obtain any patent or copyright registration, or maintain any of the foregoing.

2.8. Pre-Existing IP. Both Parties shall retain all of their pre-existing intellectual property rights and this Agreement shall not be deemed or construed to transfer ownership of any such pre-existing intellectual property.

2.9. Release For Past Patent Infringement. Agilent hereby releases Flextronics its Affiliates, and its customers from any claims that Agilent or an Agilent Affiliate may have for infringement of an Agilent Camera Module Patent owned by Agilent or an Agilent Affiliate to the extent that such claim arises out of activities by Flextronics or a Flextronics Affiliate or its customers for the manufacture, use, sale, offer for sale, import, or export of products containing Camera Modules before the Closing Date.

2.10. Indemnification By Flextronics. Except for any of the following that are Agilent Retained Liabilities or are Agilent’s indemnification or other obligations under the Asset Purchase Agreement, Flextronics agrees to defend, indemnify and hold harmless Agilent and its Affiliates, employees, agents, officers, and directors from and against any judgments, settlements, damages, awards, costs (including attorneys’ fees and costs) and other expenses arising out of any claims, actions or other proceedings by a Third Party alleging that, after the Closing Date, Flextronics or a Flextronics Affiliate’s conduct of its camera module business based on the intellectual property licensed hereunder infringes or has misappropriated a Third Party intellectual property.

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2.11. The obligations set forth in this section shall survive the expiration or termination of this Agreement.

2.12. Non-Enablement. For a period of five (5) years from the Closing Date, Agilent agrees that it will not license the Agilent Camera Module Patents and trade secrets, as a group, to a third party for the primary purpose of enabling that third party in the field of Camera Modules. Provided however, in the event that Agilent licensed these patents for the purpose of avoiding or settling any intellectual property infringement or misuse litigation or threat of litigation, such license is permitted hereunder. For the avoidance of doubt, Agilent may license the Agilent Camera Module Patents, as a part of patent license or cross-license wherein the Agilent Camera Module Patents are not licensed primarily to enable a third party in Camera Modules, even though an affect is to enable such a third party in the field of Camera Modules. In addition, the optical mouse sensor or the optical mouse sensor business, shall not be deemed to be within the scope of Camera Modules.

2.13. License of Other Intellectual Property.

In the event that Flextronics and Agilent reasonably determine that Agilent has failed to license intellectual property of the camera module business to Flextronics under this Agreement, which intellectual property existed at the Closing Date, and which intellectual property is necessary or was used in the operation of the Camera Module Business, then consistent with the license terms herein, Agilent shall license such intellectual property to Flextronics. Agilent shall have no such duty to license any improvements made to such intellectual property if such improvements were made after the Closing Date.

2.14. Agilent agrees that it will use good faith efforts to maintain the Agilent Camera Module Patents in accordance with its past practices, and Agilent shall not be in violation of this Section 2.14 for inadvertently missing a maintenance fee or report deadline with respect to the Agilent Camera Module Patents, unless Flextronics has provided thirty (30) days prior written notice of any such deadline.

2.15. Excluded Warranties.

Nothing in this Agreement is or shall be construed as (i) a warranty that anything made, used, sold or otherwise disposed of under any license granted under this Agreement is or will be free from infringement or misappropriation of patents, copyrights, trade secrets and other rights of third parties; or, (ii) a warranty or representation by either Party as to the validity or scope of any patent, patent application or other intellectual property right, except that Agilent warrants that it has the right to grant the license hereunder made. Notwithstanding the foregoing, nothing herein is intended to or shall be deemed to limit any representations or warranties made by Agilent in the Asset Purchase Agreement.

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2.16. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR THE ASSET PURCHASE AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR REGARDING INFRINGEMENT OR MISAPPROPRIATION OF ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK, OR ANY OTHER RIGHT OF A THIRD PARTY, OR ANY OTHER EXPRESS OR IMPLIED WARRANTY.

2.17. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (i) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN IS INTENDED TO OR SHALL BE DEEMED TO LIMIT ANY OBLIGATIONS OF AGILENT OR FLEXTRONICS IN THE ASSET PURCHASE AGREEMENT.

3. Term And Termination.

3.1. Term. The term of this Agreement shall commence upon the Closing Date and shall expire as of the date of the last to expire patent of the Agilent Camera Module Patents.

3.2. Termination And Effect. The licenses granted herein may be terminated before the end of the term in the event that Flextronics fails to cure a material breach of the terms of Section 2, Intellectual Property, within sixty (60) days of receiving written notice of such breach.

4. General Provisions.

4.1. Amendments. No amendment, change, modification or alteration of the terms and conditions of this Agreement shall be binding upon either Party unless in writing and signed by both Parties.

4.2. Assignment. This Agreement is not assignable by either Party without the prior written consent of the other Party. However, such other Party will not unreasonably withhold such consent if the assignment is to a successor to substantially all of the business of such Party to which this Agreement relates, whether in merger, sale of stock, sale of assets or other transaction.

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4.3. Choice Of Law. The choice of law provisions of the Asset Purchase Agreement are hereby incorporated by reference.

4.4. Confidentiality. The confidentiality provisions of the Asset Purchase Agreement are hereby incorporated by reference.

4.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

4.6. Entire Agreement. This Agreement, including the attached exhibits, constitutes the entire understanding between the Parties with respect to the subject matter contained herein and supersedes any and all prior agreements, understandings and arrangements whether oral or written relating to the subject matter hereof.

4.7. Force Majeure. Neither party will be held liable to the other for any delay or failure of performance where such delay or failure results from events beyond that party’s control, including without limitation acts of God, earthquakes, fires, floods, civil disturbance, strikes, labor disputes, and lawful governmental action..

4.8. Headings. The headings appearing in this Agreement have been inserted solely for the convenience of the Parties and shall not affect the construction, meaning or interpretation of this Agreement or any of its terms and conditions.

4.9. Independent Contractors. Both Parties are independent contractors and are engaged in the operation of their own respective businesses, and neither Party is to be considered the agent or partner of the other Party for any purpose whatsoever. Neither Party has any authority to enter into any contracts or assume any obligations for the other Party or to make any warranties or representations on behalf of the other Party.

4.10 Non-Waiver. The waiver by either of the Parties of any breach of any provision hereof by the other Party shall not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself.

4.11 Notices. The notice provisions of the Asset Purchase Agreement are hereby incorporated by reference.

4.12 Partial Invalidity. If and to the extent that any court or tribunal of competent jurisdiction holds any of the terms or provisions of this Agreement, or the application thereof to any circumstances, to be invalid or unenforceable in a final nonappealable order, the Parties shall use their best efforts to reform the portions of this Agreement declared invalid to realize the intent of the parties as fully as practicable, and the remainder of this Agreement and the application of such invalid term or provision to

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circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each of the remaining terms and provisions of this Agreement shall remain valid and enforceable to the fullest extent of the law.

In Witness Whereof, the Parties have caused this Agreement to be executed by their duly authorized representatives.

Agilent Technologies, Inc.	Flextronics Sales and Mktg (A-P) Ltd
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

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Confidential Treatment Requested

EXHIBIT A

AGILENT CAMERA MODULE PATENTS

Case Number	Sub Case	Ctry	Appn Status	Appn Number	Pubn Number	Patent Number	Appn Title
10003645	01	US	Published	10/087278	0165023		Telecentric Singlet Having A Small Height Requirement
10003645	02	JP	Published	P2003-049158	2003262791		Telecentric Singlet Having A Small Height Requirement
10003645	03	EP	Published	02023492.8	1353207		Telecentric Singlet Having A Small Height Requirement
10003971	02	JP	Published	P2001-307448	2002152596		System Solution For Amorphous LAG Problem
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10003971	05	TW	Granted	90120731	552799	186863	System Solution For Amorphous LAG Problem
10003971	06	DE	Granted	01121187.7	1195987	60102540.7	System Solution For Amorphous LAG Problem
10003971	07	FR	Granted	01121187.7	1195987	1195987	System Solution For Amorphous LAG Problem
10003971	08	GB	Granted	01121187.7	1195987	1195987	System Solution For Amorphous LAG Problem
10004419	01	US	Granted	09/919562		6435882	A Socketable Flexible Circuit Based Electronic Device Module And A Socket For The Same
10004419	02	JP	Published	P2002-219387	2003133021		A Socketable Flexible Circuit Based Electronic Device Module And A Socket For The Same
10004419	03	TW	Granted	91103451	530437	177672	A Socketable Flexible Circuit Based Electronic Device Module And A Socket For The Same
10004419	04	EP	Pending	02013011.8	1280240		A Socketable Flexible Circuit Based Electronic Device Module And A Socket For The Same

*

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Confidential Treatment Requested

[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10011231	02	US	Published	10/260186	0032523		CMOS Image Sensor Using Gradient Index Chip Scale Lenses
10011231	03	JP	Published	P2003-293248	2004080039		CMOS Image Sensor Using Gradient Index Chip Scale Lenses
10011231	04	EP	Pending	03007806.7	1389804		CMOS Image Sensor Using Gradient Index Chip Scale Lenses
10011280	01	US	Granted	10/184154	0002179	6744109	Glass Attachment Over Micro-lens Arrays
10011280	02	JP	Published	P2003-146149	2004031939		Glass Attachment Over Micro-lens Arrays
10011280	03	GB	Published	0312936.8	2391707		Glass Attachment Over Micro-lens Arrays
10011280	04	US	Granted	10/634594	0036069	6794218	Glass Attachment Over Micro-lens Arrays
10020062	01	US	Published	10/266538	0066463		Multifunction Lens
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Agilent & Flextronics Confidential

Page 14 of 17

Confidential Treatment Requested

[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
[  * ]	[  * ]	[  * ]	[  * ]				[  * ]
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10970902	01	US	Granted	09/139692		6037641	An Optical Device Package Including An Aligned Lens (As Amended)
10982203	01	US	Granted	09/183143		6593961	A Test Efficient Method Of Classifying Image Quality Of An Optical Sensor Using Three Categories Of Pixels
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10982203	03	EP	Published	99115492.3	0997845		Test Efficient Method Of Classifying Image Quality Of An Optical Sensor Using Three Categories Of Pixels
10990726	02	US	Granted	09/717185		6683298	Image Sensor Packaging With Package Cavity Sealed By The Imaging Optics
10990995	01	US	Granted	09/356560		6326601	Optical Barrier
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10990995	04	DE	Published	10033144.0	10033144		Optical Barrier
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
10991727	01	US	Granted	09/513797		6396116	Integrated Circuit Packaging For Optical Sensor Devices
[  * ]	[  * ]	[  * ]	[  * ]	[  * ]			[  * ]
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Agilent & Flextronics Confidential

Page 15 of 17

EXHIBIT B

EXISTING AGILENT IP MATERIALS

(1) Image capture/Image sensor/Camera Module Materials:

• External Reference specifications and technical manuals

• Application notes

• Customer support materials

• Sales training materials

• Final test specifications and code for camera module functions

• Image pipe calibration tools

(2) Embedded Module Auto-function Control Firmware (e.g., auto exposure, auto white balance):

• Source code

• Related documentation

(3) Config files (text files for configuring product operation):

• Preferred config file for each module

• Customer specific config files that may exist

(4) ROM for image sensor timing:

• hardware and firmware for controlling image timing

(5) Sample driver code

• Code useful to customers writing drivers to allow hardware to communicate with a camera module

(6) Demo board/application code (PC interface to display camera module images for test):

• Board layout

• schematics

• hardware design notes

• software design notes

• application software

• customer documentation

Agilent & Flextronics Confidential

Page 16 of 17

(7) Camera module opto-mechanical design:

• Mechanical specifications, design documents and computer models

• Optical specifications, design documents, and computer models

• Flex design documents, specifications, and design rules

• Manufacturing process flow description

• Assembly and inspection specifications

• Final test code, test equipment specifications, and CM specifications

Agilent & Flextronics Confidential

Page 17 of 17

EX-12.1

EXHIBIT 12.1

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our ratio of earnings to fixed charges for the periods indicated.

	Years Ended October 31,
	2004		2003		2002		2001		2000		1999		1998
Ratio of earnings to fixed charges	5.7	x	(a	)	(a	)	(a	)	31.8	x	14.6	x	6.5	x

(a) In fiscal year 2003, 2002 and 2001, our ratio of earnings to fixed charges was less than one to one due to our loss from operations in those periods. In order to cover fixed charges in those periods, our earnings from operations would have had to increase by $690 million, $1,547 million and $477 million, respectively.

For purposes of determining the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness and that portion of operating lease rental expense that is a reasonable approximation of the interest factor.

EX-21.1

Exhibit 21.1

SIGNIFICANT SUBSIDIARIES

	Organized Under the Laws of
Agilent Technologies World Trade, Inc.	Delaware
Agilent Technologies Sales & Services GmbH & Co. KG	Germany
Agilent Technologies R&D and Marketing GmbH & Co. KG	Germany
MV Research Limited	Ireland
Agilent Technologies Mauritius Limited	Mauritius
Objective Systems Integrators, Inc.	Delaware
Agilent Technologies Netherlands B.V.	Netherlands
Agilent Technologies Inter-Americas, Inc.	Delaware
Agilent Technologies Brasil Ltda.	Brazil
Agilent Technologies Europe B.V. (Holding)	Netherlands
Agilent Technologies Spain S.L.	Spain
Agilent Technologies Europe B.V. Meyrin Branch	Switzerland
Agilent Technologies Leman S.A.R.L.	Switzerland
Agilent Technologies Australia Pty Ltd	Australia
Agilent Technologies Shanghai Company Limited	China
Agilent Technologies International Japan Ltd	Japan
Agilent Technologies Taiwan Ltd.	Taiwan
Agilent Technologies Belgium S.A./N.V.	Belgium
Agilent Technologies Canada Inc.	Canada
Agilent Technologies Korea Limited	South Korea
Agilent Technologies U.K. Limited	England & Wales
Agilent Technologies Ireland Limited	Ireland
Agilent Technologies Italia S.p.A.	Italy
Agilent Technologies Microwave Products (M) Sdn. Bhd.	Malaysia
Agilent Technologies Mexico, S.de R.L. de C.V.	Mexico
Agilent Technologies International B.V.	Netherlands
Agilent Technologies Netherlands Investments B.V.	Netherlands
Agilent Technologies Singapore (Sales) Pte Ltd	Singapore
Agilent Technologies Singapore Vision Operation Pte Ltd	Singapore
Agilent Technologies (Thailand) Limited	Thailand
Agilent Technologies (Barbados) limited	Barbados
Agilent Technologies France S.A.S	France
Agilent Technologies Japan, Ltd.	Japan
Yokogawa Analytical Systems, Inc.	Japan
Agilent Technologies Company Limited	China
Agilent Technologies Cayman Islands Inc.	Cayman Islands
Agilent Technologies SARL	Switzerland
Agilent Technologies (Malaysia) Sdn. Bhd.	Malaysia
Agilent Technoloiges International SARL	Switzerland
Agilent Technologies Coordination Center S.C./C.V.	Belgium
Agilent Technologies Deutschland Holding GmbH	Germany
Agilent Technologies Deutschland Alpha GmbH	Germany
Agilent Technologies Sanigi B.V.	Netherlands
Agilent Technologies Deutschland GmbH	Germany
Agilent Technologies Ireland Finance Limited	Ireland
Agilent Technologies Deutschland GmbH & Co. Immobilien KG	Germany

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the following Registration Statements on Form S-8 of Agilent Technologies, Inc. of our report dated December 17, 2004, relating to the consolidated financial statements, which appears in this Form 10-K.

Registration Statement No. 333-91121

Registration Statement No. 333-35016

Registration Statement No. 333-38080

Registration Statement No. 333-38194

Registration Statement No. 333-47024

Registration Statement No. 333-88864

Registration Statement No. 333-116400

/s/ PricewaterhouseCoopers LLP

San Jose, California

December 17, 2004

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Edward W. Barnholt, certify that:

1. I have reviewed this Form 10-K of Agilent Technologies, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 21, 2004	/s/    EDWARD W. BARNHOLT
	Edward W. Barnholt
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Adrian T. Dillon, certify that:

1. I have reviewed this Form 10-K of Agilent Technologies, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 21, 2004	/s/    ADRIAN T. DILLON
	Adrian T. Dillon
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Agilent Technologies, (the “Company”) on Form 10-K for the period ended October 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward W. Barnholt, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: December 21, 2004	/s/    EDWARD W. BARNHOLT
	Edward W. Barnholt
	Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Agilent Technologies, (the “Company”) on Form 10-K for the period ended October 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Adrian T. Dillon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: December 21, 2004	/s/    ADRIAN T. DILLON
	Adrian T. Dillon
	Executive Vice President and Chief Financial Officer