Alicia Rodriguez William P. Sullivan - Chief Executive Officer, Executive Director and Member of Executive Committee Didier Hirsch - Chief Financial Officer and Senior Vice President Guy Sene - Senior Vice President and President Electronic Measurement Group Nicolas H. Roelofs - Senior Vice President and President of Life Sciences Group Michael R. McMullen - Senior Vice President and President of Chemical Analysis Group Lars Holmkvist - Senior Vice President and President of Diagnostics & Genomics Group

Jon Davis Wood - Jefferies & Company, Inc., Research Division Doug Schenkel - Cowen and Company, LLC, Research Division Daniel Brennan - Morgan Stanley, Research Division Jonathan P. Groberg - Macquarie Research Tycho W. Peterson - JP Morgan Chase & Co, Research Division Ross Muken - ISI Group Inc., Research Division Isaac Ro - Goldman Sachs Group Inc., Research Division Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division Amit Bhalla - Citigroup Inc, Research Division Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division Mark Douglass - Longbow Research LLC Derik De Bruin - BofA Merrill Lynch, Research Division Charles Anthony Butler - Barclays Capital, Research Division Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Agilent Technologies Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Alicia Rodriguez, Vice President of Investor relations. Please proceed.

Thank you, Derek, and welcome, everyone, to Agilent's Fourth Quarter Conference Call for Fiscal Year 2012. With me are Agilent's CEO, Bill Sullivan, as well as Senior Vice President and CFO, Didier Hirsch. Joining in the Q&A after Didier's comments will be Agilent's President and Chief Operating Officer, Ron Nersesian. Also joining are the presidents of our Electronic Measurement, Life Sciences, Chemical Analysis and Diagnostics and Genomics Groups, Guy Sene, Nick Roelofs, Mike McMullen and Lars Holmkvist. You can find the press release and information to supplement today's discussion on our website at www.investor.agilent.com. While there please click on the link for financial results, where you will find revenue breakouts, business segment results and historical financials for Agilent's operations. We will also post a copy of the prepared remarks following this call. Bill and Didier's comments today will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. We will make forward-looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. And now, I'd like to turn the call over to Bill. William P. Sullivan: Thanks, Alicia, and hello, everyone. For Agilent's fiscal fourth quarter, orders were flat year-over-year, while Q4 revenues were up 2% over last year. Operating margin was almost 22%, and non-GAAP EPS was $0.86 per share. The headline for this quarter is that most of our end markets remain soft. As a result of executing on our operating model we improved gross margins, tightly controlled our expenses to deliver a record non-GAAP operating profit, exceeded our EPS guidance and strengthened our balance sheet as a result of excellent free cash flow. We are pleased with our financial results for the quarter, as we have rebounded from our Q3 earnings miss. In regards to end markets, Q4 played out as predicted. Fourth quarter revenue, excluding Dako, was flat compared to Q3. Electronic Measurement revenues declined 5% over last year. Communication markets were down in high-single digits with softness in R&D and manufacturing. Aerospace and defense spending was down 2% year-over-year. All of our Chemical Analysis markets remained soft except for Forensic, testing for drugs of abuse, with overall business revenues down 3% year-over-year. Our Life Science business was flat compared to previous year as we continue to see positive growth for Pharma and continued weakness in academic and research. Overall organic growth in our new Diagnostics and Genomics business was slightly up year-over-year. Dako met its fourth quarter revenue plan and continues to deliver on our expectations. Looking ahead for the fiscal -- full fiscal year 2013, Agilent expects revenue of $7 billion to $7.2 billion and non-GAAP earnings of $2.80 to $3.10 per share. Forecasting the outlook for FY '13 is difficult, especially in the face of a potential U.S. financial or fiscal cliff. However, we would like to share the thinking that supports our FY '13 guidance. First, we're assuming there will be no new financial crisis in the United States or Europe. However, continued uncertainty will dampen demand until the second half of our fiscal year. Second, Agilent will face higher pension expenses and the traditional increases in compensation and benefits. These costs will be less easily absorbed in a slow growth environment. We continue to deliver on our ambitious manufacturing cost improvement plan. However, we're also facing price competition again because of the current slow growth environment. Overall, we are forecasting an FY '13 core revenue growth rate in the range of plus or minus 1.5%. Total reported revenue growth, including the impact of acquisitions, is expected to be in the 2% to 5% range. In regards to business segments, we're forecasting a 1% to 3% decline in our Electronic Measurement business. We are not counting on increased investments in cellular infrastructure in the first half. Our Chemical Analysis and Life Science businesses will be flat to up to 3% with no fundamental changes in end markets. For our Diagnostics and Genomics business, core growth to be in the range of 3% to 7%, with Dako growing around 3 -- 6%. Finally, we will continue our investments in R&D. We will ensure that we continue to meet customers' needs with innovative and cost-effective solutions to solve their most critical measurement challenges. Thank you for being on the call, and now I'll turn it over to Didier.

Thank you, Bill, and hello, everyone. As Bill stated, we are quite pleased with our fourth quarter results. Revenues were in line with our guidance, and our operating margin reached a record high of 21.7%, a noteworthy performance in a challenging economic environment. We delivered substantial sequential and year-over-year improvements in gross margin, thanks to varying cost synergies and other cost-saving programs in CAG and LSG. We also maintained the strict operating expense controls implemented 6 months ago. Reflecting on our performance for the full year, we reached a record 20.2% operating margin on 2.5% core revenue growth. Our core revenue growth was close to the low end of the guidance we provided in November of last year, but our all-time high $3.12 EPS, including $0.04 from Dako standalone, was $0.12 above the low end of the guidance. We generated over $1.2 billion in operating cash flow, $100 million more than the guidance provided 1 year ago. Now turning to the guidance for fiscal year 2013. As Bill stated, our fiscal year '13 revenue guidance of $7 billion to $7.2 billion assumes the economy will muddle through in the first half of our fiscal year and pick up moderately in the second half. We do not assume a fiscal cliff scenario, but do expect stringent government spending. The $2.80 to $3.10 EPS guidance takes into account year-over-year increases in compensation and benefits of $100 million, as well as an increase in sales commissions of $15 million as quarters are being reset, offset by variable pay reduction, cost synergies and the incremental Dako standalone operating profit contribution of about $30 million. At the low end of the revenue guidance, one would also expect a tougher price environment. As you update your models for fiscal year '13, please consider the following. Annual salary increases will be effective December 1, 2012. Stock-based compensation will be about $90 million compared to $76 million in fiscal year '12. And as we front-load the recognition of stock-based compensation, the Q1 expense will be about $32 million. Pension expenses will grow from $70 million in fiscal year '12 to $85 million in fiscal year '13. Depreciation is projected to be $195 million for the fiscal year. Net interest expense is forecasted at $95 million, and other income at $15 million. The non-GAAP effective tax rate is assumed to remain at 16% and the diluted share count at 355 million shares. And we expect operating cash flow of $1.25 billion and capital expenditures of $220 million. Now finally moving to the guidance for our first quarter. We expect Q1 revenues of $1.68 billion to $1.70 billion and EPS of $0.65 to $0.67. As a reminder, we typically see EPS decline materially from Q4 to Q1 because of the impact of the December salary increase, front-loading of stock-based compensation and the increase in payroll taxes due to disbursement of the variable incentive pay of the previous semester. With that, I'll turn it over to Alicia for the Q&A.

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

[Operator Instructions] And our first question is coming from the line of Jon Wood from Jefferies. Jon Davis Wood - Jefferies & Company, Inc., Research Division: So, Bill, obviously we've got 4 more years here to look forward to of somewhat less accommodating tax policy. At what point does the board -- do you sit down and rip the Band-Aid off, so to speak, so you can put in place kind of a more formulaic capital deployment plan given your tax situation today? William P. Sullivan: Well, I think that our fundamental tenets in terms of looking on capital deployment has not changed. Our #1 priority continues to be investing in the businesses as we have done. Secondly is to tax effectively, return excess cash to the shareholders. We've done that through stock repurchase, as well as paying for a dividend. And so I don't believe that there'll be any fundamental change whatsoever. And I don't understand why one would deliberately not maximize your balance sheet to ensure the health and -- the health of the company going forward. Jon Davis Wood - Jefferies & Company, Inc., Research Division: Understood. So, Didier, why not put in more of a buyback or a capital deployment event to 2013? From what I understand, you've got some $500 million or so coming back tax efficiently. What have you assumed in terms of your marketing that U.S. cash for next year?

Yes, I mean we intend to continue on the kind of programs that we've had since the last 3 years. As a reminder, in fiscal year '10, we bought back $411 million of shares, fiscal '11 $497 million, this year $172 million. We've maintained our basic share count of 346 million shares. We do have opportunities, potentially to bring -- to put some of the money we did bring back, by the way, on November 5 as permitted to good use in the U.S. through potentially acquisitions, small acquisitions. We spend about $200 million every year on small acquisitions, and we will continue to do regular buybacks as per above the average of what we have done in the last 3 years. So we will put the $500-plus million to Q3. In terms of the projected share count, I mean it's always difficult. It's so much influenced by the stock price, and I think it's difficult to [indiscernible], so it's just what to -- what we think, I mean it's just a nice round number. William P. Sullivan: And the board fully supports our fundamental position that we will remain investment grade. We will make prudent acquisitions to drive success for the company. We'll do everything possible to tax effectively return excess cash to the shareholders.

The next question is coming from the line of Doug Schenkel from Cowen & Company. Doug Schenkel - Cowen and Company, LLC, Research Division: It appears that you are guiding us to model about 100 to 150-basis-point decline in the operating margin, is that right, Didier? And if so, is that all mix? And some of the other items that you called out on the call, are there areas of -- other areas that we should be thinking about where you are making investments this year?

Yes, I mean, the -- we are -- in the range that we have provided, at the low end -- at the high end of the range, we are pretty much aligned with kind of gross margins -- I mean, this year's results. But at the low end yes, indeed, that assumes that there will be a tougher pricing environment and a corresponding potential hit to the bottom line. William P. Sullivan: Fundamentally, at essentially 0 organic growth rate being the middle of our range, we're not going to get the leverage. We felt at this point in time, given the economic uncertainty, that to make any sort of restructuring charge to make up the difference is not prudent. Secondly, to back away from our investment in emerging markets, to back away from the investment we're making in Dako, to back away from any investment we're making in research and development is not the prudent thing to do. We are having very, very solid forecast in uncertain economic times and I believe that we not only need to be well positioned today, we need to make sure that we're well positioned for the future. Doug Schenkel - Cowen and Company, LLC, Research Division: Okay. That's all very helpful. And one follow-up. How did the expectations that you factored into 2013 guidance for Dako compare to those outlined at the time you closed the acquisition? Specifically, is the deal tracking below plan, ahead of plan? I think you had talked about moving towards market growth and for revenue of $0.33 in the -- or so or above $0.30 in the first full year of revenue. We're about a quarter and a half into that. So just wondering what you factored into guidance.

So the fundamental core business of Dako continues right on plan. We continue to make the investment in Asia. Those revenues are slightly behind plan. The investment in selling SureFISH through their product line is going well in terms of number of customers. We're not quite yet getting a high enough reorder rate to hit the -- linearly on track to what we had said. We obviously have lots of time ahead of us. This is going to be a multi-year effort to be able to drive the value of Dako. But we are very, very pleased with the progress that we've made today, very pleased with the integration. And as I said, the core business of Dako continues to recover as originally outlined.

The next question is coming from the line of Daniel Brennan from Morgan Stanley. Daniel Brennan - Morgan Stanley, Research Division: Just wanted to ask you about -- Bill, you're kind of down 1.5% to plus 1.5% for DD&A kind of guidance for fiscal '13. What type of environment, I know that you envision, I know you lay that quantitatively, but it seems to be still kind of a breakage maybe with the model in terms of the economic growth and what type of organic growth you would achieve versus that? I'm just trying to kind of reconcile the 2. William P. Sullivan: Well, it's very, very difficult to give guidance in this environment right now. We often joke it’d be a lot better to give guidance after decisions were made on Washington and how the financial cliff was going to be dealt with. But what we have done with each of the group presidents and Ron have gone to -- into each one of the groups, market-by-market to try to make a balance estimate of where we see the overall business. We believe that with the political uncertainty in Europe and the U.S., that you're going to see a pretty flat growth rate. People are hesitating. It's a model forward, as Didier said. And so as a result of that, you give the pluses and minuses of our market segments, which really haven't changed in Q3. You can easily come into an environment of relatively low growth. Our operating model obviously doesn't get the incremental when you're outside of our range or bottom end of our range of 4%. And then the question comes in as do you restructure the company now to force ourselves back into the model or do we continue making the right investment for the future. And we have made the decision to continue to make the proper investments to the future while continually to focus on improving our manufacturing cost of sales or manufacturing footprint and overall productivity. Daniel Brennan - Morgan Stanley, Research Division: Great. And maybe just one related to that. Just in terms of EMG specifically, which you think that was the big fear in the quarter, but it looks like it kind of came in close to kind of expectations. Can you just set the pace of what you saw throughout the quarter, maybe as you ended the quarter, the down 7% in orders, just kind of what do you -- kind of how are you thinking about that going forward?

I'll have Guy respond to that question.

Well, we had a bit of state defense, as we expected sequential growth over last quarter but still under last year. And in general, all our market segment were low. Remember, the overall communication industry is lower in Q4, and that's what we -- what happened in this last quarter or so. So very consistent with our expectation. Daniel Brennan - Morgan Stanley, Research Division: Okay, in terms of the orders down 7%, that was, I mean that wasn't -- I mean that kind of was consistent with the way you guys were seeing in the world?

Yes. William P. Sullivan: As Guy alluded to, a lot of the orders and revenue that we have recognized tends to be ahead of the holiday season, and the team has done a great job of delivering those orders. And typically, you will see it soft in Q4 and potentially soft in Q1, depending what the inventory carryover is from the holidays. Daniel Brennan - Morgan Stanley, Research Division: Maybe just one more to sneak in. Didier, on the pension expense, can you just kind of highlight specifically, I know you kind of called that out, but how much does that factor in to kind of the $2.80 to $3.10? How should we think about that increased kind of investment in the pension plan?

So in terms of the -- I mean, we are very well funded overall with our pension plan. But we were impacted by a significant reduction year-over-year on discount rates, which basically imply that our liabilities went up. Our return on assets for the fiscal year '12 was very good, better than our expected return on assets. But net-net, that resulted in an unexpected because we cannot forecast pension expenses. It all depends on what happens on the last day of the fiscal year. So we saw a $15 million increase, and now we're all set for the fiscal year '13. That's about $0.03 of EPS.

The next question is coming from the line of Jon Groberg from Macquarie. Jonathan P. Groberg - Macquarie Research: I guess just first briefly, Bill, is there any change to the ROIC targets for fiscal year '13 in terms of the variable pay? William P. Sullivan: No. As you know, this year we raised the return on investment capital target from 21% to 25%, and there's no change in that number going forward. Jonathan P. Groberg - Macquarie Research: Okay. So that stays that way for '13. And there's -- to be clear on Dako, I think you had guided for '13 I think $0.35 of accretion. I don't know if you can do it this way, either maybe Didier or Bill, but if you, like, take each of your segments, can you maybe and do a walk, you did $3.12 in earnings this year. Could you maybe kind of just help us think through the -- you have Dako, it sounds like you said $30 million in operating profits I think if I'm doing my math right, you're talking about like $0.07, and then maybe some of the decrementals that you're expecting in the other business segments?

Yes, it's a little difficult. Yes, I was -- $30 million increase in operating profit for Dako between 2012 and 2013. For the rest, the operating margins, as answered previously, are the high end of our guidance are similar to what we have seen in 2012 on the relatively flat revenue growth. Again, I would say that it is -- our high end of the range is about 1.5% core revenue growth for the business, and at the low end minus 1.5%. But there's not a fundamental -- I mean, I didn't calculate the incremental corresponding because that, at 0% core revenue growth, it's very difficult to calculate the incrementals. But we are really, really, really operating very -- not only in line with our operating model, but even, in fact, better than what we committed to when you think that we've reached a record operating margin both for the quarter and for the year on the -- only 2%, 2.5% core revenue growth that is way better than what we committed to in our operating model. Jonathan P. Groberg - Macquarie Research: So I guess if we think about there's pretty narrow range of core growth. I think you said, right, minus 1.5% to plus 1.5%? I mean if you -- it sounds like what you were saying, Bill, in terms of restructuring, I mean if you do anything -- I mean but it looks like it's a fairly wide range in terms of kind of where the margin could come in. But so if you're going to be flat for the year, don't expect that given what your plan is today, that you would be able to keep flat margins year-over-year. Is that kind of the message just sort of to be clear? William P. Sullivan: Right now, without us restructuring and because of the increased cost of DD&A outline, we'll be roughly at a 19% operating profit. At this point in time, we will not restructure to make up the difference. Jonathan P. Groberg - Macquarie Research: And so that is [indiscernible]. Last question, I mean, Bill, what would you need to see in order to say, "Okay, let's actually take a little bit of a deeper step here?" William P. Sullivan: I think you'd have to have, first of all, you'd have to see a negative growth in the business moving forward, and that negative growth would happen beyond a year. Typically restructuring costs, enormous amount of money, enormously disruptive for the company. And to do something like that, we would have to ensure that the return it would be better than -- you get your return for making that -- those cuts within a year. So you'd have to see a fair amount larger drop in business, and the duration would have to be beyond a year or at least forecasted beyond a year.

An additional comment on the 19%. This is on the overall Agilent business, including Dako, which still has, especially with investments that we've committed to make, a lower operating margin than the rest of Agilent. William P. Sullivan: We're very close to upholding our business, our margins quite high in a slow growth environment. And obviously if, in fact, that we are wrong, economy does recover and I always joke if we had a budget resolution in Washington a Eurobond and $0.5 trillion Chinese stimulus, our view might be a lot different. We're still going to be able to get the type of leverage that we've got in the past.

Your next question is from the line of Tycho Peterson from JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Bill, in your comments, you commented on the pricing environment a number of times. Can you just talk about where you're experiencing some of the greatest pressures, and whether you get a little bit more aggressive on price going forward? William P. Sullivan: Any big deal where the customer is getting multiple bids from all of our competitors, we're going to have pricing pressure moving forward. We've actually done a very good job this year of holding our discounts across the company. Again, we measure those. But as Didier said and I have said, if you go in to an environment of slow growth, you just don't have as much leverage in terms of the overall pricing. And so to not assume that there's going to be some downward pressure I think would be unrealistic, and that's the message that we're conveying. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then in your comment a minute ago, you joked about China stimulus. But can you just talk about whether you're expecting a reacceleration in China over the coming year? And how much of that will be EMG versus Life Sciences and other areas? William P. Sullivan: So right now in China, EMG is down because that's where most of the end communication test equipment ends up. As it stands now, and Guy can correct me, that the G4 standard in China is now not going to even be approved until March. And so I believe there's not going to be a lot of growth in the first half of the year. Our overall analytical business in terms of Chemical Analysis and Life Science, the revenue is modest this quarter. The good news was that the orders themselves were in the teens. And as I said, we continue to leverage our infrastructure for Dako's products inside of China. So given all the issues in the world, China is still the #1 story and one could imagine that if our order trend continues that China could, in fact, see a pickup, particularly in the second half of the year. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then maybe last one for Didier. As we think about the guidance, are you baking in extra conservatism here given the experience you had in 2012? If you could just talk about the philosophy behind guidance, if you will?

Right, it's -- I mean it's tough to say that we're either conservative or not. I mean we look at the -- in terms of the GDP projections that our guidance is anchored on, we're assuming that flat GDP growth at about 3% until at least the end of the first calendar quarter. So that's basically going into our third fiscal year -- fiscal quarter, and then going up slightly 3.4% from that. So it's really we're assuming more of the same of what we have seen in the last quarter or 2 for the next 2 quarters and then potentially a little bit of an improvement. There's no doubt that as we've said many times, our -- when we provide a guidance range, I mean as executives, our target incentive is based on at least the highest -- the high end of the guidance, but that doesn't mean in itself that it's -- there's a level of conservatism. I mean we're setting the bar at the right level for executives.

Your next question is from the line of Ross Muken from ISI. Ross Muken - ISI Group Inc., Research Division: So I guess if we sort of take everything together that's happened, I mean the global economy has obviously been challenging, and that's made your core difficult to grow from an EBIT perspective. And then we have all these moving parts. It seems like the new numbers, probably from what most of us were expecting in terms of the outcome, were more so around through the pension expense in the comp. I guess as you're sort of stepping back, it was a busy year. You guys have a fairly big acquisition. It's a tough environment. You're looking at an equity that's been sort of in this level in the mid to high-30s for quite a while going back, x sort of the period where we used to press in '08, '09. What do you feel like from like a market perspective in terms of what the stock is telling you given all of this mix? I mean what -- how are you -- what are you most focused on? I mean when you step back and you say, "You know what, I need to keep investing in the business, I don't need to do more cost pruning. I don't need to aggressively do something different with capital deployment." And the stocks sort of sitting where it is, what do you think the disconnect is between sort of what you're executing on the plan and kind of what the market's telling you?

Well, the market is telling us that for the investors, that they are still skeptical on the revenue projections moving forward. If you in fact lower the revenue, then the valuation of the company quickly comes into range. Our #1 focus is to invest where business is driven by the emerging market. Our other priority is to invest in the segments of the measurement market more that we believe we can get more growth out in the average communications or on the Life Science side, the mass spectrometers, the investment in pathology across the board or energy and Chemical Analysis. We need to continue to focus on where we think the longer-term megatrends of investment are, and that's what we're going to do. And I believe that when the investor community feels either more confident in the macro economy, more confident that we're going to be able to execute on the investments that we're making in the higher growth areas, then the results will turn around moving forward. But the fundamental issue is, as I believe, that our overall revenue growth rate projections are being discounted. Ross Muken - ISI Group Inc., Research Division: And so I guess I understand that, but I guess when you look at other -- I mean there was something -- it was a Wall Street Journal article, they say something like 50% of businesses in S&P 100 are talking about cost controls and sort of CapEx controls for next year given the uncertainty. Now I get -- when you are sort of sitting there and debating whether or not the incremental/decremental margin you're sort of delivering on next year given sort of the fact you're kind of deciding to eat some of these incremental costs. I mean as you're sort of debating that versus the growth outlook, I mean was it really just a function of you look back at '08, '09 and you said, "All right, maybe we cut too hard in certain places," or "Maybe we think we'll competitively disadvantage ourselves if we do so." I'm just trying to get the sense for what was the key sort of determinant because we're seeing other businesses that I guess are spending more time on the middle part of the P&L given the fact the top lines, in general, were kind of constraint? William P. Sullivan: So if you go back to the question on 2009, there we had unique opportunity. One is that we did dramatically reduce the size of our corporate infrastructure. And secondly, we reset the operating model in our Electronic Measurement business under Ron's leadership moving forward. However, during that period of time, we did not make dramatic cuts overall in research and development. So if you look at today in the corporate infrastructure, we will continue to negotiate with our vendors to try to get better IT support costs and supporting our real estate. And then that's an ongoing business moving forward. But the other 2 big buckets of money are related to sales and R&D. And in the sales area, not making investment for the future, not making the investment to continue to expand in BRIC, I think would be highly shortsighted. On the research and development side, disrupting that organization where we know we have a very, very strong pipeline of products also I think would be a terrible mistake. And finally, in terms of manufacturing, we have been very clear that we have continued to aggressively focus on manufacturing. We're closing down sites. We still have a lot of work to do to get our analytical business up to 55% gross margin. And that effort is going on as quickly as we can. So again, that's not new but we are continuing the progress as we noted this quarter, I think you're starting to continue to see the benefits of the effort of manufacturing. But in terms of our expense structure right now, given what we know and how quickly you could change if, in fact, that we get some stability in Europe and the United States, I believe it just would not be prudent to make back and cut back our probability of winning for the long term.

Your next question is coming from the line of Isaac Ro from Goldman Sachs. Isaac Ro - Goldman Sachs Group Inc., Research Division: If I could just put Bill's comments in the last question into context with the guidance, I just want to revisit some of the assumptions you have between the pension item and then sort of all the other investments you're making in the business. And the reason I asked is if I looked back at the last couple of quarters you guys have done, you're a little bit averaging over $0.80 a share. And if your business conditions are more or less stable versus the last couple of quarters, my assumption is that you guys should be able to annualize north of $0.80 a quarter, which would imply $320 million plus if we back out the $0.10 of the pension expense. Just wondering the balance there between what's left in your guidance? Like could you maybe help us understand what those items are on the writing expense side? William P. Sullivan: I'll let Didier go through the numbers, but the model is very simple. We will absorb the incremental compensation cost, and we are assuming that the manufacturing cost reduction efforts that we will implement may be offset by pricing pressure in a slow growth market. But, Didier, could you go through and go through with the delta expense and compensation expenses are?

Yes, the increase in pension expense is one out of many factors. I've mentioned $100 million year-over-year increase in overall compensation benefits. Obviously, the salary increases as of December 1 is half of that, the rest being either payroll taxes, increasing health expenses, stock-based compensation because our stock has gone up over the last 4 years and things like that. You have situations also like this year we didn't pay out sales commissions at target. And as we reset the budget for the fiscal year, obviously we are planning now to pay our target this fiscal year on and on and on, and then offset by -- and then as Bill said, there's -- the impact of the Varian -- the last tranche of the Varian's cost synergies and then other cost savings coming from the manufacturing rationalization that is taking place, that we consider especially at the low end of our guidance could possibly be offset by some level of pricing pressure. So you have all those things, and I think extrapolating the Q4 EPS is very, very aggressive. William P. Sullivan: Again, to offset the compensation increases, you need the calculation of how many people have to be terminated, I think it'd just be a terrible decision for the company at this point in time for what we know to do that. Isaac Ro - Goldman Sachs Group Inc., Research Division: Okay, that's very understandable. Let me just one more follow-up on that, which is you'd maybe – Didier, offer us a little bit of color on the margin assumptions you have by the business units just so as we think about the rising cost here. Is it fair to say most of it on the margin pressure should be tied to EMG? Or is there another item here in the other segments we should keep in mind as we model through the margin impact in the various segments?

Yes, in terms of operating margin, again, it is -- if you exclude Dako, which has a lower operating margin than the legacy business, at the high end of our guidance, operating margin is expected to stay relatively flat versus 2012, very, very slightly lower. And there is not -- they have some improvements more in the BAM and more conservativeness for Electronic Measurement. So the 2 have kind of offset each other. Continuous improvement on the BAM front and more pressure on the Electronic Measurement because of the reasons that have been highlighted. And -- but overall for legacy Agilent, about relatively stable operating margin year-over-year.

Your next question is coming from the line of Patrick Newton from Stifel, Nicolaus. Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division: I guess a point of clarification. Bill, I think on an earlier pricing-related question, you said that you're seeing pressure on big ticket items. Just want to make sure that I heard that correctly. William P. Sullivan: Big ticket deals is what I had meant to say. In other words, where our customer is putting out x number of instruments for bid, those type of deals can become quite visible to the marketplace, and the buyer has a fair amount of leverage. Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So that being said, is the expectation that's baked into guidance that it goes past these big ticket deals and that the pricing pressure actually expands into perhaps more product-providing segments in end markets? William P. Sullivan: The big concern -- it doesn't work that way. Biggest concern is that in a very tough pricing environment, it leaks back across the board. And again, we're not assuming that, but as Didier alluded to, if in fact you go into a year of negative growth, there's just lots of pricing pressure in the organization moving forward. I think the team has done a great job of holding discounts to date. But we've seen this before. And to go in and put a forecast in this environment that suggests that, that may not happen again I think just isn't very realistic. Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then I guess, Bill, you discussed the expectation of a challenged growth environment for fiscal 2013 given Europe and also fiscal pressures in the U.S. Can you discuss a little bit, and you touched on this, but can you discuss a little bit your expectation more so for Europe for the full year? And also, do you have any expectations around the potential for any magnitude of potential stimulus coming from China? William P. Sullivan: Right. In terms of Europe, Europe, as you know, is weak. But Europe in and of itself has been difficult for us. And we're not assuming any greater deterioration. We're not assuming anything particularly better in Europe moving forward. I do believe in China, there is an opportunity for more focused government stimulus once the political leadership change has been settled down and things get back to normal. Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then I guess just last one for Guy. I wanted to dig a little bit into your PXI business. I think you guys have been a little more aggressive in offering solutions since you entered the market, I believe, in late 2010. And I wanted to ask you how that platform is going relative to your traditional EMG business and just thoughts around your competitive positioning in that market?

Yes, thanks for the question. Definitely, we have invested as you know and have a clear long-term strategy to be in this marketplace. In fact, we have and we continue introducing new products on the PXI format. And we just introduced and showed last month the fastest-switching signal generator in this form factor. So we're making good progress there. Obviously, it's still small in our portfolio. I remind you the strategic position we have here is that we propose to our customers the choice because they look for a total solution where the combination of modular PXI and instruments are -- is already, in general, the right solution for what they look for. So we're pleased with the progress we're making there. But it's a long-term plan to keep building the whole portfolio. Patrick M. Newton - Stifel, Nicolaus & Co., Inc., Research Division: And, Guy, can you comment on the growth rate of this portfolio relative to EMG?

It's in line with what we look for. William P. Sullivan: The growth rate is much greater than our core business. But it's still small. Hopefully soon, you'll be able to ask him how much it is for the total business, but got the advantage of a smaller base, the growth rate is good.

Your next question is coming from the line of Amit Bhalla from Citi. Amit Bhalla - Citigroup Inc, Research Division: I was hoping that Nick could spend a minute to just talk about LSG and specifically LC and Mass Spec performance and what's going on with -- what's been going on with the orders in the quarter there? Nicolas H. Roelofs: Thanks for the question. Well, basically, what we've seen is 2 sides of the house of the markets, which is the academic government side, everybody's in pause and that's causing some global ramifications that's not just in the U.S., so people are tied on joint grants. Pharma side is pretty solid. So in the LC and LC/MS, obviously, they play out in that factor. We do pretty well in Pharma. We're still penetrating academic. LCE is the market that looks pretty soft, and we were actually down in terms of the LC market low single digits. Mass Spec, that market is still growing, and we're also growing in that market. So we think that market is a good market. We recently like the LC market, but it's been a bit of a pause in terms of where the things are going. Amit Bhalla - Citigroup Inc, Research Division: And I know last quarter, you talked about $50 million in order pushouts in the overall company, and you weren't expecting them all to come through this quarter. But I'm just curious, did you get any visibility on some of those orders coming through or did they -- were there any cancellations overall? William P. Sullivan: Hopefully, we said that we had $50 million at the end of Q3 that customers did not take delivery as expected. The delivery date, of course, being get rolled over into Q4. We did not see measurable pushouts at the end of our fiscal year, so it appears to have been an anomaly in Q3 and did not repeat itself an immeasurable amount in Q4. Amit Bhalla - Citigroup Inc, Research Division: Okay. And just my last question, in China, in LSG, any comments you can make on the competitive environment? I know it's getting a little bit more competitive, but anything you can add there? Nicolas H. Roelofs: Yes, I mean it's essentially more of the same. It's a very competitive environment. A lot of people are going there. A lot of our competitors are putting in facilities and infrastructure which we've already had, so they're getting the shiny newness of that in the marketplace. But it is really still a good economy. We saw quite a solid order step-up for the quarter, although as Bill said, the overall revenue performance was pretty soft. So we think we're doing pretty good. We said we were resetting the team for the next phase of growth, and we are in fact doing that. But it takes some time. We got to get people in. We got to train them. We're pleased with the progress we're making, but we still have progress to make.

Your next question is coming from the line of Paul Knight from CLSA. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: Bill, could you talk about the -- is the scope business is most competitive in this kind of environment right now? William P. Sullivan: The scope business? Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: The telescope market? William P. Sullivan: Well, I think all the segments of the market are highly competitive. Fortunately, that's one area of the market where we continue to do reasonably well. But my guess is Guy wouldn't change the competitiveness versus cellphone test versus scopes. I think that's far more competitive. As I said, it's going to be big customers, big deal across the company. And it doesn't matter if it's a source/spectrum analyzer, mass spectrometer, anywhere where there are going to be large buys and labs or manufacturing facilities to R&D. I think you're going to see a competitive environment. As I said though, the team has done a great job of holding our discounts, and we try to add in value and differentiation and aftermarket support and service. But we are clearly being or preparing for a difficult pricing environment if, in fact, our forecast is correct that we're entering into continued flat market. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: And then as I look on Page 6 of this handout, last quarter, I guess some of the softness was centered around the aerospace defense market. What would be the 2 areas that were softest in this current quarter, Chemical, Energy and academic, or what were the 2 that has the least visibility? William P. Sullivan: Outside of aerospace and defense, which is as predicted, government spending is okay. The primes are cutting back, and that's well documented. The Chemical Analysis market clearly had more difficulty. And, Mike, you want -- may make couple of comments about some of the softness you had even though there was some positive in that, the orders were better. Michael R. McMullen: Yes, Bill, sure. As we've commented in the third quarter, we've talked a lot about the slowness in the Chemical space in our Q3 results. We saw that carry forward into the fourth quarter as well, mainly in the replacement market for chromatography products. And if you got the chance, you may have actually seen some of our major customers also make announcements in the Chemical space after the third quarter where they are either restructuring or having some plant closures. But as Bill mentioned, we do see -- feel like we've reached the bottom there. And -- but we saw that the weakness of the callout in the third quarter to continue into the fourth quarter. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: Okay. And then last, the China growth, negative 3% in this handout again. And were there any placement orders like the last couple of quarters where the Asia x Japan was not really negative 3%, but kind of color around anything on what core growth really was?

No. I mean the -- you're referring probably to a large orders in the wireless manufacturing test that we had in the second and third quarter. In the fourth quarter, as expected, the volume of orders or revenue came down, so it was not a big factor.

Your next question is coming from the line of Mark Douglass from Longbow Research. Mark Douglass - Longbow Research LLC: Most of my questions have been answered. I just -- I guess a little more on the investments that you're talking about, increased salaries, compensation and benefits, how much of that is for let's call it existing infrastructure of people and assets? And then how much more is just actual incremental, say, feet on the street, new facilities, new marketing efforts, new product development? Can you kind of flush out these incremental costs year-over-year versus new versus legacy? William P. Sullivan: The vast majority of the numbers that Didier quoted are related to the 22,000 existing employees. We will continue the investment in Dako, in the expansion in Asia, the increase in research and development. But first order, the -- all of the additional fixed costs that we're seeing are related to our existing headcount. And we have no plans in this environment for measurable increase in headcount as we move forward.

Your next question is from the line of Derik De Bruin, Bank of America. Derik De Bruin - BofA Merrill Lynch, Research Division: A lot of my questions have been answered, but just want to make -- just want to clarify something. So it sounds like the softness in the Communications business, this was more of you had really strong quarters in Q2, Q3, and this is just sort of a slowing from that rate and just a sort of delay and sort of the infrastructure build?

Yes, Derik, this is Guy. This is true. Derik De Bruin - BofA Merrill Lynch, Research Division: Okay. And what about the competitive landscape there? Have you seen any new players coming in, people being more aggressive? Since Teradyne's buying LitePoint, have they become more aggressive in the market?

Well the overall competitiveness, as Bill was mentioning, is to across all market segments, and wireless is definitely one of those. So there are a number of competitors. You mentioned one that are pushing very hard, especially in the production environment. William P. Sullivan: So there's been no fundamental change to the competitive environment. Derik De Bruin - BofA Merrill Lynch, Research Division: Right. That's sort of what I was getting at. And I guess just to sort of clarify the speed, there was no further slowing as sort of the quarter went on in some of the academic end markets, basically inside, there are things you didn't take another step-down that you saw -- you didn't see any further hesitation on that part? Nicolas H. Roelofs: No. I think they're pretty much were on the brakes towards the end of our last quarter. And this is exactly what we expected in Q4. Remember that I have not been highly positive on what would happen, and it's been my expectation with where we thought they would be. William P. Sullivan: As you all know, I'm not the most optimistic guy in this environment right now. And that was the good news is academic and research and overall for the company, there really wasn't much change in the end markets from Q4 to Q3. Derik De Bruin - BofA Merrill Lynch, Research Division: Great. And just one final question, can you sort of like give us some of your timeline projections on Dako? And when can we see -- what are we expecting to see new products coming out? And was -- could you just sort of update us on what sort of the product flow will be? William P. Sullivan: Lars, why don't you take that and give an update on where the integration is going and where we're headed?

Yes, absolutely. Thanks for the question. Well I think the bottom line is, as Bill and Didier alluded to, is actually some [indiscernible]. And Dako continues to deliver the base business, which is on or slightly ahead of schedule actually. We still had some work cut out for us in terms of the ramp-up of feet on the street in APAC and so forth and also some of the buyout of indirect channels. These are things that are in place and actually going to kick in towards the back half of fiscal year '13. Now in terms of the very much long expected, long awaited next generation from Dako, we continue to make progress and on track for a 2013 market launch. So let me just characterize where we stand right now. As we speak, we are in a, call it a limited manufacturing ramp. And during the next I will say 3 to 4 months, we ease our way into the kind of the early test signs, and this is now then going to be expanded into kind of more what we call a beetle [ph] side, which is kind of more of a commercial expense. And somewhere there between I would say third and fourth quarter, I do expect that all breaks are going to be altered, are going to be -- form an impact to the product availability. And this is a global one. So this is, I think, the most significant product launch that we are expecting. On top of that, we have a number of new antibodies coming out, obviously the SureFISH expansion with the probes is hitting us on a weekly basis, and this is rapidly expanding the portfolio of products that we are having. But just to characterize Dako and the -- to 2013, we are on track with the launch of [indiscernible]. Derik De Bruin - BofA Merrill Lynch, Research Division: Great. And just one quick one. Nick, what are you doing to sort of revamp the cytogenetics pipeline and the product portfolio there? There's a lot of new -- obviously with Illumina buying BlueGnome and assay getting so bad there, how are you kind of going after and revamping the side of product? Nicolas H. Roelofs: Well I've got lots of opinions, but I have the great opportunity to share those with Lars. And Lars has been managing that. So I'm going to kick this to him, and if he wants the other comments, I'll let him kick it back to me.

Well, thank you, Nick. It's my pleasure to take that on. Well, I'm sure as you guys noted that we made a joint announcement together with NimbleGen on the array side just a couple of weeks ago. So we are now in a coordinated effort moving forward to convert the customer base, and that is a fairly significant amount of customer and business. And we will continue to make a fairly rapid progress in that regard. And we are obviously rapidly expanding our SureFISH line of products. We currently have 450 FISH probes, and we have 15 new probes actually targeting leukemia. So what you'll see is going to be a very concentrated effort around our FISH business, our array business, but also around the basic target, in which I'm pleased with Halo flakes. That continues to make a terrific progress as we are actually exceeding our expectations in that regard. So it's going to be a very focused effort from our side in those areas.

Your next question is coming from the line of Tony Butler from Barclays Capital. Charles Anthony Butler - Barclays Capital, Research Division: Bill, 2 questions. One, you commented that you believe there would be a budget resolution. And I'm sorry to ask this, but what gives you that level of confidence and why doesn't the overall business environment with respect to spending or business spending get materially worse? And then likewise, and perhaps inversely, if there is a resolution, why doesn't business spending actually get materially better? And you've kind of hit the midpoint, I guess, to some degree, but I would actually argue that there is potentially a greater window for sales to have either the higher upside and then likewise sales to have even greater downside? Appreciate some comments. William P. Sullivan: Well, you just said the 2 bookends of our discussion for the last 2 weeks on how to give guidance in facing of the financial or the fiscal cliff moving forward. Our forecast assumes that there's a resolution. That's not my own personal opinion, but that's just the overall assumption. I -- as you know, the odds are somewhere between 30% to 50% that there won't be a resolution. But assuming that there is moving forward, I think that because of the delay of resolution, you are already starting to slow down. You're heading into the holiday season so for -- the way our fiscal year is constructed, one could easily see a Q1 that is soft and potentially a Q2. I won't argue with you. If there is a successful budget resolution, then the second half of the year things could get better. And of course if that happens, then we'll adjust our forecast accordingly moving forward. But at this point in time, we have been completely candid on what our thinking is and try to give the best outlook we can with the available amount of data we have. And we all know that there is a wide potential outcome.

Your next question is coming from the line of Richard Eastman from Robert W. Baird. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: Just 2 questions, I guess maybe for Guy or Didier. When you look at the EMG business and you look at the order number in the fourth quarter, typically we built some backlog, typically we have a book-to-bill that's well north of 1 in EMG. And what I guess I'm a bit concerned about is does the first half of the year look like down 15% to 20% with the back half for the year up 20% to 25%, is that the way the revenue distribution would look?

For fiscal year '13? No, no. It's way flatter than that. But basically Q1 would be fairly similar than to Q4 in terms of revenue decremental. In Q4, we had 4% core revenue decline year-over-year. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: But you took about $60 million out of backlog, right? I mean I'm just -- I mean generally speaking, your first quarter is 90% of your fourth quarter orders, which would put you sub $700 million in sales. But that's not the case.

He can talk to you. And we have looked at the same numbers as you have for Q4, and have done the exercise and that led us to the kind of guidance that I'm mentioning. Again in Q4, our core revenue growth was -- decline was about -- was 4% and in Q1, we expect something more like 5% to 6% revenue decline. That's embedded in our guidance. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: And then ending the year minus 1 to minus 3. Okay, I mean just one thought... William P. Sullivan: Just as a clarification again, the guidance that we're giving that made up over for EMG is still for a revenue number that is below the incoming order rate in Q4. So again, I don't -- we look at all of those, and we don't think it's out of bounds. Obviously, that's the number that tends to have the more volatility. But I think mathematically and what we know the pipeline is, we feel okay. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just one other thing, I mean aerospace defense you usually have a bit more visibility there. Obviously, one area that could be pretty impacted here depending on what happens within negotiations, budget negotiations. What do the orders in aerospace defense look like in the fourth quarter?

This is Guy. We had better orders in gross compared to last year in aerospace defense for this quarter. The year-end business has been there as we were expecting it and in fact, we're still expecting this coming into the last 2 months of this year. So I would say it was still -- it was positive. William P. Sullivan: Again, Guy, correct me if I'm wrong, because a lot of the spending comes from the government, use it or lose it...

Yes. William P. Sullivan: Most frankly will happen. The primes is where we're seeing a cutback in anticipation of the actual direct government spending most likely will play out as predicted for the end of the year?

That's correct.

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Ms. Alicia Rodriguez for any closing remarks.

Thank you, Derek. On behalf of the management team, we'd like to thank everybody for joining our call today, and also wish you a happy holiday in advance of the season.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.