Ned Barnholt
1943–

President, chief executive officer, and chairman of the board, Agilent Technologies

Nationality: American.

Born: 1943, in New York City, New York.

Education: Stanford University, BS, 1965?, MS, 1966.

Family: Married (wife's name, Jimi); children: three.

Career: Hewlett-Packard, 1966–1973, research and development engineer; 1973–1980, marketing manager; 1980–1984, general manager, Microwave and Communications Group; 1984–1988, general manager, Electronic Instruments Group; 1988–1993, vice president; 1990–1999, general manager, Test and Measurement Organization; 1993–1996, senior vice president; 1996–1999, executive vice president; Agilent Technologies, 1999–, president and chief executive officer; 2002–, chairman of the board.

Awards: AeA Medal of Achievement, 2002; Excellence in Leadership Communication Award, International Association of Business Communicators, 2003; Spirit of Silicon Valley Lifetime Achievement Award, Silicon Valley Manufacturing Group, 2003; National Day Award, Singapore, 2004.

Address: Agilent Technologies, 3000 Hanover Street, Palo Alto, California 94304-1112; http://www.Agilent.com.

■ Edward W. "Ned" Barnholt received his MS in electrical engineering at Stanford University and went from there to Hewlett-Packard's Palo Alto headquarters, where he became a true believer in "the Hewlett-Packard Way," a style of management that involved a great deal of interaction among management staff and employees. His experience in marketing as well as his leadership of a new division in Seattle made him a candidate for running the Agilent spin-off from Hewlett-Packard in 1999. He took over leadership of Agilent just as the market for Agilent's high-tech products went into a steep and prolonged decline. His response to the crisis that followed put his skills to a severe test.

THE HEWLETT-PACKARD WAY

When Barnholt joined Hewlett-Packard in 1966, both Bill Hewlett and Dave Packard were still running the company. Packard made it a habit to mingle with workers and to visit his company's various work sites. The corporate culture focused on innovation, trust of employees, respect for employees, and management integrity. These would be the ideals Barnholt espoused when he ran Agilent. In 1973 Barnholt had tired of his work on production and secured a transfer to marketing, where he proved to be an able salesman. This experience would become very important when he tried to direct Agilent out of a nearly catastrophic decline in sales in 2000–2002. From 1973 to 1976 he worked in the Stanford Park division, moving in 1976 to the Santa Clara (California) division, where he served until he was sent to Spokane, Washington, in 1980 to open and manage a new division for Hewlett-Packard's Microwave and Communications Group.

Originally, measurement and testing equipment had been the heart of Hewlett-Packard's manufacturing, but during the 1980s there was a marked shift in the company's focus, with computer and printer products replacing measurement and testing devices as the company's big moneymakers. By 1998 computer and printer products accounted for about 80 percent of Hewlett-Packard's profits. The president and chief executive officer (CEO) of Hewlett-Packard, Lewis E. Platt, decided to have the company focus on computers and printers, having the other aspects of the business spun off into a new corporation; he tabbed Barnholt to lead the change.

Barnholt had his doubts about the potential for a spin-off to succeed, but he also saw a chance to preserve the corporate values that he thought Hewlett-Packard was losing. He wanted to maintain what he called Hewlett-Packard's "foundation values," and since the new company would include the Measurement Organization, which had once been Hewlett-Packard's only focus, he saw an opportunity to do so. Many of the workers who were to join the new company thought that they should retain the name "Hewlett-Packard," because their organization had been Hewlett and Packard's first corporate endeavor, but their new company was given the name "Agilent," derived from the word "agile," which is what Barnholt hoped the company would be when responding to developments in the high-tech marketplace.

In March 1999 Agilent brought with it not only the Test and Measurement Group but also the Life Sciences and Chemical Analysis Group and the Semiconductor Products Group. One-third of Hewlett-Packard's researchers joined Agilent. At its inception Agilent had $8.3 billion in funding and manufactured 20,000 measurement devices. Agilent's initial public offering was valued at $2.1 billion, although Hewlett-Packard retained an 84 percent interest in the spin-off. The new company started well, with its stock going up in value, but then the worldwide recession hit, with a dramatic reduction in purchases by Agilent's customers. Perhaps as much as 50 percent of orders for Agilent's products were cancelled in 2000.

Barnholt's response to the crisis included diversifying the company by acquiring smaller companies that produced hightech components that complemented Agilent's own products; he also instituted a $135-million advertising campaign in 2001 that featured the slogan "Dreams Made Real." In 2001, 55 percent of Agilent's sales were in electronics and telecommunications, and the decline in orders was sharpest in those very areas.

HANDLING MASSIVE LAYOFFS

From 2000 to 2001 Agilent's business dropped 50 percent. Barnholt initiated a company-wide effort to economize, and employees strove to cut costs by recycling equipment parts, cutting back on toll calls, and doing without unessential supplies. These economies helped, but Agilent was still losing hundreds of millions of dollars. When Agilent began, it had 42,000 employees; by November 2000 it had 47,000 employees. Barnholt was loath to lay off any workers, believing that the Hewlett-Packard way was to cut employees only as a last resort. Thus, in early 2001 he sold Agilent's health-care services division to Holland's Philips Electronics NV; this move sent five thousand employees and their jobs out of Agilent. In March 2001 he released five thousand temporary employees.

Barnholt blamed "excess capacity" for the problems in high-tech industries; when demand slumped, companies such as Agilent had more manufacturing capacity than there were orders, which meant that there was a huge overhead in maintenance of facilities and in underemployed workers that had to be compensated for elsewhere in the company. If Agilent's divisions had still been part of Hewlett-Packard, the computer and printer divisions would have picked up the slack, but Agilent itself had no such moneymakers to help out.

To keep Agilent afloat, Barnholt cut employee's salaries and wages by 10 percent in 2001. He carefully explained what was happening to his employees and even took a pay cut himself (to $950,000 annually). Employees by and large responded by working longer hours, regarding the pay cuts as part of Barnholt's efforts to save their jobs. Still, Agilent continued to hemorrhage money. In the third quarter of 2002 alone Agilent lost $228 million. For the entire year losses were $1 billion, with sales of $6 billion. Despite such losses, Barnholt was made chairman of the board that year. He remarked, "How you communicate bad news is an important challenge, because how you treat people who leave has a great impact on the attitude of those people who stay" (Agilent press release, June 11, 2003). Barnholt told every employee in all Agilent's offices about the massive layoffs by broadcasting the announcement. More than eight thousand people were laid off in 2002.

The response of employees to the layoffs was remarkable. The general impression of the employees was that Barnholt had done all he could to save their jobs, and those who were laid off stuck with their jobs, working hard, until the end of their last day with Agilent. The Hewlett-Packard way had paid off in employees who were not angry with the company and thus would be willing to be rehired by Agilent should the company manage to end its steep decline. An internal survey by Agilent's management revealed that nearly 90 percent of employees thought that those who had been laid off had been treated well; this resulted in a high level of motivation among the employees who remained. By 2004 Agilent had only 28,000 employees, but the company seemed to be stabilizing.

NAVIGATING ROUGH SEAS

Quoting an African adage, Barnholt asserted that "calm seas do not make skillful sailors" in a 2002 speech to a BusinessWeek CEO summit (Agilent press release, September 30, 2002). Not everything was gloomy during Barnholt's first years running Agilent. In 2001 life sciences sales, primarily in chemical analysis, grew by 25 percent. Sales of measurement devices, the heart of the original Hewlett-Packard company, brought in about $600 million. Agilent established public relations offices in fourteen countries around the world, and by 2004, 55 percent of the company's income came from outside the United States.

Barnholt took a forward-looking approach to his direction of Agilent. He made alliances with small companies to help with manufacturing components for Agilent's products, outsourcing much of what the released temporary workers had done; this move cut down on the overhead for storage of parts. In February 2001 he founded Agilent Ventures, even though Agilent was entering very rough seas. Agilent Ventures was a research division devoted to finding promising high-tech start–ups, especially in telecommunications, and funding the research of those startups with an eye to having the startups create new technologies that Agilent could use.

Perhaps Barnholt's hardest decision was to end work on photonic, or optical, switches; these had the potential to revolutionize semiconductors, because the switches operated at the speed of light and many more of them could be put on a chip than could electrical switches. But there was no market for chips using photonic technology. Many potential customers were deciding that the processing chips they had were good enough for what they wanted to do, and sales for processing chips of all kinds declined in 1999–2002.

On the other hand, Agilent took a lead in the manufacture of fiber-optics products, and its host of measurement products made it the place to shop for customers who had many different measurement needs, such as manufacturers of hospital monitors. Agilent brought forth "system on a chip" technology that allowed it to put several processes on one chip, rather than on several different chips. Interest in this technology was slow to grow, but in 2003 demand began to rise, because the system-on-chip design saved space, expense in maintenance (only one chip to look after), and the cost of buying several different chips to do what one system on a chip could do. In 2003 Agilent seemed to have turned around, earning $6.056 billion in profits for the year.

AGILENT LABORATORIES

One of Agilent's strategies countered the latest thinking about corporate research, which was that it should be decentralized, with research laboratories focused on only one project and making the project succeed. Instead, Barnholt wanted a central research facility that was charged with conducting all of Agilent's research. He wanted communication among Agilent's researchers, and putting them together seemed like a good way to make sure they all knew what others were doing and could help when necessary. Thus was founded Agilent Laboratories.

The laboratories were to focus, in Barnholt's vision, on research that would have identifiable practical applications rather than on pure research. One of the laboratory's first triumphs was the development in 2000 of the DNA chip. This involved laying DNA on semiconductors that would detect and arrange in proper order strands of DNA, occasionally rebuilding damaged genes. By 2002 Agilent was spending $1 billion on Agilent Laboratories, but hard times forced cutbacks, with research funding cut by 18 percent for 2003. The halting of the development of the photonic switching platform had to have been a blow to research staff personnel, but Barnholt insisted that the photonic switch would be taken up again by Agilent when the world was ready for it.

See also entries on Hewlett-Packard Company and Agilent Technologies Inc. in International Directory of Company Histories.

sources for further information

"Agilent Chairman, President and CEO Ned Barnholt Receives IABC EXCEL Award," Agilent press release, http://www.agilent.com/about/newsroom/features/2003jun11_IABC.html, June 11, 2003.

Meade, Peter, "The '$8B Start-up' Starts Out," Communications News, July 2000.

"Ned Barnholt, Agilent President and CEO, Discusses 'Culture, People and Processes' at the 2002 BusinessWeek CEO Summit," Agilent press release, http://www.agilent.com/about/newsroom/features/2002sep30_bizweek.html, September 30, 2002.

Roth, Daniel, "How to Cut Pay, Lay Off 8,000 People, and Still Have Workers Who Love You: It's Easy, Just Follow the Agilent Way," Fortune, February 4, 2002, pp. 62–65.

Sperling, Ed, and Jeff Chappell, "Biggest Test," Electronic News, November 25, 2002, pp. 22–23.

—Kirk H. Beetz