Hewlett Packard (HP) Announced the Spin-Off of Its Agilent Technologies

question 21

Essay

Hewlett Packard (HP) announced the spin-off of its Agilent Technologies unit to focus on its main business of computers and printers, where sales have been lagging behind such competitors as Sun Microsystems. Agilent makes test, measurement, and monitoring instruments; semiconductors; and optical components. It also supplies patient-monitoring and ultrasound-imaging equipment to the health care industry. HP will retain an 85% stake in the company. The cash raised through the 15% equity carve-out will be paid to HP as a dividend from the subsidiary to the parent. Hewlett Packard will provide Agilent with $983 million in start-up funding. HP retained a controlling interest until mid-2000, when it spun-off the rest of its shares in Agilent to HP shareholders as a tax-free transaction.
-Discuss the conditions under which this spin-off would constitute a tax-free transaction.

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Definitions:

Polygraph Act

Legislation regulating the use of polygraph (lie detector) tests, especially in employment settings.

Employment Screening

The process of verifying the backgrounds and qualifications of job candidates before making a hiring decision.

Polygraph Tests

Examination techniques that measure and record physiological indicators such as blood pressure and heart rate to determine truthfulness.

Reliability

The degree to which an assessment tool or measurement consistently produces stable and accurate results over repeated uses.