Opinion ID: 201960
Heading Depth: 2
Heading Rank: 3

Heading: CSFB's Involvement with Agilent.

Text: 9 CSFB's relationship with Agilent began when the Tech Group, assisted by Rogers, made a sales pitch to Agilent's top brass with an eye toward managing that company's forthcoming IPO. Agilent was impressed, and CSFB helped to take the company public on November 18, 1999. The stock, initially priced at $30 per share, closed at $44 after its first day of trading. 10 On December 13, 1999 — the first day of the class period — CSFB initiated its analyst coverage of Agilent stock with a buy rating contained in a report authored by Rogers and two of his confreres. The report set a twelve-month target price for the stock of $55 per share. That day, the stock closed at $45.50 per share, up $0.75 from the previous day's close. 11 CSFB published a second report, authored by the same trio of analysts, on February 18, 2000. This report reiterated the earlier buy recommendation and explained that Agilent's growth was spurred by strong orders for semiconductor products (up twenty-seven percent) and reasonable gains in Test & Measurement. It discussed Agilent's six percent increase in test and measurement (T & M) orders under the heading Good Orders, but Not Explosive. That day, the stock closed at $93.75 per share, down $3.25 from the previous day's close. 12 Four days after issuing this buy recommendation, Rogers sent the following e-mail to Agilent's Director of Investor Relations: 13 TMO order growth was 6%. Communications test and semi test were highlighted as key growth drivers. One would expect communications test growth to top 10% (vs.Q4:99). Growth in Teradyne's Q4:99 orders was above 40% sequentially, Credence's Jan:01 orders were up over that amount. Yet Agilent's TMO business only grew 6% despite two seemingly hot markets. What retarded your growth, or were Communications and Semi test less hot than you let on? 14 On March 6, 2000, Agilent stock closed at its class period high of $159 per share. Although the stock price tumbled thereafter, CSFB analysts maintained a buy rating in their third report (issued on May 19, 2000). That day the stock closed at $66.62 per share, down $4.38 from the previous day's close. 15 On July 20, 2000, Agilent released a statement indicating that third quarter earnings were expected to fall short of forecasts as a result of manufacturing constraints, component shortages, and sluggish sales attributable to two divisions. This press release came as a surprise to the market as a whole. The following day, the CSFB analysts issued their fourth report. The report maintained the stock's buy rating but flagged the surprise announcement and cautioned that Agilent was rated a buy only in the most generous sense. The stock closed that day at $48.06 per share, down $5.94 from the previous day's close. 16 On Saturday, August 12, 2000, Rogers received an e-mail from a CSFB customer inquiring as to his outlook on Agilent stock. Rogers replied: Let's see what they announce thurs pm. Hopefully some meaningful restructuring of the two problem divisions. Absent that would not be aggressive despite the price pullback. 17 After the market closed on August 17, Agilent reported that its third quarter earnings were better than anticipated. The following day, the CSFB analysts issued their fifth report (which was the last report authored in whole or in part by Rogers). This document cited the upbeat announcement and reiterated the familiar buy rating. That day, the stock closed at $56.38 per share, up $9.88 from the previous day's close. 18 On October 12, 2000, a Tech Group analyst, Tim Mahon, sent an e-mail to a fellow CSFB employee in response to a general question about how to rate a struggling stock when investment banking sensitivities existed. The e-mail read: Suggest you ask Elliot [Rogers] about the `Agilent Two-Step'. That's where in writing you have a buy rating . . . but verbally everyone knows your position. Neither Mahon nor the analyst whom he advised was ever involved in reporting on Agilent securities. 19 In a November 8, 2000 e-mail to all Tech Group analysts, Rogers used Agilent as an example of how to draft analyst reports. Under the heading Wordsmithing, Rogers wrote: 20 Verbally, you can say a lot more than what you put into print without it coming back to haunt you (he said, she said). That does not preclude you from making your point, subtly. For example: . . . 21 Agilent: money-losing operations supposedly fixed in our quarter. Ha!! Fat Chance!! While management plans on turning the operation around next quarter, we have chosen to give them more breathing room to allow for any slippage. As a result, our estimates are more conservative than management's guidance, but allow for upside to our EPS projections if they achieve their bogey on the stated timeline. 22 Other CSFB analysts issued Agilent reports on September 29, November 21, and December 6, 2000. Each report reaffirmed the buy rating. The per share stock price rose on the dates of the September and November reports (up $0.99 to $48.94 and up $4 to $48.62, respectively), but fell following the December report (down $3.06 to $52). 23 On February 21, 2001 — the last day of the class period — Agilent announced that it was trimming back its forecast of second quarter profits. That day, CSFB issued a report downgrading Agilent stock from buy to hold. The stock sagged to $40.20 per share, down $3.80 from the previous day's close. 24 Throughout the class period, members of the Tech Group's investment banking team maintained contact with Agilent executives regarding potential investment banking business. None materialized.