Well, thank you everyone for joining us today, and welcome to New York. I'm Matt Gugino, Vice President Investor Relations here at Danaher. I'd also like to thank everyone that's joining on the webcast. Forward-looking statements, not going to go through these in detail, but I do need to say today's presentation may include forward-looking statements, and actual results may differ materially from those statements. Please refer to the slides for more information. Here's the agenda for the day. We're going to do things slightly differently this year. Tom's going to come up, give his opening remarks. After his opening remarks, he's going to take 10-15 minutes of Q&A. We'd ask that you keep your questions on the specific businesses and 2015 guidance until later in the program, you'll get your chance to ask those questions.
After Tom is done, our segment and platform leaders are going to touch briefly on their businesses, including 2014 highlights and performance drivers going forward. We'd have two separate sessions on the segments, and then we'll have a Q&A after each of those sessions. The first session is going to be Test & Measurement, GVR, Dental, Industrial Technologies. We'll take a short break. You'll be able to see some of the product demos that are outside. We'll come back, we'll do Water Quality, Diagnostics, and Life Sciences. Tom will close with remarks on 2015 guidance and then take any additional questions after that. You see here too, we have a cocktail reception for all those that don't have other obligations. It'll be from about 4:30 to 5:30. That'll be in the Terrace Room directly downstairs of the ballroom.
We'll get you wrapped up here about 5:30. With that, Let's go ahead and get started and bring up Tom.
Thank you, Matt. Good afternoon, everyone. Thanks very much for joining us today. While I've met many of you over the last several months and over the last several years, there are obviously a number of folks here today who I haven't gotten the pleasure of getting to know better. I thought I'd just take a minute or two and give you a little bit of background. I joined Danaher 25 years ago. I joined in the Danaher Tool Group, a terrific business, a great place to learn Danaher and DBS. Through a series of assignments that took me into a manufacturing plant in West Hartford, Connecticut, into a toolbox business in Raleigh, North Carolina, that Cliff is always kind to remind me of my history there.
Onto our Water Quality and Life Sciences & Diagnostics businesses, where I spent a good deal of time in Loveland, Colorado with the Hach business. All of those experiences together, for me, made for a wonderful Danaher career over those 25 years. As 2014 opened, and really for every year that led up to the beginning of this year, I never imagined that I would be standing here today in the role I'm in today. While that may be surprising to some, Danaher for me, has always been about the journey. It's never been about the destination. I hope you'll take that as an indication of really what the Danaher culture is all about. It's really about a journey. It's really about continuous improvement.
It's really about the Danaher Business System and all that we can accomplish as we build a truly premier global science and technology business. Matt took you through the agenda. It's a full one today. To give you a little bit more detail, I'm gonna give you an update on current trading, give you a sense of kinda what we're seeing here in the fourth quarter. I'll give you a very brief overview of Danaher and the segments and the platforms, just for those of you who may not be quite as familiar. And then I'll give you a brief retrospective on a business that I've been very close to over probably the longest of my Danaher tenure, and that is the Water Quality platform.
Hopefully, that retrospective will give you a little bit of a sense about how we think about building businesses at Danaher and how I think about what a truly robust, sustainable level of competitive advantage really looks like over time. The core of the presentation today will really come from our Executive Vice Presidents and our Group Executives. They'll take you through the segments and the platforms and give you a good sense of our priorities and how those priorities really are manifest in each one of the segments. Finally, I'll come back after those presentations and I'll wrap up with the 2015 guidance. As Matt mentioned, we'll have actually three chances for Q&A today. I'll take some at the end of my opening remarks.
Each of the guys will take questions as groups at the end of each one of the segment presentations, and then we'll take more of the detailed questions associated with the guidance at the end of the afternoon. A brief update on what we see in the market today. Generally, not a lot of changes, certainly from a macro perspective. As we look at the current trading environment, generally, we see the fourth quarter pretty well in line with what we communicated early in the quarter. December is a big month. We're off to a good start, but it's always, it's still early in the month. We've got a lot to do, but generally, we feel pretty good about where we are. If we look around the world, the U.S. generally pretty encouraging to us.
If anything, maybe even a little bit of strengthening in the U.S. that's helping to offset some mixed environments in the high-growth markets. High-growth markets continuing to lead, continue to be important part of our growth, but very much a more mixed environment than we'd seen in the past. We communicated a series of productivity improvements and enhancements that we're going after here in the fourth quarter. That'll cost us roughly $125 million. The projects have rolled in with the potential to be a little bit north of that. We'll update you in January as to where that number ultimately comes out, but we're very encouraged by the projects and the paybacks associated with those projects. We're confident around a $100 million return in 2015.
We also see 2014 as being our 23rd consecutive year of free cash flow in excess of net income, a continuing hallmark of great operating performance across all of our businesses. It's been a busy year. It's certainly been busy of late in terms of capital deployment. We closed the Nobel Biocare acquisition this morning, so we're pleased to have that team now in the Danaher family. The Devicor acquisition for our anatomical pathology business at Leica closed last week. That brings us up to nearly $4 billion of capital deployed year- to- date. That's roughly 3 x the capital that we deployed last year. Clearly we're just getting started down the path of building and shaping the portfolio for the years to come.
We're well equipped to do that with north of $8 billion of capacity available to deploy. You all saw this morning the guidance that we issued. We initiated Adjusted EPS guidance in a range of $4.35-$4.45. That's anchored to a core growth assumption of 3%-4%. We'll take you through the details behind those numbers again at the end of the afternoon. In general, I would say that those numbers don't represent really significant changes in how we look at the macro environment, but I think should be reflective of a continuing optimism on our part that our performance will continue to sustain improvements in organic growth and operating margins.
Again, for those not quite as familiar with how we run the corporation, we have organized the corporation into five strategic segments. The segments that you see horizontally, Environmental, Test & Measurement, Dental, Life Sciences, Diagnostics, and Industrial Technologies, and nine strategic platforms in those segments. The highlights that you see here, those segments and those platforms that are highlighted, represent the platforms where we did significant acquisitions or in some cases reshaped the portfolio of businesses during the course of 2014. Each one of these platforms has delivered solid organic growth and operating margin improvement over extended period of time. Each of them has received a level of capital deployment over time that's helped to strengthen them strategically.
We're very encouraged by the diversity of this portfolio today and how it sets us up well as we go into 2015. That portfolio that you just saw is exposed to some very attractive macro drivers. Regulatory macro drivers that clearly would have influence, for example, on our environmental platform. We know that our healthcare businesses, as well as the environmental platform, continue to be the recipients of strong funding dynamics around the world. Of course, broad exposure to high growth markets and digital trends. You'll hear a number of examples today of where our businesses are taking advantage of opportunities that are presented now in the digital world. These are resilient business models.
These are business models where our core operating businesses have outstanding installed bases, and those installed bases generally have annuity streams associated with consumables, with software, and with service that create high margin opportunities for each. Each of them have terrific innovation opportunities. Today, you'll hear about a number of examples in each one of the businesses where we're driving innovation and seeing real results in organic growth. Some examples of that, of course, in the digital area, and also as we develop software that ultimately can be accretive to those recurring revenue streams as they become services. It's interesting, at least to me anyway, when I look at the metrics down on the lower right-hand side, and I reflect back to 1989 when I joined Danaher.
A business not nearly the $21 billion run rate that we're headed towards at Danaher, but an $800 million business back in those days. A business whose gross margins barely touched 30%, and whose exposure to the aftermarket bore little resemblance to the 26% that we now have in high growth markets and the 45% exposure that we'll have next year in the aftermarket. That's pro forma for Nobel, which brings in a very strong consumable stream, and you'll hear more of that from Henk this afternoon.
When you look at a set of businesses like that, with those kind of operating margins and the underlying resilient business models that support those margins, it's hopefully easy to see how this is a portfolio built for what is likely to continue to be a relatively low growth macro environment. So, I mentioned I'd give you a brief retrospective on a business where I'd spent a great deal of time in my career, but I think the important part of this brief story is to give you a sense of how we think about building the portfolio at Danaher. I use the Water Quality portfolio as that example.
It really starts, the story begins in 1998, where we bought two outstanding franchises, really cornerstone businesses of what would later become the Water Quality Platform, the Hach business and the Lange business. I think what's important about the way we built out the portfolio are the multiple vectors against which we applied our capital. We look to expand the portfolio in terms of content and menu and assays. We also extended it inorganically in terms of our penetration of certain vertical markets. We extended the platform geographically with acquisitions of distributor partners and other channel mechanisms that helped enrich our ability to reach customers around the world. We added capabilities around service and engineering. Most recently, made small acquisitions that strengthened our ability to leverage the digital world, and really turn instrumentation data into more relevant information for customers.
$1.4 billion of capital, 35 acquisitions over time. When we look at Hach, which was the beneficiary of many of those acquisitions, where DBS really starts to make a difference begins with the integration of those acquisitions. I think this is a platform that's a great example of how we've thoughtfully and carefully integrated acquisitions over time, understanding what to do with a bolt-on acquisition and how to integrate that carefully and get the greatest value creation through that integration, and where certain businesses that we might have acquired that were more adjacent businesses that deserve to be more standalone and more focused on penetrating their individual markets. From there, investments around commercial and go-to-market and feet on the street that ultimately then transitioned into investments in digital marketing and greater service penetration. We extended our position in high growth markets over time.
When I began at Hach, I think we had three people in China. You see now the growth in high growth markets from $80 million to $400 million, a 5x growth over the slightly more than a decade that's represented there. And then finally, R&D investments. You'll hear from Mark Beck later today about the progress that Hach has made in product vitality. At the break, I'd urge you to stop in and see the Hach booth, where you'd see one of our more exciting product breakthroughs, the Portable Parallel Analyzer. A terrific example, I think, of how we've not only acquired businesses, but integrated them smartly and then driven outstanding revenue and operating margin performance over time. When you put that together into a financial frame, you see it looking something like this.
A business that starts at $350 million, that today is north of $2 billion, and operating margins growing along the way. I think what I'd draw your attention to most here is if you look at the growth from acquisitions at $650 million, and you see that the growth organically is nearly twice the growth that we've delivered inorganically. I think that's a powerful message to know that as we build portfolios, we're not only getting leverage inorganically, but getting it smartly organically as well. I think the last message and an important takeaway here is to understand that we look at results with a very long view.
While we've been very disciplined over time with return on investment—return on invested capital metrics around three years for bolt-ons and five years for adjacencies, if you look at what happens over time to our platforms, in this case, over an extended period of time, you see that the real returns, the returns in the mid to high teens, are the returns that happen when the combined impact of those acquisitions and inorganic growth with DBS really turns into extraordinary returns over the long haul. Now let's look ahead. We have three key priorities for 2015 and the years beyond. Driving organic growth through the highest impact organic opportunities, and I'll talk about three of those here briefly this afternoon. New product innovation, our digital investments, and building scale in high growth markets.
The second priority is optimizing our portfolio. I'll talk through how we think about capital allocation going forward. Finally, enhancing our competitive advantage with DBS, the core of our culture. It's who we are, and it's how we do what we do. The first of those priorities, driving organic growth. Driving organic growth starts with the products and the services and the solutions that we deliver to customers every day. Making that happen starts with R&D and the effectiveness of our new product development processes. On the left-hand side of this slide, what you see is that investments that we've made in R&D have driven out performance in our businesses. Just here in these examples, Leica Microsystems with product vitality greater than 40%. Dental Technologies, 30%. Roughly 60 new products in Dental over the last three years.
Dan Daniel will talk to you later on today about Product Identification, where 14 new products just in the last year are continuing to have that team on a roll. The right-hand side of this slide talks to many of the bets, many of the investments that we're making right now that we believe will pay off over time. Obviously, the largest of those, when you look across the corporation, are investments in software and enabling our products digitally to provide better information and better solutions to customers. It's not all about software. The investments that we've talked with you about in the past, and Arnd Kaldowski will talk about this today, around molecular diagnostics and the VERIS platform.
Jim will talk about Fluke and Fluke Connect and EMV and the regulations and how those are driving our growth at Gilbarco. We'll certainly give you an update on ballast water, one of the investments we've made in water over an extended period of time that we're confident is paying off. That was a big number we talked, I showed you just on that last slide associated with investments in digital. We are already seeing our digital and software-related revenue growing at 3x the growth of the balance of the corporation. We're very encouraged by what we see, and there's a number of examples of businesses today that are really making significant inroads in the way they provide and enhance solutions to customers.
You see here, and Henk will talk about this more today when we get to our Dental platform, a 35% growth in Digital Dentistry in the last four years. Radiometer, which we won't talk about much today, but is doing a fantastic job continuing to be one of the star growth engines of our Diagnostics platform, has really taken software and integration of instrumentation across hospitals to new levels. Jim Lico will share with you an update on Insite360, the cornerstone of Veeder-Root's investments in integrating data across the fuel dispensing network. If you think about our portfolio of instrumentation today, and you use the graphic down at the bottom of this slide, you can think about that instrumentation as largely an installed base that we are capable of creating sensors, of networking together.
Bringing that data together oftentimes through the cloud, and sometimes then integrating it with data sources from other instruments, we're ultimately able to then present information to customers in enhanced methods such as their mobile devices that we know brings a greater level of value to our customers. So we're also investing in a new shared team of technology experts that will help us stay on the leading edge of these technologies and assist each one of our operating companies in developing better solutions. The third dimension of driving organic growth to higher levels is continuing to invest aggressively in high growth markets. You know, this business today in high growth markets at nearly $6 billion is dramatically bigger than the Danaher I joined in 1989. It's now 26% of the revenue of the entire corporation.
I think what's particularly encouraging about this to us and represents, in a broad sense, is the diversity and the breadth of our growth in high growth markets. The pie chart shows the breadth as we look across each of the individual platforms, each of them with a significant presence in high growth markets. It's no longer simply about China. We began as a very China-centric set of investments around high growth markets, but today we have a very balanced approach to investing in those markets, and we're seeing growth now across a number of them. That's obviously important as we've seen this more mixed environment today, where certain of those markets running ahead of others.
As we built scale commercially and grown those businesses, we then have been able to reinvest some of the operating margin generated there in increasing the scale of not only our sales organization, but more importantly, our R&D organization, and putting product planning resources in place and R&D resources to build products for those local markets. Finally, we now have an outstanding set of leaders, largely group executives at Danaher who've taken responsibility for ensuring that we're bringing our operating companies together in those regions and getting the highest level of value and synergy that we can from collaboration across operating companies. So, we're confident that new product innovation, that investments in high growth markets, that digitally enabling our instrumentation will continue to lift our organic growth rates over time. With that, let me turn to our second key priority, which is optimizing our portfolio.
The goal here is to improve and sustain our market-leading positions. We know that if we do that effectively, we'll continue to improve the growth trajectory of the overall corporation as well as continue to expand operating margins. Let's talk briefly about what we accomplished in 2014, then I'll share with you a little bit about how we think about capital deployment going forward. 18 acquisitions in 2014. Again, as I mentioned, nearly $4 billion of capital deployed. You'll hear a number of these examples today. Jim Lico will tell you about our investment in ANGI, expanding the footprint of our GVR franchise into compressed natural gas. Mark Beck will talk about how we've expanded our geographic footprint by the acquisition of Aguasin in Chile and really gave our ChemTreat business a foothold in a whole new geographic market.
I'm sure you're all familiar by now with our NetScout transaction, an exciting opportunity to bring two terrific businesses together, highly complementary, and position those businesses for long-term success. Nobel Biocare that I mentioned that we closed this morning. Henk will talk to you more about the implant market, the importance of this business to really broadening the franchise, the number one franchise in dental products in the world today. Two really important acquisitions in our, in our diagnostic business, the Siemens Microbiology business, which gives us a position in a whole new piece of property, if you will, in the hospital laboratory environment, and Devicor, which moves us upstream in anatomical pathology to the biopsy and gives us a greater ability to control the sample and deliver higher levels of diagnostic quality. Obviously, a lot on the inbound. Couple things on the outbound, NetScout being one.
Dan Daniel successfully took care of a divestiture of a business inside of our motion platform. You put these together and it represents, I think, some good examples of how we continue to build and shape the portfolio going forward. We're in terrific shape from a balance sheet perspective. We have lots of opportunity to continue to build and shape over time. As we think about capital allocation, we remain biased towards M&A. It's been our history. We have a tremendous legacy of success in deploying capital smartly and effectively, as many of the examples I've already shared I hope would indicate, and we'll continue to do that. There are other opportunities for capital allocation we know.
We would look at buybacks, but only in a very opportunistic way, in the case of some form of dislocation in a market where it was a unique opportunity. Dividends, you saw us increase the dividend recently, albeit modestly, but we would see that as a programmatic approach to capital allocation that we'd look to extend over time. We're in terrific shape. We're confident that with north of $8 billion of capacity that we'll continue to build and shape the portfolio smartly, and the results of that will be an improving organic growth trend as it well as operating margin expansion. Thirdly, but by no means least, in fact, arguably the most important thing we do every day is enhancing our competitive advantage with DBS. DBS is our culture. It is who we are. It's our core values. It has three pillars.
I'll talk to you about each of these briefly. The pillar around growth, how DBS drives Lean, our History, and Leadership. DBS is our culture. The core values that are embedded in DBS, the tools that are represented in DBS across Lean, Growth, and Leadership were the tools that helped me and the businesses that I've been engaged with over 25 years sustain the growth and profitability that we've been able to achieve. Over the last number of months, I got an opportunity to spend time in operating reviews and strategic plan reviews with a number of businesses that I've not worked with. I saw DBS alive and well across every one of those businesses. I saw the five core values alive and well.
I saw teams, deepening teams with great bench strength, who were listening to customers and who were embracing the input of customers to build terrific strategic plans, who were approaching the values of customers like quality, delivery, cost, and innovation, and applying Kaizen and the tools of DBS to live up and exceed those customer expectations every day. An increasing focus on innovation, both in terms of core new products as well as investments around the digital world. Teams that really understand that we do compete for shareholders every day, and driving that performance upward and onward is mission critical. Last year, we spent a great deal of time with you, in fact, almost the entirety of this day a year ago, on the tools of DBS.
I won't go through these in that depth again here, suffice it to say, there are an extraordinary number of examples where the growth tools of DBS are continuing to make a big difference in our businesses. The brands you see here, you'll hear more about today. You'll hear from their leadership. They'll highlight many of these tools and many of the results you see on the right-hand side, many of which represent double-digit core growth, where we've applied DBS Tools and seeing tremendous impact. DBS also creates and helps us drive real operating leverage, that operating leverage translates into operating margin expansion and ultimately EPS growth. Year- to- date, we approved for that by virtue of the 70 basis points that you see there in core operating margin expansion.
Three out of the five segments at 90 basis points or even better than that. Three of our five segments are at 20% operating margin or roughly there already. That gives us great confidence that we're on a journey, we're on a trajectory to taking the corporation to 20%. A lot of that has to do with the next four or five years and the line of sight to get our Dental platform and our Life Sciences & Diagnostics platform to those levels. By the way, those are the places where we've made some of the more significant inorganic investments, and therefore, plenty of work to do to get those up the curve. Part of the reason we're encouraged is that we have a portfolio, as I've mentioned, of high margin businesses with terrific recurring revenue.
When we have portfolios built the way we have, that gives us great encouragement that even in a slow growth macro environment, that we will be able to continue to outperform. Investments that we're making combined with the productivity initiatives that we launched here in the fourth quarter give us some tailwind going into 2015, we think position us well to continue on that journey towards 20% operating margins. None of that is possible without having the best team on the field. The best team wins. It's one of our core values. Inorganic growth, organic growth, new product development, high growth markets, all of that takes having the best team possible. We think we've attracted, developed, and retained one of the best teams anywhere, and we continue to do that.
I spent a ton of time on talent as an EVP, and it's job one for me today. We have a very attractive model when it comes to talent. A growing business with a terrific balance sheet that can deploy that balance sheet in M&A with operating company OpCo-centric models that allow P&L leaders real autonomy is very attractive to talent. We've built strong benches in each one of the businesses, and we continue to build capabilities in our younger people. You heard from Angie Lalor last year around our talent and our development processes around young talent. We continue to invest there, and we're seeing the results. We've seen terrific succession over the last year or so. There have been 33 promotions of Presidents at Danaher in the last year.
A third of those actually came from other Danaher operating companies, representing how we're able to grow talent in one business and then leverage that talent to another business, continuing to represent an example of where scale really matters and the diversity of the portfolio really pays off. Today, you're gonna see a couple of examples of that succession that it really continues to support the growth of the platform. You'll hear from Arnd Kaldowski and from Rainer Blair, two of our newer group executives, who were able to come in right behind me and create the kinda leverage that we needed in two platforms and helped us with what we believe was a very successful transition into my new role. Great examples, we think, of where talent and the development of talent and leadership over time continues to be a critical element of DBS.
In summary, three key priorities. Drive growth by investing selectively and aggressively in the highest impact organic opportunities that we have available to us. Optimizing the portfolio, ensuring that we're improving and sustaining those market-leading positions. Finally, the underpinnings of all of it, the core of our culture, enhancing our competitive advantage with DBS. We're confident that these three priorities will continue to help deliver tremendous shareholder value. We recognize that we compete for you, that you have choices that you make every day about where you invest. We compete to be that choice every day. We compete for shareholders, one of our core values. With that, we'll transition into a brief Q&A period.
I think we have some microphones somewhere, and whoever has the microphone, given that I can't see, with the blinding lights here, we'll take that question. Megan, did you? Okay, got it. Hey, Steve.
Hey. What's your upstream oil and gas exposure in your portfolio? The comment around portfolio optimization, can you maybe talk about your view on, you know, core versus non-core and you know, what that word optimization means from a portfolio management perspective?
Sure. First of all, we have very limited upstream, downstream, or any other oil and gas exposure. Not to suggest that it's zero, it is very, very, very small. Optimizing the portfolio. What it really means is looking at each one of those segments, ensuring that the processes that we've talked to you about many times around driving funnels of opportunities, cultivations, looking at markets and companies that may strengthen each of those segments, will be looked at first and foremost for their strategic merit. And that, our goal is to deepen and strengthen the walls of competitive advantage in each one of those platforms. That said, you've heard us repeat it a number of times, there's no permanence to an operating company's position in the portfolio, no permanence in perpetuity, if you will.
Businesses that were part of Danaher five years ago, some of them are not part of that portfolio today, and some of the businesses that are part of the portfolio today may not be with us five years from now, and there may be new businesses to replace them. We're committed to continuing to shape the portfolio, both on the inbound and in selective cases on the outbound, if we find, like we did with our communications platform, that the combination of that business, for example, with another enterprise, simply puts that business in a better place, that makes it more competitive, that allows the associates in that business to be more successful over time. I think we've got tremendous support for thinking through that, t he team's been terrific in helping me learn where those opportunities are, and we'll continue to drive that as a key priority.
Hey, Tom.
Hey, Steven.
Thanks. Just to follow up on that portfolio question, what's your current philosophy about the balance of Med Tech versus industrial for Danaher? As you think about it going forward, maybe there's a business model angle here, maybe there's a question of attractive assets. How are you thinking about that? Then I've got an R&D question.
MedT ech versus industrial. I don't think of the portfolio in that necessarily bifurcated way, but it's a fair question nonetheless. We like and have always liked the diversity of the Danaher portfolio. Whether that was a diversity that 10 or 15 years ago meant our tools business or it's a diversity today that represents a different types of diversity across the portfolio, it has always served us well. We've been able to move talent, attract talent because of that diversity. We've been able to be nimble with M&A in terms of where we're able to put capital as cycles moved up and down in the capital markets. We've been able to leverage capabilities in high-growth markets and incubate businesses across operating companies. There are a number of reasons why we value the diversity of the portfolio we have today.
I know it's a, it's a, it's a common question that's embedded in a hypothesis that the guy that came from most recently life science and diagnostics wants to take the corporation, you know, all in that direction. Sure, I love those businesses, but those businesses simply represent characteristics of businesses that we like a lot. You know, I can name others, whether it's our water business or our Product ID business, you know, that have tremendous recurring revenue streams and great high growth market exposure. I think that's the way I'd urge you to think about the way we value the construction of the portfolio. You had an R&D question.
I do. That's helpful. On the R&D side, we're talking about core growth and organic growth being such an important leg in your top priority, well, one of your three priorities that you've got here. R&D has, I think, gone up to 6% plus of sales. The question is that the right number? Are you getting the results that you want for that amount of spend? As we continue to have an improving U.S. economy anyway, are you thinking that for you to really outperform in core growth, your investment peer group, that needs to go higher or not?
You're right with the facts that we have taken R&D investment up significantly. Over an extended period of time, it's close to doubled on the metric you noted at 6%. I don't think of that as some sort of magic number or a number alternative to that as a magic number for the corporation. What I do think about is that each individual business has some unique needs relative to where their R&D spend ought to be. Many of our businesses are in the right place from an R&D perspective. Probably not every business, though. Normally, a newly acquired business might take some adjustment. I'd cite Beckman Coulter as the perfect example. The diagnostic business was underinvesting in R&D, and we needed to take that number up, and we have.
Many of the costs we've taken out at Beckman have gone into R&D and taken that number up, and we're starting to see the result of that, and Arnd talk about that, talk about that later. I think we want to be careful and thoughtful about where we put those and, you know, relative to where that number would be a year from now, I think, or two years from now or a decade, I think it would be based on the adjustments we'd make operating company by operating company.
Hey, Tom, it's Jeff Sprague here.
Hey, Jeff.
Just back to the portfolio. You know, one of the hallmarks, I guess, if I look at the nine platforms, is each one of those had kind of its anchor acquisition, you know, at least a decade ago. Obviously, you've kind of redefined what's underneath those segment banners to some degree. I was wondering if you could address to what extent there is some prospect of some new platform. Wouldn't expect you to name it by name, of course, but if you think about kinda your strategic, you know, horizon that you're looking at a potential opportunities, d o you see something that maybe fits the mold of what we've seen here over the last 10 years?
Jeff, thanks for not challenging me to name it. I would not say that a new platform would be a priority today. That doesn't mean that it's completely out of the question. I would just say it's probably not a priority today. I would say the priority has more to do with strengthening and deepening those competitive walls and barriers to entry in our existing platforms. Sometimes that might be with a fairly significant addition. Nobel Biocare, a great example. I mean, a big add to an existing platform. I wouldn't necessarily take my answer to mean that staying within the segments today would necessarily mean smaller acquisitions. We can clearly deploy into large positions in those segments.
We'll keep our eyes open. I think we've got a long history of being open to new opportunities where we might add a segment. I'd never say never to that. I would just say in the near term, probably not in our top priorities. Do we have one more, Megan, one or two? Deane? Hey, Deane.
Hi. Hi, Tom. This is not the first time we've seen Software as a Service on Danaher's wish list. The fact is, a number of your businesses already have high digital content, but maybe you can just share with us your thoughts on this as an area you'd like to expand, how you're defining Software as a Service, and maybe how you reconcile some of the higher multiples these assets command.
Sure. We're fortunate that many of our businesses have been successful in developing software capabilities and heading down the road towards software as a service organically or with relatively small inorganic bets. One of the more meaningful bets and a place where we've learned a lot is at Leica Biosystems. I'm not sure Arnd talk about this in depth today, but the acquisition of Aperio was a terrific addition to the Leica Biosystems platform and really gave us a business that is a software-as-a-service business. We digitize the results of a the morphology from a tissue sample, and by digitizing that, it allows us to provide that image broadly across clinicians.
We learn from opportunities like that without making a huge bet or having to tackle some of the larger multiples from larger assets. I'm probably more inclined to make smaller bets along those lines, learn from those, and continue to invest organically, as many of our teams are at Radiometer, at Beckman, and even frankly at places like PID, which is doing a terrific job at Videojet of adding sensors to continuous inkjet printers and creating new service capabilities. I think there's a lot we can do on our own. Is that? Okay. Thanks for those questions. There will be multiple opportunities for additional questions today. I know there's more. Thanks for your patience. We'll try to get to as many folks as possible.
Now we're gonna move into the segment presentations. What you'll hear today from the segment presentations, I think will reinforce multiple times the three key priorities that I talked about here in my opening comments. To lead us off into the segment presentations, Jim Lico, our Executive Vice President responsible for our test & measurement platform, as well as our Gilbarco Veeder-Root businesses, is gonna lead us off. Jim, welcome.
You go first.
It's up there.
Yeah, thanks. Thanks, Tom. Good afternoon, everybody. It's nice to get the lead-off spot here and be done early. I've never been able to sit in the back for three or four hours and let other people present, so this is kind of nice. We'll talk, as Tom said, we're gonna lead off here with Test & Measurement. This is obviously a platform that's familiar to a lot of you or a segment that's familiar to a lot of you. We think about this in two platforms, as you saw on one of Tom's slides, the Instruments Platform, which is really Fluke and Tek, and then the Communications Platform, which is really Tek Communications, Fluke Networks, and Arbor Networks. The revenue here about $3.5 billion, the geographic footprint here, we like obviously.
A little bit more in North America, principally because of the Communications Platform. If you were to look at the Instruments Platform, you'd see a more geographically diverse portfolio. We like the diversity here, lots of opportunity. Some of our bigger, higher growth market businesses within Danaher exist in T&M. The market large, it's pretty large served market here with good growth characteristics. The drivers here are pretty simple. The digital world, the Internet of Things, a lot of terms that are maybe broadly used in a lot of ways. When you think about mobile devices and engineers who are developing new products, relative with those new technologies, mobile technologies, digital technologies, that's really where our principally where our Instruments portfolio plays.
The networks, the drivers around the network business, the communications platform are really around network congestion. We're really doing a lot of troubleshooting, particularly with service providers around challenges that exist in their networks and the proliferation of security threats as well. That really are some of the big drivers in the business and a broad range of customers, right? From electronic technicians to engineers who are doing design work, to network engineers and telecom operators who are really trying to keep the network up and running. Really, everything about this is about keeping things up and running. As we look to transition into 2018, we think we're pretty well positioned here for better growth or excuse me, in 2015.
So, let's talk a little bit first about 14 and some of the highlights. I think we've started to see some nice returns in some of the investments that we've made. We'll talk about Fluke Connect. Hopefully, you got a chance to see Glen out there with the Fluke Connect demo. We'll run a video here as well to give you an opportunity to see Fluke Connect. A really strong start in investments that we started to make around taking advantage of some of the digital opportunities to look at what we do with handheld testing. Our MDO, our Mixed Domain Oscilloscope, 3 K, which is the next generation, follows our 4 K product that really is doing a great job in the mid-price point of oscilloscopes. It's really the largest segment of scopes.
We'll hear a lot today about digital investments. Obviously, Tom gave you a good summary of that. Really what you'll see here in T&M is good success in online sales. As we partner with a lot of channel partners who are really accelerating their digital online sales and really supporting that with better content and better customer experiences. High growth markets continues to be a good story here, I think for us. We've had good growth in China and Brazil at Fluke and Tek.
And the, one of the, I think, really exciting things for us into the future is that Fluke has now launched their third generation of products at the price points and value propositions that are really about those markets, and that's allowed us to expand our channels of distribution, principally in China and India, to take advantage of those product launches. Finally, as we'll talk, Tom talked about shaping the portfolio, this combination that we've got with the Communications platform that we're really excited about with NetScout really gives us a great premier position in both network management tools and in security. I'll give you an update on that in a slide in a minute.
We think that that's a, you know, a lot of work going into it, a long time of building relationships and really seeing the strategic value, and we're off to a good start in getting that done. So, what you're really gonna hear today is about trying to improve our growth through more attractive market verticals. I think the organic growth that Tom really talked about really supports what we're trying to do here. Our investments in service. We'll give you an update on what we're really talking about, how we're trying to build our service portfolio here in the business to give us a better growth profile, to enhance our customer experience, and to sort of reduce the volatility of the platform by not making all of our sales about equipment.
Finally, I'll give you an update on NetScout. First, around really positioning the verticals. You gonna run the video? We're gonna run the video first here.
Hey, Charlie, got an issue on panel 201.
Yeah, I see the voltage. It doesn't look too good.
That's almost 20 amps across the neutrals. Can you authorize a work order?
Let's get going on that as quickly as possible. Drop everything else and get this done.
All right, thanks.
Some of you may have seen that video before. We made some changes to it. One thing that's still true today is that Charlie hasn't caught any fish casting that way. We'll hopefully he'll get a little bit more time to do that. I think hopefully what you see in pictures are worth 1,000 words, and maybe video's worth 1 million words. What you really see here is the largest portfolio of instruments. In that video, you see three or four different instruments being used. I think many of you know, I've been associated with the Fluke business since we bought the company back in 1998.
One of the great things that we always wanted to do was to be able to bring multiple measurement technologies to the user in a way that allowed for them to be able to troubleshoot and diagnose problems in facilities and plants. Mobile technology today makes that a reality, and that's what Fluke Connect is really about. It's about taking and leveraging the enormous largest installed base in the world that we have of handheld tools and being able to leverage that data, that information in new and unique ways for our customers. You saw a lot of different things, whether it's the analysis of critical data, it's the ability to communicate broadly through the facility, all of those things. It really enhances, improves the workflow, improves accuracy and efficiency for maintenance personnel, gives them great opportunities for productivity.
The other thing that you don't see here is that it allows, in many cases, for a much safer environment. There's a scene in that video where he actually steps away from the main breaker, and that allows for him to do work while not being close to the high voltage that exists in that main box. Really also is a great safety play here as well, and we're excited about it. This really is a software as a service platform that we can build on over time, advanced analytics, APIs, and really allows for us to do some really neat things into the future. This isn't just about what we've done today, but it's really about what we're gonna do in the future.
In this business today, over $30 million of enabled hardware already sold, we're just getting started here. This is a launch that just occurred a few months ago. The other part of the digital world that we're really trying to take advantage of is really around RF or Radio Frequency technology at Tektronix. Obviously, this is a critical issue for developers, right? Today, there's about 5 billion cell phones in the world, and the prognosticators or predictors here are talking about 50 million mobile devices. The designers and engineers who are designing those types of mobile-enabled devices really have a challenge because it's not just the digital and analog signal today that they have to troubleshoot, but they have to troubleshoot the wireless signal or the cell signal that's also being given off.
Think of a Nest thermostat today, right? A thermostat that used to be just, didn't have Wi-Fi on it now needs to be troubleshooted with all those signals. That's what the Mixed Domain Oscilloscope really does. It takes the digital and analog analysis that's just been great at Tektronix for the history of the company, and it integrates into that workflow, the RF capability as well. We were the first in the industry to ever introduce this kind of product. This is historically done with multiple instruments. What this really does is integrate all of that capability into one instrument, gives them more value, not only from one instrument, but also allows for them to troubleshoot and diagnose problems in an integrated way.
The other part of taking advantage of RF is being able to offer instrumentation in a different product format like USB. You see our new spectrum analyzer, which is really a USB product. It's powered through USB, it's portable, and it really very much has all the power and capability of a spectrum analyzer at a very different cost position, and allows for us to redefine some of the market that we've historically been in through what we'd now call the Internet of Things. Today, we play it in about half of that $500 million market. With the introduction of things like MDO and our new spectrum analyzer, we really now play in a couple hundred million dollars more market opportunity. That really allows for us.
We're just, to really improve the organic growth picture with innovation at Tektronix. We're also trying to improve the portfolio through the acceleration of our service business. This is really an attractive market globally. Good growth characteristics through the demand for greater asset productivity. We have an unequaled position with broad services and unmatched reach. As you can see on the map here, over 90 worldwide locations to meet the needs of customers around the world. This is really a business that is really great for DBS. Not just in the traditional sense of improving operations through the use of DBS lean tools, but also using DBS growth tools to improve things like attach rate on our instruments. This $300 million business can continue to be a good, strong, recurring revenue opportunity for us in the future.
Finally, the other part of the portfolio is obviously our NetScout communications combination, our communications platform combination. We're very excited about this. We think that this is just a very unique way, as Tom said, when we look at things, how do we really build a better business in the future? We think this is just an incredibly unique way to do that while at the same time maximizing shareholder value. We really help customers a great deal. We think about all of our core values. This sort of hits on all of them, from really helping customers to really helping shareholders. All of our stakeholders here really benefit from this combination.
The new company will take our troubleshooting and security solutions and the performance monitoring solutions at NetScout, combine those capabilities in the service provider market and in the enterprise market to really have a great combination of not only technologies and innovation, but a global footprint that's second to none. It really expands the growth potential of the company. It gives us an opportunity to do new things with customers through the expansion of our sales coverage as well. It's an attractive way to create shareholder value. We've been excited about this from the standpoint of what customers have said. Our customers are excited about this when we come to them and talk to them. We've had about six or seven weeks here now to be in front of customers and talk to them.
The conversations that I've had and others have had with our customer base has been they're excited about this combination because they see the unique value that the combination of these businesses can really bring to them. Our employees are also excited about this. Our associates really see the opportunity to be a part of a bigger and better entity. I think that, and I think the shareholder opportunity here is exciting as well. The transaction's still targeted to be about mid-2015. We're on track to all of our major milestones. Last week, we did several of the regulatory things that we needed to get through, and we continue to progress all of our activities relative to trying to get to a close here in 2015.
All good on the path to completing this transaction next year. Hopefully that gives you a view of really what we're trying to do from an attractive market vertical standpoint. With both Fluke Connect and RF, really trying to expand our businesses into higher growth, the higher growth markets that really take advantage of some of the digital world transition that's going on with our customers. Really invest in service and the capability that's built there. We're excited about that and how that enhances customer experience. When we do that, we tend to see good things from a growth and profitability perspective. Finally, hopefully, NetScout gives you really a good example of how we're trying to reshape the T&M portfolio for higher growth as well and better margins.
With that, we'll do questions later. I'm gonna reintroduce myself, so won't do that, but we'll go next. We're gonna transition here from Test & Measurement to part of our environmental segment. Many of you know that our environmental segment is really two pieces. Our water business, Tom talked a little bit about that. You'll hear a bunch of great things about our water business from Mark Beck here in a little bit. I'll take the Gilbarco Veeder-Root part of our segment here and give you an update on what's going on with Gilbarco Veeder-Root. This is a great set of businesses. 18 years ago, I started at Veeder-Root, so I've had a foot in this business for a little while.
The business that I started with 18 years ago to what this set of businesses is today is incredibly better in terms of in terms of size and scale, but really in terms of what we're doing with customers. This is one of our best geographic businesses from the standpoint of in being in high growth markets. These businesses have great positions. As you can imagine, retail petroleum is pretty much people are using gasoline to put into cars everywhere in the world, and Gilbarco Veeder-Root is really there in all of those parts of the world, and you can see that in the geographic breakdown.
We like the component here of equipment and service as well, as well as software, and we're gonna give you a good opportunity to understand what we're doing with Insite360 and how that really represents a great software as a service opportunity for Veeder-Root and Gilbarco. First, let's talk about 2014 and what's going on there. Veeder-Root had a good year. We were excited about some of the regulatory changes, particularly around vapor recovery that occurred in many of our high-growth markets, and Veeder did an outstanding job in really capturing that opportunity and with good growth this year. EMV, we're gonna talk about that as a new credit card standard. This may be the first time.
It stands for Europay, Mastercard, and Visa, but that doesn't really matter to you. As much as what matters to you is this is the new generation of security for credit card transactions, both in the credit card and on the terminal or whatever device it's using to read that. That has been in-store, what we would call in-store, in the POS system, in the convenience store, as an example. That's moving out later, and I'll later talk to that to the outside part of it, and I'll talk about that standard. That's a major regulatory environment change that we've, we're gonna take good advantage of in the future, but we've already taken good advantage of it with strong growth in our point-of-sale solutions this year.
In order to take advantage of that EMV regulation outside the store, we really created a strategic partnership with Verifone. I'll give you an update of why that's important and why that's such a good thing for Gilbarco Veeder-Root. Gilbarco Veeder-Root's history has always been of successful M&A. Going back to the success of the Gilbarco acquisition over 10 years ago, we really have had great success in acquiring businesses to make Gilbarco a stronger and better global competitor. We'll talk about how the ANGI acquisition really did that in a new adjacency for them, really leveraging their opportunity in alternative fuels.
This business has always been great at DBS. I think our history has been a strong, history or strong capability in DBS, not only on the lean side, but on the growth side. We see that. We'll talk about how Insite360 used the tools of DBS to really accelerate product development. Then in the tried and true principles of lean, our Gilbarco Veeder-Root plant in India, a business that we acquired a few years ago, won Danaher's best plant, most improved plant in Asia, which is just an outstanding award and a recognition of just outstanding performance from a factory perspective, which is a hallmark of Gilbarco Veeder-Root's business over the years. What you're gonna hear today is really about three things.
One, our leverage of our installed base, taking and utilizing strategic partnerships to take advantage of our opportunities in the marketplace to accelerate growth, our expanded presence in alternative fuels with ANGI, and then, really excited to talk to you about Insite360 and what that does from the standpoint of improving the workflow and building a broader reccurring revenue base for the business. Let's talk about EMV first. As I mentioned in the previous slide, the point-of-sale equipment has been going through this upgrade over the last couple years with a 2015 deadline. We're now moving out to the outside payment terminal with a deadline of 2017, and that's really being driven by the widespread data security breaches that have occurred and the enhanced card security that's being adopted in order to avoid those situations.
The deadline is 2017, but we believe this will probably extend further out after that, so this is really sort of a five-year opportunity for us. We think this is about a $500 million opportunity for this business over that timeframe, so it's a significant opportunity for us. When you think about our installed base of over 300,000 dispensers, the opportunity to upgrade those dispensers or replace those dispensers is a huge opportunity for Gilbarco Veeder-Root, and we're excited about that. In order to do that, we felt it was necessary to have a strong partnership to take advantage of the opportunity with Verifone.
The reason for that is when you think about Gilbarco and the outstanding North America footprint that they have, the great sales and service organization that they've built here in the United States, and Verifone's long history of payment security technology, we thought the combination of that in a partnership would give us the opportunity to really leverage this EMV opportunity that's coming ahead of us and really give us a way to solve customers' problems in a better way. We signed this partnership here in the last few months, and we're looking forward to that partnership going forward over the next several years. We will continue to compete with Verifone on the in-store part of it, in the POS side, so we'll continue to do that.
We'll partner on the payment side. We think that the combination of our installed base and our knowledge about the petroleum re-retail vertical and their capability in payment security is really a solution that customers are really gonna want in an accelerated way, and we're looking forward to what that really will do for customers. That opportunity is really sort of in the second half of 2015. We'll see that start to play out in the second half of 2015 and certainly in 2016 and 2017. The ANGI acquisition, as I mentioned before, we always look at acquisitions. Tom talked about thinking about adjacent markets and how we think about that.
The water example is obviously a great example of how we've built that over time. ANGI is part of Gilbarco's history in that regard as well. This is a situation where our team really looked at alternative fuels and saw that alternative fuels were coming out of maybe places where municipalities might be using it for buses and things like that, and it was becoming potentially a long-haul fuel given what was going on with some adoption of CNG engines that are being sold in the heavy duty market. Many of our customers, many of our biggest customers who own truck stops were starting to think about putting these kinds of sites on their truck stops for the long-haul logistics operations of large-scale fleets.
This was a good opportunity for us, and ANGI represented a great share position in that traditional market and the leverage and complementary nature of what we do today with the existing Gilbarco offering really gives our combination of assets really an outstanding opportunity for growth. It gives us a common payment. If you can imagine that whole stop is gonna be integrated from a payment perspective, the look and feel of a Gilbarco dispenser, what they have today, and it really accelerates our strong position with customers to help those ANGI solutions get sold into those places. At the same time, expand opportunities on our international footprint by taking these solutions more broadly around the world. We think it's about a $200 million opportunity over the next few years.
A good opportunity and a good adjacency for the business. Insite360 is really our opportunity to bring software as a service and cloud-based analytics to the retail petroleum site. If you look on the slide on the right, what you really see here is, if you can think about this, the equipment that we provide today, the dispenser and the point-of-sale system, the tank gauge, gives off a lot of data at the site of what's going on. Not only the environmental compliance of the site, but what's going on with fuel and flow rates and things like that. It really allows for us to leverage all that data and integrate it into a cloud solution, and then offer that as a service on a monthly basis to our customers.
Given the fact it's a good opportunity, we've had a good organic opportunity here to create this, with the acquisition, recent acquisition of a small company called FuelQuest, we add fuel logistics into our capability. That really gives us a broad set of solutions for a variety of different kinds of customers. Remote visibility for small retailers who want to understand what's going on at their site, analytics and fuel ordering for many mid-sized retailers who don't normally do that kind of thing, and then all of those kinds of solutions plus compliance and alarms and fuel management for large-scale customers. There's a set of solutions that we can offer to customers over time. As I mentioned before, the use of DBS as a growth tool here really accelerated this in record time to bringing these solutions into market.
It leverages our strong Veeder-Root tank gauge installation base in North America and gives us the opportunity to really give more solutions to our current customer base. In a short amount of time this year, we're already up to 2,300 fueling stations, and we think this is a good recurring revenue opportunity that we can build into the business in North America. Finally, from where we stand today, hopefully you really get the view that our large installed base and our is really a great leverage opportunity for what we wanna do, and it really gives us a great advantage with our partnership with Verifone to really accelerate growth with the EMV opportunity in front of us.
We've already had a good success rate on the indoor side of that, and we very much feel strongly that we're gonna be able to broker that kind of success into the future on the outdoor side. We continue to look for good acquisitions to expand our market size, ANGI hopefully represents something you can see from an alternative fuel perspective that not only is a good cost advantage today for fleet owners, but also is an environmental advantage as well for them. Finally, really thinking about the workflow. We really have a strong knowledge base about what happens at a retail petroleum site, both on the indoor and the outdoor side, what's going on with environmental compliance. Our customers see that. They're always asking for us to do more there, Insite360 really gives us the opportunity to do that.
I think we're well-positioned with all of those strategies for 2015 to not only take advantage of our current market position, but to also grow with the market and take share as we go in the future. With that, I'll hand it back to Tom, and we'll come back for questions later. Thank you.
Thanks, Jim. Hopefully you can see why we're encouraged about the progress that we're making at Test & Measurement. A lot to like about the things that Jim just talked about, whether it's about Fluke Connect and the organic innovations and the web enablement that we see at Fluke Connect, the progress with Tek Instruments and, of course, the addition of the adjustment to the portfolio with the NetScout transaction. GVR as well, a lot to like about what's happening there with the regulatory driver driving our hardware business, the EMV dynamic, as well as the addition of ANGI which extends the footprint of that platform. I think a lot to be excited about there.
To talk about another platform that is really well-positioned to capitalize on new product innovation as well as a very exciting acquisition, Henk van Duijnhoven is coming up, and he's gonna take us through the Dental platform. Henk?
Thank you. Good afternoon. Let me see. Yes, that works. I'm gonna talk about the Dental platform. We operate in a $15 billion market space where we provide consumables and technology to the professional dentist. It's a market that is growing low to mid-single digits, long term with some very attractive growth drivers. In the developing world, we clearly see an aging population that has an increasing need for dental care as people live longer. In high growth markets, we have a rising middle class that, through their income increase, gets access to or can pay for dental care, and importantly, it's often a way to get up the social ladder in those markets to keep or get your beautiful smile back.
Aesthetic dentistry is clearly a growing need, both in the developed as well as the developing world, where people just wanna keep a beautiful smile over a long period of time. Importantly, and an important driver of our strategy is that we're clearly seeing a digitization of the digital workflow in many dental procedures. With the addition of Nobel Biocare, I'm very pleased that we can close that today. We now have a $3 billion platform in that in that market with mid-teens profitability. We think we're well-positioned around the world, both in the developing and the developed markets, and really cover, cover every major market with our products and solutions. A couple of key highlights from 2014.
We continue to grow very well in high growth markets. Another year with double-digit growth in high growth markets across the entire portfolio with places like China and Russia, but also Turkey and Mexico growing very well for us. We continue to invest in more innovation. Another year of more than 20 new products, significant products brought to market this year, and it just continues to build our strength of the portfolio. While we invest in places like high growth markets and more R&D, we still manage to expand our margins, and as many of you know, we've been on that path for quite a while, and year- to- date, we're up over 60 basis points with the Dental portfolio.
And importantly, that allows us then to also invest in inorganic opportunities, not only with Nobel Biocare, but we also acquired earlier this year a company called DUX D ental, which is a very nice tuck-in for our Kerr or our general consumables business, as well as two smaller channel partners that were acquired earlier in the year. I want to talk today mostly about how our portfolio really positions us incredibly well across pretty much every major segment in dentistry. Secondly, how DBS helps us both invest in places like high growth markets and innovation, but also enables us to continue to expand our margins, and importantly, how Nobel Biocare fits into this picture that we've been building over a long period of time.
Our dental portfolio, there is a lot here, but let me try to take you through the major pieces of this. Kerr and Kerr TotalCare is really the brand and the business that provides solutions to the general dentist and the hygienist, both in terms of general restorative materials for teeth cleaning as well as operatory room turnover. That's a broad set of consumable businesses in that segment. In the specialty segments, of course, Nobel Biocare is a great business for implant placers, so a great add to the portfolio, but also Ormco is the leading fixed appliance manufacturer for the specialist orthodontist, and we're incredibly well-positioned with that business as well.
Across all of those segments, whether that's a general dentist or a specialist, we have a set of technology solutions that we provide to these dentists. In our digital imaging business, we have brands like i-CAT, Instrumentarium, Gendex, and DEXIS, which is really the broadest portfolio of digital imaging solutions available in the industry. With KaVo and Pelton & Crane, we have a very strong set of instruments and treatment unit capabilities that all of these dentists need. When you then look at that broad portfolio of capabilities, when we go to larger customers like group practices or sometimes they're called DSOs, or universities or government customers, we can really provide a broad set of solutions for almost all the needs that these larger groups have in dentistry.
So, very well-positioned in that market across the specialties. When we're looking at growth and what we've been doing from an investment perspective, not too long ago, I think I stood up here in the same room talking about how we were about 15% of our portfolio in high growth markets. We've consistently been investing in more commercial capabilities, feet on the street, more than 300 ads in a number of markets over the last couple of years. I can now proudly say that we're almost up to 20% of sales now comes out of high growth markets. That investment is really paying off, and we continue to grow very well in high growth markets.
We are continuing to increase our spend on R&D. This year, again, a year with more than 20 new products to the market, and that's really now three years in a row where we've been well over 20 new products to market. Our pipeline management and importantly, what comes out of that pipeline is functioning very well. Important in a year where we're going into an IDS year next year in March, there's a significant dental show in Germany, and we're well-positioned to bring yet more product to market at that show. A lot of the innovation investment is going into Digital Dentistry, and I will tell you some more about Digital Dentistry.
For us, Digital Dentistry really starts with the image capture and we're very well-positioned with 3D cone beam CT technology. It consists of treatment solutions and software where you can really plan an entire case. Importantly, it consists of the custom consumable that comes out at the back end, where we really provide customized solutions for the clinician and patients. We have products and services in pretty much all of these pieces with our i-CAT, with the Treatment Studio software set, and now the addition of NobelClinician and custom consumables such as NobelProcera and Insignia for orthodontists. We're making all of these investments while we are expanding our margins. Over the last five to six years, we've almost added 500 basis points of profitability to the platform.
That excludes Nobel Biocare. We're continuing to find that balance between organic investments and driving the margins up. As I mentioned, one of our flagship products is the i-CAT, i-CAT was the pioneer in 3D X-ray or 3D cone beam CT. When we launched this product many years ago, we quickly created a leading position in the, in this space. Last year, we came up with a significant revamp where we substantially improved the workflow as to how the machine actually works, the software that comes with that machine for treatment planning, and importantly, we significantly reduced the radiation levels that patients get exposed to all the way down to levels that were previously seen only in 2D x-ray.
It's been a great success, and we've taken substantial market share with this product over the last two years. Let me take a minute to explain to you why Digital Dentistry is so important to us. Let me explain that to you through the eyes of Nobel Biocare when a patient gets an implant. In a traditional implant procedure without Digital Dentistry, once that implant is in the bone of a patient, it typically takes another three visits to the restorative dentist to take an impression, put a temporary crown on top of it, then a lab makes a permanent crown, and then a permanent crown needs to be placed in that patient. That takes three visits, three times in and out of a chair, and that is a lot of work.
In the digital world, once that implant is in and you know exactly where that implant sits within the patient, you can directly make a permanent prosthetic. A week or two later, you can bring that patient back into the office and place that permanent prosthetic directly on the implant. It really provides a lot more efficient procedure for a clinician. It also provides a much better clinical care as the fit of these prosthetics typically is a lot better. From a patient perspective, of course, the clinical outcome is a lot better because it goes much faster as to when a full tooth is restored. Importantly, they only have to go once back to a dental office rather than three time. It's just a better way of practicing dentistry.
Nobel Biocare. We're very excited that we could close this deal today. Nobel Biocare is a $750 million implant business, it's more than just an implant business. It has very high gross margins, 75%, and importantly, a substantial consumable stream as most of the business is really consumables. As Tom has reminded me already a number of times as we've gone through this discussion, typically, when we have a business with such high gross margins and such a large consumable stream, our return on the investments do incredibly well. We're excited about this investment. Nobel is an incredible brand. 80%, 80% unaided awareness in the dental industry is probably one of the strongest brands we could have ever found in the business.
We're very pleased that we can add this to the portfolio. The current team under the leadership of Richard Laube, they have done a very nice job starting to turn the business into more growth and expanding the margins over the last couple of years. We believe that by helping them with DBS and accelerating the improvements that they have been working on, we can quickly take Nobel Biocare to the next level. Nobel is not only just an implant business. They have long been working on really digitizing that implant workflow, not only for the placement of the implant, but the entire prosthetic that sits on top of that implant, as I previously explained.
The major product, and the major tool that Nobel uses is a software product called NobelClinician. During the break, you should go check it out. We have it right here outside. NobelClinician is a capability that starts with taking in cone beam CT data, such as from an i-CAT, into a software package. In that software package, you could then fully plan the placement of that implant in the bone of a patient. It has an ability to, through an iPad, go talk to a patient about it as to why they need an implant and where that implant is gonna really be sitting in their mouth.
Importantly, through a cloud application, NobelClinician can not only talk to the surgeon, but also to the restorative dentist who can see how that patient is going to be treated, and also a lab who might be making the prosthetic piece that sits on top of that implant. Nobel is very well advanced in that digitization of the workflow, and I think with some of the products that we already have, we're really strengthening our position in this procedure that is going digital increasingly.
In summary, we think we have a very strong position with our Dental platform and can truly say that we have a number one or a number two position in virtually every important segment in dentistry. DBS enables us to continue to drive up the margins, but importantly, also reinvest in the business in places like high-growth markets and innovation and digitization of that workflow. Of course, Nobel Biocare substantially changes our position in the market and enables us to continue to drive the business forward and for more future success. Thank you.
Thank you, Henk. Many of you were with us out in Anaheim, California in June, you got a chance to see live and in person, many of the technologies that Henk talked about and how we're bringing those technologies together, into integrated workflows for Digital Dentistry. A lot to be bullish about in our Dental platform, Henk and the team continue to do an exceptional job of running a terrific playbook of organic growth through selective and aggressive investments, largely in digital, plus a big inorganic play layer on DBS and driving a winning formula. To talk about a formula that's working really to a [inaudible] in another one of our segments, Industrial Technologies, Dan Daniel is gonna come up.
He's gonna tell you about how that playbook is working out at Videojet and our Product Identification segment. Dan?
Thank you, Tom. Thanks to all of you for joining us today. I know it's a busy time of year, but we actually look forward to sharing with you how we're closing out 2014 and setting up what we think is gonna be a terrific year for Danaher in 2015. Our Industrial Technologies portfolio has some tremendously strong brands. We serve about $20 billion of markets that are generally growing at low to mid-single-digit rates. We are very much focused on serving the packaging industry, not just in Product Identification, but also across our automation and our sensors businesses. I think we've been pretty consistent in our vertical market focus. We like the medical market space, medical device space, and the broader automation markets that we play in a number of businesses as well.
Certainly, packaging is a market that we've invested heavily in with Esko and X-Rite, and Videojet over the years. We continue to see packaging proliferation accelerate where brand owners and consumer packaged goods companies come out with multiple flavors and different versions of their own brands and packaging to try to grow their retail market share. This is a trend that we see gonna continue for a long time and accelerate in high growth markets. We certainly are seeing track and trace capabilities and requirements grow as well. This is certainly a theme through our Product Identification business. High growth markets have a lot of runway for all of the portfolio. We're now at the Danaher average of 26% of our sales coming from high growth markets.
Just a few years back, that was in the high teens. We're pleased with how that's developed. We've made investments in both organically and inorganically to accelerate our position in high growth markets. Energy efficiency, as we all know, is an important element of the automation market. It's a diverse portfolio with solid growth and very strong margin performance. 2014 has been just that. We've had a core growth about 4%, pretty solid across the platform. It's been another year of solid margin expansion. Certainly, the growth has been led by Videojet and Esko. These are both businesses we've invested heavily in for product development and sales and marketing, go-to-market capabilities, and those investments have certainly been paying off for us, and we expect them to continue to do so in the future.
I'll talk about some of our product development initiatives and how they've helped accelerate our growth. As Tom mentioned earlier, we took another step to rationalize our portfolio in the industrial space with the divestiture of a $100 million product line in our Kollmorgen Motion Control business, primarily serving lift trucks and electric vehicle space. I might remind you, over the last four years, we've divested nearly $1 billion in revenues, starting four years ago with our Aerospace and most of our defense businesses, a couple other adjustments over the years. It's all been in the name of improved core growth and less volatile growth, and we think we've positioned the portfolio very nicely for that here as we exit 2014.
We strongly believe there's continued core growth and margin runway across our industrial portfolio. Today, I'm really gonna focus on Product Identification. Three primary areas, some of the wonderful product development initiatives at Videojet. It's been a record year for product launches inside Videojet. Our Esko software continues to gain tremendous traction with brand owners. I'd also update you on DBS and how we're accelerating performance in both Esko and X-Rite. We have two growth platforms in Industrial Technologies, Automation, which is primarily our Motion Control companies, and part of our sensors portfolio. Won't spend any time on that today. I really wanna focus on Product Identification, where we serve $8 billion in market. The acquisition of Esko and X-Rite really expanded our market potential and really showed us some attractive adjacent spaces.
The Product Identification businesses have that Danaher business model we really like, where we place hardware and then have a nice recurring revenue stream that comes from Videojet with parts and fluids and service, and on the Esko and a smaller portion of the X-Rite business in software, where we have a nice recurring revenue stream. We're about 50/50 between instruments and consumables. That gives us nice, steady, and consistent growth. As I said, Videojet has had a record year for product launches, and Videojet's track record in terms of organic growth has been phenomenal over the 12 years that we've owned it. In the early days, the investments were about feet on the street, both sales and service capability, investing in a global footprint in high-growth markets.
Five to six years ago, when we developed the thousand line, it really strengthened our portfolio of CIJ printers. Joakim Weidemanis , the Group Executive for Product ID, last year shared with you how we're using marketing to accelerate growth. Really, over the last 12 to 18 months, our product development has been one of our major initiatives for investment. We've had 14 product launches in 2014. I'll highlight a few of them for you here. First, a label print and apply product expands our presence on the packaging line. The intelligent motion capability within that is patented, and that came from collaboration between our automation businesses and Videojet. It really has us positioned well to expand our presence around the packaging line. That's important because most Videojet customers don't buy a single technology for their facility.
They have multiple technologies. Our intention has been, and will be, to maintain the broadest, most competitive product portfolio in the marketplace. Our thermal inkjet product line was launched as well this year. We have proprietary technology around the cartridge and some of the ink solvent combination for very difficult-to-print applications on tough substrate, particularly for the pharma market. We've been very pleased with how this product line has been accepted in the marketplace and has been a nice grower for us this year as well. We also announced at Pack Expo in November our move into remote service and remote diagnostics with our CIJ printer line. Our customer's production lines move very quickly, and sometimes our service people take hours to get there. We're developing solutions that we can remotely dial in and solve in minutes.
This is the first-generation product. It's the first in the industry. We'll look to continue to expand that. Service has always been a strength for Videojet. Our field service force of over 1,000 associates is by far the largest in the industry, and clearly a competitive advantage. Today, we think the remote diagnostic capability can address about a third of the most common problems that our customers see with printers. Again, we can dial in remotely, transfer control of the printer to one of our inside service techs, and solve about a third of the problems we face today. We look to increase that over time, and certainly expand it out over the rest of the portfolio as well. Service has been a competitive advantage, and it is certainly something that we're continuing to strengthen.
It's been one of the reasons why Videojet has been a strong market outperformer and share gainer over the last few years. Turning to Esko and our software, as you know, we acquired Esko 3.5 years ago. It put us deeper into the packaging market. Part of Esko's business, the primary part of its business is pure software for packaging management. The packaging supply chain has many different players in it. We have design agencies and brand services companies. There are printers, there are converters, there are logistics companies, but it all starts with the brand owner. Many of these are consumer packaged goods company. They're the ones driving the supply chain and really paying the bills for the supply chain.
What Esko software tools do is help put more control in the hands of brand owners that allow them to make packaging changes faster, with higher quality, and add a finished product on the shelf that looks like it does on the design table. Hopefully at the break or after the presentation, Susie and Emily from Esko can give you a full demonstration of some of the Esko software capabilities. Some of the major elements of our software portfolio are WebCenter, which is workflow automation. It allows collaboration throughout the value chain within brand owners with their suppliers. ArtiosCAD, which is structural design.
Automation Engine is what takes a flat design of a package and converts it into a three-dimensional object and makes sure all the steps are done properly and the printing is the way it's supposed to be, so the package looks like it should on the shelf. So those are the key elements of the Esko software. Over the last couple of years, and frankly, one of the first decisions we made around investment with Esko back in 2011 was to invest heavily in brand owner capabilities. Again, they start the packaging value chain. Our lean software development tools have helped develop new software products and capabilities, primarily around 3D capabilities. That's been a heavy investment and really strong feedback from brand owners of the additional capabilities that it can give us.
I've got a little quick demonstration or video that shows the capabilities of our 3D software today. These are just some of them. Basically, we start with a consumer and their view entering a retail store. These are retail stores that can be customized to a specific retailer or a more generic template just for their observation. It helps show packages on the shelf. You can do competitive comparisons and lineups and simulation, whether that's a initial draft of a concept or a finished product. At the end of the day, it puts the consumer first and helps brand owners develop packages that are gonna help them win retail shelf space. As you all know, it's extremely competitive environment, and everything for them is about shelf space and gaining share. We'll continue to develop additional 3D tools.
We've got some examples for you on some monitors out in the lobby. This is an area that, as you can see, we've had tremendous success with. Most of the leading global brands are working with some Esko solution, and we see plenty of runway ahead, both in developed and high-growth markets. It's not only Christmas season here in New York, but it's also color season. As last Thursday's Wall Street Journal evidenced, it was the 2015 color of the year. The color is Marsala. It's on my tie. It might look like some of the wine in your wine glasses at the cocktail reception. We get wonderful publicity from this, great coverage in the general media. That's all nice, and that's great, but it really helps translate into business results as well.
It solidifies Pantone, which is an iconic brand, frankly, one of the strongest in the Danaher portfolio in terms of relative market share. It helps drive new sales of color palettes and licensing opportunities. Pantone has been a wonderful growth business for us in the 2.5 years since we acquired X-Rite. In 2014, our growth will be in the very high single digits in Pantone. It's a portion of the X-Rite portfolio that is really, really solid for us, and we see lots of opportunities in the future, including with PantoneLIVE, which we shared with you at our Product Identification Investor Day in Chicago last year. PantoneLIVE is really digital color standards in the cloud.
Brand owners, printers, converters can share the exact same digital information and access the exact same digital information regardless of what the ink and the substrate combination are, because those things vary throughout different processes and controls. PantoneLIVE is being rolled out. It's a long cycle with brand owners. They're adopting. They're bringing their supply chain along. Ink companies are on board as well. It's, it's a way for us to continue to leverage the Pantone brand, but also help improve an industry, take cost out and improve quality, again, for better finished product on the shelf and market share gains for retailers. Lastly, the DBS journey is still fairly early at Esko and X-Rite. As you can see, we've delivered nice margin improvement, certainly on the operational side, with cost improvements, supply chain improvements.
Late last year, we consolidated the X-Rite Asia manufacturing facility into the Videojet manufacturing facility. Plenty of DBS runway ahead on the cost side, we're really focused on growth in these two businesses and using our DBS Tools to accelerate growth in Esko and X-Rite. Esko has been a mid-single-digit grower for a long time. We've been able to take that into high single digits. We see that continuing. X-Rite has been more of an inconsistent grower in the past before Danaher, we're currently driving that business into the mid-single-digit growth rate. Our growth tool focus, whether it's feet on the street and go-to-market, expanding our high-growth market teams, product development, this is all underway at Esko and X-Rite, and it's been a wonderful accelerator and expansion for Product Identification. We're pleased with where we are.
We think our best days are ahead in Product Identification. Our product development investments are paying off. Focus on software and the capabilities that Esko has brought us has been a real boost to our growth and margin improvement. The DBS journey, like it is across all of Danaher and Industrial Technology, continues to generate opportunities for improvement, and we're excited about the future. Thank you, and I think Tom's going to come back up, and we're ready for another Q&A session.
Thanks, Dan. Yep. It's a good-looking tie.
Hey, thank you.
I'll look for my tie under the tree in a couple weeks. Product Identification, I think another great example of building a platform along multiple strategic vectors. Building out from an exceptional position in marking and coding, extending that position into the work of brand owners, and helping to integrate what are sometimes challenging and unique workflows around packaging design. I think but one more great example of how we build out strategically robust portfolios of businesses at Danaher. Nice job to that team. At this point, I'd ask Jim Lico to come back up. Henk's gonna come back up. And our three early presenters of the afternoon will take questions for the next few minutes.
All right. He or she who has the microphone, I think.
We're gonna let them pass the microphones around.
Thanks. Maybe a question for Henk first of all. I guess there was a perception that Danaher wasn't, you know, overly enamored with the high-end Dental Implant market before. Obviously, Nobel Biocare happened. Is it a change in the market view, or it's really a view that you can bring a lot of change to the market share of Nobel itself?
I think we had the luck when we thought about the implant business to really look at that market first through the value segment lens. Through our investment of Implant Direct, at the joint venture that we have today. As we looked at implant dentistry, and we looked at long-term the market growth drivers in that business and what will happen to that market over a long period of time, we came to the conclusion that both the value and the premium segment would grow for a long period of time. Implant dentistry is still a fairly under-penetrated segment of the dental market. Markets like North America, particularly here in the U.S., but also markets like China are gonna grow for a long period of time.
Then when you look at how different players add value to the clinicians, we concluded that there is a long growth rate for the premium players as well as for value. We clearly believe that within that premium segment, Nobel is incredibly well-positioned, not only because they were the pioneer of implant dentistry, but also because of the digital capabilities today.
Thanks. Dan, just quickly, the automation business, you know, has had a lot of sort of tweaks and changes to the portfolio. The business as it is today, how's the organic growth there been in the past three or four years, and how do you see that changing from here?
Certainly in the last few quarters, we've said we've been in a low single-digit growth rate. We think that's an area we can sustain. With the divestiture that we made this year, what it really does for our Kollmorgen business is focus it on the broad industrial automation. It had been off in some other markets, not really driven with that sort of consistency. We see some good runway there. Fundamentally, that's a low single digit sort of business, and we look to add some share gain on top of that, and we think the focus that we have with the portfolio today will allow us to do that.
Jim, can you maybe give us an update on what you see in Tek instruments end markets? We had, you know, a modest improvement in order rates this year, you know, as that continues. Tom talked about, you know, going through the portfolio and strengthening the walls around businesses. I'm just wondering, you know, how do you strengthen the wall around Tek?
Thanks, Nigel. First I think we've clearly seen some improvement in the second half here with low single digit growth. I think some of the things we talked about relative to some of the innovation we brought to the market in the last few months is really accelerating that, improving that, bringing that growth rate to bear, and we think that that can continue in 2015. I think that I think it's really a twofold strategy attack around building walls. I think number one is continuing to leverage the technology and innovation that we have in our current installed base, and I think RF is a great example of that. I think number two is we see the position with Fluke and channel partners as a way to continue.
If you look around the world, we still continue to be able to build a larger presence with a lot of those channel partners. The value proposition that we offer in that place, I think, in those places really gives us an opportunity to continue to do that. One around product technology, the other really in a go-to-market way.
Just a question on digital technology. It seems your thinking has been evolving around this. Should we be thinking about digitizing opportunity? Is it an incremental growth opportunity, or is it just part of doing business these days, that's what you have to do to keep up with the market? And the second question, given all the investment you have to make, is this something that enhances returns on capital down the line?
Anyone of our three?
Why don't you start? You want to start.
I think in dental, the digitization of the clinical workflow is clearly a long and a long, long-term growth driver in dentistry. We're still very early in that digitization. While the image capture through cone beam CT and 3D x-ray capabilities is clearly more advanced, when you look at the actual treatment opportunities and the treatment workflow is still in its earlier stages. To some degree, in dentistry, it's almost a generational thing because you need to really train a new set, a generation of dentists on these new technologies. I think for us in dentistry, it's really a trend that will be there over a long period of time.
I think with the Industrial Technologies portfolio being very, very wide, perhaps we see the broadest range of opportunities. Some are clearly incremental, we also believe some are much more significant. PantoneLIVE is one example. Connecting devices that we have in our installed base, it's really just gonna open up a lot of opportunities to add value, to help change workflows. I think we'll see incremental opportunities, but we do believe there are a handful of businesses that have some fundamentally game-changing opportunities with this technology that's available today.
I would just add maybe a little bit more broadly around the corp. I mean, I think when we look at the whole digital strategy that we've got and we're trying to drive within our businesses, I think what you see is across a range of portfolio with the strong position that we've got with brands and installed base, it's really a place where we understand workflows. When as you migrate to sort of these software businesses, if you understand the workflow, there's a lot of value you can add.
Now, that means we may have to augment that with M&A to make sure we've got some technology. The Gilbarco Veeder-Root example where we bought FuelQuest in order to make sure we had fuel logistics is a good example. So, I think the combination of organic innovation investment and with what we're doing on the M&A front positions us pretty well because of our strength in the installed base.
Hi.
Hello?
Hey. Over here on your left. Hi. Just a question for Jim, and then one for Henk. Jim, on the Tektronix side, one of your big competitors, you know, earlier this year recently kinda spun out and now stands alone as sort of a independent player for the first time in a while. At the same time, they would argue at least that they were, you know, somewhat starved for resources to keep up with the innovation curve. How do you guys look at the kinda competitive landscape on that front into 2015? Do you need to ramp up your R&D spend to stay ahead of, you know, a stronger competitor?
Well, I think that we have ramped our R&D spend on our side of the house for a while now. I think that it's not just about ramping up your R&D spend. I think it's leveraging strategically the advantages you have in the business. We have a lot of good competitors. I wouldn't, whether they're independent or they're private, or they're part of a publicly traded company, I think good competitors are throughout the industry. We don't reposition. It's really about the game we're going to play and not about the game someone else is going to play, or the capital allocation method that they have.
Got it. Henk, a question for you on just the U.S. dental market. You know, it seems like, and you touched on this briefly, the DSOs side of things. You know, there are some of these organizations that look to be kind of having very aggressive plans to double, maybe, more than that kinda their store counts. It seems to me that the channel, you know, in U.S. dentistry could be changing significantly, perhaps to your favor. How important is, are DSOs to sort of your ability to grow at or faster than the U.S. market? What's the operating plan there?
Yeah. We, you know, DSOs in the U.S. have clearly been a segment that has been growing and has been growing faster than the general market. We estimate that maybe DSOs today have roughly 10% of the market, so it's still relatively small. We actually think that our position, which is a broad set of consumables and technology that we can really provide to these larger group practices, and they have typically a pretty broad set of needs, positions us incredibly well to take advantage of that growth that we believe will be there in that DSO market for quite a long time.
One of the trends that you're seeing with some of these DSOs is that while many of them started more with general restorative type of services, some of them are now starting to branch out more into the specialties. Again, that positions us incredibly well to not only provide them with digital imaging solutions that they can run in multiple offices, but also provide a broad set of consumables to really further enable them and be efficient in running their practices.
In the room over here.
Thank you. A couple more questions on Dental for Henk. You mentioned pathway to 20% margins. Maybe a little more color on what drives that and how much of that margin improvement is related to Nobel. On Nobel, gross margin 75% sounds like operating margins are mid-teens. What's the opportunity to kind of take operating margins up there? Could it be a significant expansion of margins here?
Yes. Yeah, let me try to answer that in two or one go. You know, I've been running the Dental platform now for a while, and I think many of you have heard this before. We continue to find the right balance between investing in places where we can drive incremental growth, such as high growth markets and investments in more innovation, while we have continued to drive the margins up in the platform, almost 500 basis points in the last five to six years. In the core business, if you wanna think about it that way, that operating approach is not changing at all. We're gonna continue to drive the margins up on our way to 20%. That will be a constant.
With Nobel Biocare, very high gross growth margin business. And a team that has been working on, and you've seen their margins improve over the last couple of years. We really believe that by handling that team DBS or teaching that team DBS and working collaboratively with that entire team, we can substantially accelerate the rate of improvement. That in turn should help the entire platform accelerate the margin expansion.
This looks like the hook coming.
All right.
All right.
Thanks, guys.
Thank you.
I think we'll take about a half an hour break here. Got a great set of product demos representing all five of our segments outside, coffee, food. Let's be back here at 3:00 P.M. to get started with the rest of the program. Thanks.
If we could have everybody take their seats. Thanks. Welcome back. I hope during the course of the break you got a chance to visit some of the product displays and demonstrations out in the lobby. If not, a couple of those may still be in working order by the time we break later on. I think really those represent one of the three key priorities we talked about through the early part of the afternoon. That is driving organic growth through new product innovation and product development. I think there's some terrific examples out there. One of those examples out there was obviously from our Water Quality platform and from the Hach business.
Mark Beck is gonna come up here in just a moment and share with you a few more details about the Water Quality platform and its performance and its potential going forward. Mark's the newest member of our leadership team. He joined us earlier this year, I think represents the commitment that we have to continuing to build great talent and deepen the talent bench across the corporation. Mark, welcome, and why don't you give us an update on Water Quality?
All right. Thank you, Tom. It's a real pleasure for me to be here today. As Tom said, I'm the new guy. I joined the company back in April, and I immediately jumped into the Danaher immersion program. If you were here last year, you heard about this as we described DBS in detail. Immersion is a unique program, I haven't seen it at any other company, where you get the opportunity to devote, in my case, three months full-time learning all about Danaher and about DBS. It was a remarkable experience and one that I'll never forget. I completed immersion in July and have been in the chair ever since then, continuing to learn about water and the great franchise that Tom described earlier.
Now, as I've made this transition to Danaher, a question that has been asked of me quite frequently by friends and former colleagues goes something like this, "Mark, we've heard about Danaher, we've heard about this great DBS, and we've heard all the hype. Is DBS for real? Does it really matter? Does it make a difference?" Although I have done this immersion program and have been on the job for a few months, I certainly cannot count myself as a DBS expert. I'm still at the very early steps of my personal DBS journey. I have seen enough, however, to be able to say with quite a bit of confidence that, yes, DBS is for real.
I've seen powerful examples of DBS at work, not just on the shop floor, but I've seen it in places like sales and marketing, in our labs as we do development work on new products, and in our functional groups like HR and finance. DBS truly is at the core of Danaher culture. I want you to know I've also been really frankly wowed by the caliber of the people that I've met at the company. There seems to be a common set of characteristics among the men and women that I've met. We all seem to be passionate about customers, passionate about excellence and continuous improvement, and passionate about winning. Not just winning any old way, but winning together as a team with a sense of pride in the team, but also, I think, quite unique, a sense of personal humility.
I just want to say how grateful I am to be a part of the Danaher team, and how honored and humbled I have been to be invited to join this great company. As Jim mentioned earlier, the environmental segment is made up of two platforms, and he already covered Gilbarco Veeder-Root, I'll be talking to the Water Quality Platform. As you heard, this is a great platform with a wonderful track record and history, I'm obviously pleased to be a part of it. I'm also excited to be a part of Water because what we do in the Water Quality Group every day actually makes a difference in our lives.
If you, if you were here in the city this morning, when you showered or brushed your teeth, the water that you used was actually treated by UV technology that was developed, manufactured, and installed by one of our companies, Trojan Technologies. What is it that we do in the water group? We develop, manufacture, and sell products, instruments, sensors, and reagents, chemicals, equipment that is used to test water, to measure water, to do analysis on the water, and to actually treat the water that is used all over the world. There are three major companies in the water group. I've already spoken to Trojan, which is the world leader in UV technology for water treatment. We also have ChemTreat, which is expert in designing custom solutions, particularly in the industrial segment.
And Hach Lange, where it all began, is the market leader in making instruments and sensors for testing and analyzing. All of these companies in the Water Quality Group benefit from very attractive long-term trends. Things like regulators around the world stepping up, raising the bar and stepping up the way they enforce those regulations. A general sense of greater concern for our environment. In high-growth regions, more and more people are demanding that they have clean water every day, and that's driving opportunities for us as well. 2014 was another solid year for the Water Quality Group. Year-to-date, core growth was in the mid-single digits, which is better than the market. We've also enjoyed expansion in our margins, and we've done this by applying DBS Tools to improve things like pricing, our procurement processes, and driving manufacturing efficiencies on the shop floor.
In addition to the financial performance, we're very pleased to say that this year, just a few months ago, we got our very first orders for the Trojan ballast water treatment system. This is a critical and very important milestone for the Trojan business. We've also completed an acquisition which helps expand our footprint in high-growth margins, and I'll talk about the Aguasin acquisition just a little bit later. It's a great platform with a great history, but what I wanna tell you is it also has a great future, and in fact, in many ways, it feels like we're just getting started here. We're gonna take this business, this platform, to a whole new level by focusing on the three things that you see here. I will elaborate on each of these, starting with innovation and new product development.
Over the past three years, across the water platform businesses, we have launched over 100 new products. I'd like to highlight one of those, which Tom mentioned earlier, which is called PPA. To understand PPA, let me first describe what it is our customers are trying to accomplish. Regulators require drinking water providers to go out and test that water at various locations in the distribution network. That way, no matter what part of town you're in, the water's being tested to make sure that it's still clean after it was delivered to you. The drinking water suppliers, often municipalities, dispatch operators all over town to conduct these tests. They have to test more than just one thing. There's multiple parameters that they're testing.
Typically, they would carry two to three instruments, a whole bunch of different reagents, and conduct these different tests. There's a very specific protocol that must be followed exactly right for them to get the correct answer when they run these tests. Now, our customers told us they were concerned that some of the operators may not be doing these tests exactly right every time. We applied a DBS principle to a customer problem. There's a DBS concept called poka-yoke, which simply means, it's a Japanese word that means to make something foolproof, to make it so easy to do that you can't mess it up. We've tried to apply that principle to this particular work stream and created the PPA. What I'd like to do now is show you a two-minute video which highlights the old way versus the new way.
Let's run the video. Whether you've been an operator running these tests for 10 years or it's your first day on the job, you can get accurate, repeatable, reliable results in 1/3 the time. This technology is only available from Hach, and none of our competitors have anything like it. Hach has been the leader for decades in providing state-of-the-art sensors and instruments for testing water. It only makes sense that we would be the ones to lead out in going beyond simply getting a test result, and actually using that information to help our customers run their operations better. With things like the RTC, we can move beyond simple test results and actually provide decision support or even automated decision-making. RTC stands for real-time control, and what it does is it continuously monitors the customer's process.
When that process begins to move out of certain parameters, out of control, it can send signals that automatically make changes to the process so it comes back into compliance. This not only assures that the water is treated appropriately, it also reduces the customer's cost for things like energy and chemical usage. Prognosys is another new technology that we're bringing forward. This helps give our customers a greater sense of confidence in the calibration of their instrument. Without Prognosys, it's pretty common for our customer to get a test result that's unfavorable and say, "I wonder, is this the calibration on my instrument, or is this a problem with the water? Which of these has changed?" Thanks to Prognosys, they'll have the confidence in the calibration to invest their time on looking at the problems with the water and get that corrected quickly.
Our customers, like everyone in the world, are increasingly turning to the Internet to get the information they need to do their jobs better. We've been building our capabilities in the digital realm as well. We now have over 1 million visitors a year to our 38 websites, which are available in 19 different languages. 60% of our customers start with a visit to a website. At Hach, we also have the ability, as those visitors turn into leads, to track them through every step in the sales process all the way to close. That kind of information helps us to optimize our marketing initiatives and to accelerate growth. I'm sure you're all aware that we've been investing significantly in high-growth markets, as you can see here, it is paying off.
We've invested in increasing feet on the street in these regions, improving the quality of our local leadership, and particularly in China, we've been able to develop, design, and manufacture products that are specifically created for the Chinese market. Today, about 20% of our sales in China are products that we've developed there. We've also been increasing our presence in these high-growth markets through selective acquisitions in these regions. I'd like to tell you a little bit more about the most recent of these, which is Aguasin. Aguasin is the market leader in the Chile water treatment market. They also serve other countries in the Latin American region, but they were acquired as part of a very deliberate strategy to help us grow ChemTreat geographically.
However, as we did this acquisition, we've learned that Aguasin has a very broad set of capabilities, and other Water Quality companies have now began to identify opportunities through working with Aguasin to help them grow their businesses in the region as well. We are applying DBS as well as the ChemTreat commercial sales model to this business, and we're already beginning to see some results from those activities. As I wrap up, I would just like to invite you to recall a few things. First of all, DBS is for real. I've seen it, and it really does make a difference.
Secondly, we've got a great Water Quality platform, but we are just getting started. By focusing on the three things you see here, we will continue to grow and improve these businesses. We'll be focusing on new products. We'll be focusing on capturing opportunities through this digital transition, and we will continue to win in high-growth markets. Thank you for your attention.
Thanks, Mark. A wonderful platform with outstanding growth potential in the years ahead. When I introduced Mark, I talked about the terrific addition that he represents to our executive leadership team. An example of building talent and deepening our bench. The next two presenters are further evidence of that bench and our development of talent. Arnd Kaldowski, who has led the Beckman Coulter business for the last couple of years, and now has responsibility for the Diagnostics Platform. Rainer Blair, who's come up from AB SCIEX, now leads our Life Sciences Platform. Both two great examples of talent taking on added responsibility and both doing a terrific job. Arnd's gonna kick us off with a look at what's going on in diagnostics. Arnd?
Thank you, Tom. Good afternoon, everybody. It's a pleasure to have the opportunity to share the Diagnostics businesses and the highlights of 2014 with you. In the Diagnostics Platform, we're serving clinicians worldwide with critical tools they need every day to diagnose patients and decide on the right treatment path. We do that in three segments of the IVD market through the three operating companies we have in that platform. Beckman Coulter focused on what I would call the core lab, providing tools for the standard blood testing that may be used from Quest Diagnostics or LabCorp when you get your blood drawn there and the test done. Radiometer in critical care and blood gases throughout the hospital, more and more in Point-of-Care physicians.
Leica Biosystems in tissue-based cancer diagnostics, provided in anatomical pathology in order to detect cancer and decide on the treatment path there. From a revenue breakdown perspective, well distributed from a geographic perspective, with a third of our revenues coming out of high growth markets. Looking at the business model, the recurring part of our revenues is 80%, 80% in consumables as well as in services, and often tied into five-year contractual commitments of the customer, so a very steady revenue base we have. The market we serve grows in mid-single digits. Significant growth drivers here, they haven't changed over the last years. Directionally, high growth markets, investments into preventative and predictive medicine.
From a lab perspective, continued demand for automation solutions while it gets harder and harder to find skilled labor, and on the other hand, having higher cost pressures in the healthcare system. The vast majority of our business is either in the hospital or in the commercial laboratory environment. Highlights for 2014. 2014, a good year for us. Looking at the Beckman Coulter Diagnostics business, which came to us, more than three years ago, improved core growth, improved profitability, and improved product quality. Mid-single-digit growth, which we have achieved, in the middle of this year, then an OP margin expansion above 150 basis points, really taking full advantage of DBS. Radiometer and Leica Biosystems continue to grow share in their market segments.
Radiometer with the fifth year in a row at high single-digit growth, taking advantage of a strong product portfolio, but also commercial execution and investments into high growth markets. Leica Biosystems with 2 x the market growth in advanced staining. That's the largest segment in the anatomical pathology market and the fastest-growing part of the market. We continue to invest aggressively into the growth drivers, namely the R&D side and the high growth markets. Year-over-year was a 10% increase in the spend in the platform in those two dimensions. Last but not least, two acquisitions this year, which help us to broaden the addressable market. One being Devicor, which closed last year, excuse me, which closed last week. I'll get to the strategic rationale for the Devicor acquisition in a second.
The pending acquisition of Siemens Microbiology, allowing us to enter another lab within the hospital. We can again deploy the same logic of workflow improvements, as well as deploying DBS in order to drive opportunity together with our customers. What you will hear, I will focus first on the organic investments into new product, as well as the go-to-market. Secondarily, I want to spend a little time on the Devicor acquisition and the strategic rationale and how that fits to the Leica Biosystems franchise we have. Last but not least, want to share progress with DBS in the Beckman Coulter Diagnostics environment. From a growth investments perspective, a significant progress in Beckman Coulter Diagnostics from a new product launch perspective. We have been continuously strengthening the number of resources as well as the processes and new product development environment in Beckman.
As Tom pointed out earlier, that was relatively low when we acquired the company. This year, really a breakthrough with regard to the number of sizable new products we're bringing to market. Three vectors, which I wanna talk over. One, continued focus on automation, bringing out the connectivity for the hematology instruments. If you had a chance to see the products outside of the room here, the ability to link multiple instruments together, allowing the user to load up to 400 samples. The system takes care about the level loading, and it's a full walk away for 400 samples in the laboratory.
The second one, we received FDA clearance for the Power Express, which is the next generation of our lab automation. In a core lab, imagine you have something in the middle, which is kind of a conveyor belt solution, pretty sophisticated, and you can hook up a large number of analyzers to that. Here, having a high throughput and a fast turnaround is important for the customers. The Power Express, relative to the preceding solution we had, almost triples the throughput, so a significant step forward from an automation perspective. Exciting two launches on the menu expansion side in Beckman. Vitamin D. Vitamin D deficiency, a significant issue in the worldwide population. One estimates about 1 billion people in the world have vitamin D deficiency. More and more are testing, and more and more input into the right treatment, particularly on bone disease.
We now enter that market, currently just outside of the U.S., but expecting to have that availability or that product available in the U.S. at some point of time, really opening that market for us in which we didn't participate. The second one, on the menu side, automated AMH, measuring what's called the ovarian reserve. This is a good indication for fertility or infertility. One estimates that about 10% of the couples in the world are challenged with either low fertility or infertility, a significant size market where the diagnosis helps to decide if that couple needs support with regard to fertility and the right treatment path. A significant market, with the automation of the product, the availability to the standard laboratory being able to conduct this test.
The third vector here, not yet launched, but as Thomas pointed out, a significant investment organically for Beckman and Danaher with the VERIS, a fully automated PCR system, which will bring us into the molecular part of the diagnostics market. Again, focus on the instrument side, on the throughput, turnaround time, and ease of use. Relative to existing instruments, we expect the turnaround time to be half, and we expect the need of the user to interact with the system to be reduced by more than 50%, and really paving the way for PCR to make its way into the core lab, into the central lab in the hosp ital over time. We're going to launch with a virology panel in Europe next year, and then we'll broaden the menu. The product has that capability to further diseases.
From a revenue perspective, we do expect that to be a business for us above the $100 million mark over time, so really an exciting opportunity to broaden what we bring to the customers as well as to our P&L. Leica Biosystems, two significant launches this year. The FDA clearance for HER2 IHC, broadening our menu in the breast cancer environment. Then with the availability of the digital pathology imaging platform, coming from Aperio as a software, as a service, allowing customers to easily share images independent of the location of the tissue and share that amongst physicians globally and pay for that as they go on a usage model. Second topic I wanna touch is on the acquisition side. You may have seen that we've acquired Devicor. Devicor, the market leader in vacuum-assisted breast biopsy.
A market which is about $400 million in revenue globally, growing mid-single digit. Growth coming from an increasing incidence rate in breast cancer, but at the same time, a substitution of the classical procedure, which was open surgery to extract the tissue from the human body for the diagnosis to the vacuum-assisted tools. Vacuum-assisted gives you a faster procedure and easier procedure for either the radiologist or the pathologist and also reduces the risk of complications for the patient. Now how does it fit together with the Leica Biosystems business? A big issue in cancer diagnostics is degradation of tissue. When you extract the tissue out of the human body, a process of deterioration of the tissue happens. Liquid gets pulled out of the cell. The cell structure changes and deteriorates.
Your diagnostic result may be less good from the quality, or you may even have a tissue arriving at the lab which you can't diagnose and you need to send back, find the patient again, and do another biopsy. For us to close that loop from the extraction of the tissue to the lab and making sure we control the sample and provide the right fixation throughout that process until the sample arrives at the lab, an opportunity to combine those workflows and also drive for higher diagnostic outcome, ultimately impacting the Mammotome sales, that's the product name of the Devicor product, as well as the Leica Biosystems sales. Last point on Devicor, certainly an attractive business model, high margin and very high consumable share in their revenue. That's the workflow.
Don't wanna go into much detail, but really a drive towards a higher diagnostic quality at the end and a broader coverage of the total workflow through Leica. DBS at Beckman DX. We're now more than three years together with Beckman, and we've been working with the highest priority on improving the quality as well as improving customer satisfaction. That's where we deployed a lot of the thinking and a lot of the DBS focus. We started off with bringing a couple of colleagues who were longtime in Danaher, a lot of Danaher experience, a lot of DBS experience into Beckman, but then invited the Beckman associates to join, to learn, to join the culture, and to work on specific topics and critical issues for our customers. The significant achievements over the last three years, four which I wanna highlight.
First one, the remediation of our quality management system. Two major impacts. A, we were able to close out the four warning letters we had. Secondarily, we got the troponin back on our instruments and able to sell that in the U.S. last year. Second one, the graph on the right-hand side. When we acquired Beckman, there was a lot of frustration on our customer side about the lack of ability to consistently deliver reagents and getting them out of the manufacturing and towards the customer. If you imagine a customer laboratory which requires to get the diagnosis done on time, not having certain reagents is a big problem. Over the last three years, we reduced the number of stock-outs of reagents by more than 75%.
Going by the VOC we do, have moved from behind the competition to significantly ahead of the competition ability of the delivery quality, which is critical for the lab. Deployed the Danaher Reliability System to all the instruments. Uptime important for the customer. Reliability also important for the service costs we have on our side. We were able, in the last three years after starting that engine, to improve the reliability of our instruments by a factor two, reducing the number of failures by more than 50% in average across the product portfolio. More to come. Clearly a place where we wanna differentiate against the competition because it's that critical for the customer. The last point here, by deploying DBS to the field service processes and the escalation procedures measured in VOC from the customer.
There's an external party who does that for the industry, IMV. We've moved from a number four position in chemistry and IA to a number one position in the ranking of the customers of our service delivery over the last three years, which is quite an improvement and very important for our customers. Clearly, DBS driving the customer satisfaction in Beckman, ultimately translating into better customer retention as well as better competitive win rate. With it, we were able to turn the tide from losing revenue in the U.S. year-over-year to, since Q2, having a positive growth in the U.S., and more to come based on the installed base we're building this year in the U.S. Obviously, DBS for customer satisfaction, also for the productivity side. A couple of highlights here from the journey at Beckman.
Margin expansion in the first year above 300 basis points. Since then, 150 every year. Working capital turn improvements above half a turn every year. While we're improving the operating margin, we were able to invest about 200 heads every year into R&D, our feet in the street, and high-growth markets are really fueling the growth engine for us out of utilizing DBS. To sum up, new product launches and go-to-market investments to continue to drive the growth. Two acquisitions this year to broaden the addressable market as well as, in the Devicor case, improve the quality of the diagnosis. DBS really an engine to drive the improvements at Beckman Coulter DX. We're somewhat at the beginning, more to come, but definitely good performance over the last three years. Thank you.
Thanks, Arnd. You know, speaking as somebody who had the privilege of being the president of Beckman Coulter for two years, post the acquisition, it's really exciting for me to see the great progress that Arnd and the team have made, really starting to kick organic growth into gear on the back of some terrific new product innovations. Now really adding the second significant bolt-on to Beckman Coulter. We did the IRIS acquisition, which added urinalysis not long after the acquisition. Now with the addition of Siemens Microbiology, I think continuing to build out a terrific portfolio around Beckman in the interest of a long-term competitive advantage in diagnostics.
Speaking of another leader who was arguably another top grade to his predecessor at AB SCIEX, Rainer Blair, who took my spot after leading that business for a period of time, is gonna give us an update on the Life Sciences platform. Rainer.
Thanks, Tom. Not sure how to interpret it, top grade in that context there, but thanks a bunch, Tom. For those of you that are not too familiar with the life science industry, we like to sum it up with answers for science, knowledge for life, and we really talk about that knowledge for life part. Our customers are working on solving some of those big mysteries around cancer, around Alzheimer's, diabetes, kidney disease, you name it. Pretty exciting stuff. Also such big tasks as protecting the food supply or the water supply. The life science industry is broadly set up, and it's a pretty exciting place to be, chock-full of innovation. I'm really happy to be here this afternoon with you to share some of the good news, so to speak.
The Danaher Life Sciences platform consists of four operating companies, Leica Microsystems, so microscopy business, AB SCIEX, Mass Spectrometry, Molecular Devices, high content screening and plate readers, and then Beckman Coulter Life Sciences, where we do Flow Cytometry, centrifugation, automation, and some other lab solutions. We operate in about a $15 billion market. I'll come back to that in just a little bit. We're about a $2.5 billion platform. If we just have a quick look here, we have nice balance in our geographic distribution of the $2.5 billion. You can see also a very large respectable position already in the high growth markets, which we continue to strengthen. From a recurring revenue perspective, we're already at 35% with a view towards enhancing that as we go forward. We really like this market.
An accessible market, $15 billion, mid-single digits, great macro drivers. The continued increase of chronic diseases and infections or increased regulatory oversight and testing requirements really are driving higher testing volumes. We really do see that growing in developed markets as well as the high growth markets. Well, our customers, some of them you know well. They're the classic government institutes such as the FDA or the CDC, there's also academic research institutions and reference labs. Increasingly, in the applied markets, we also see food companies in their testing of their food quality to ensure that their brand isn't impacted. Large variety of applications here in the life science and industry. Allow me just to give you a quick update on 2014, some exciting highlights.
We continue to invest in new product innovation and introduction. Perhaps during lunch or the break, you had a chance to see some of those out there in the lobby. That's across the board. In all four operating companies, we had major product launches here during the course of the year, and those are tracking for the most part, to expectations. We continue to increase our investment in high growth markets, already thinking about the second tier of high growth markets, for instance, I think the Middle East, with in excess of 15% growth, but also Brazil. Now we're approaching a 30% level of investment in digital marketing, really enhancing our reach into markets, using digital means. Pretty exciting stuff that we have going there, all supporting our growth.
If we look at another highlight here, our Leica Microsystems operating company drove mid-single digit growth here and operating margin expansion well in excess of 100 basis points. Perhaps just as exciting, another Nobel Prize winner here, Professor Stefan Hell. In this particular case, he's also a collaborator of Leica Microsystems, helped develop parts of this technology for us, the STED confocal technology, which is a high-resolution microscopy. This, by the way, is the 3rd year in a row that a Nobel Prize winner has used Leica Microsystems solutions. We're really excited and very proud of that. If we look at AB SCIEX continues to outperform the market with mid-single digit, high single-digit core revenue growth.
We continue the parade of new products, which was started 3.5 years ago with the launch of the 6,600 and the 3,500. Again, something that you can see outside. Then, of course, a next generation collaboration, we call it OneOmics, with Illumina. For those of you who are not familiar with life sciences, Illumina is a leading company, and the leader in genomic instrumentation. I'll come back to that in a little bit more. We're pretty excited about how we finished 2014, and we feel good about how that sets us up for 2015. I'm gonna take AB SCIEX, if I can, as an example of how we try drive growth both at the top and the bottom line and create value.
We'll talk about really three pillars here, c ommercial execution and enhanced product innovation cadence, as well as this Illumina partnership as an example of a way to create and enable new research fields, so new fields for new growth. Then we'll talk about DBS, the engine room, and how we make things happen. Let's start with the commercial execution. We leveraged the Danaher Business System at AB SCIEX in order to outperform the market. You can see that on the right with a sustained above-market growth rate where we're taking share. We did that by certainly improving our market coverage, the standard things that have been mentioned, feet on the street, tighter distributor management, but also new techniques such as transformative marketing, which you heard more about last year, and leveraging systematic digital marketing in order to increase our visibility.
Think of it this way, seeing more deals. If we then look at conversion, i.e., the win rates of those deals that we see, here we focus primarily in two dimensions. One, from a regional perspective, two, from an application perspective, to see where we are not meeting our expected win rates, and that's, of course, a great opportunity to enhance your win rates. Immediately, it jumps off the page. You can see the leverage that you create by one having, seeing more deals, and on the other hand, winning more deals. That is what gives us the leverage here in order to outperform the market in a sustained way. If you have the commercial execution humming, then you've got to feed the fire, of course, and then we've done that here with an enhanced product innovation cadence.
In fact, it's a variable fireworks here. We've launched in excess of 15 platforms in the last 3.5 years. Again, the Danaher Business System is at the foundation of this. In this particular case, we use speed design review, we call it SDR for short, that helps us cut the cycle time to market for our innovations. When we first bought the company, we had a cycle time of innovation of around 48 months. Today, it's six to 24 months, depending on the type of platform or whether you're face lifting or doing a fundamental change. That has significantly enhanced not only our value propositions to improve win rates, but it's also allowed us to access adjacent applications and continue to drive our growth. As you're all aware, the value of information is increasing significantly.
All of the innovation that we're talking about here, of course, includes best-in-class software that accompanies these instrumentation solutions. I'm gonna take a minute here to explain the background to this collaboration that I spoke of. Again, the point here is that we're enabling a new field of research, and the question is, well, what is OneOmics ? Well, when we talk about omics, we talk about genomics, proteomics. The study of genes, the study of proteins. You might speak of metabolomics, the study of metabolites. Essentially, the problem that scientists are trying to solve is they're trying to understand and describe the biochemical pathway from a disease state back to your genetic disposition.
Imagine how that is, how great that would be, if you would be able to connect the dots from your genetic code all the way to a disease state. Let's pick a disease state. Let's call it lung cancer. You would essentially be able to see which proteins are up and down-regulated, there are more or less of based on the genetic, your genetic, fingerprint. Presumably, if you're able to see the causality in this pathway, then you'd be able to do something about it. Interrupt it from a therapeutic perspective, diagnose it earlier as you see it develop. You can see how exciting that would be. There have been some missing links. In particular, while the genetic data has been of high quality and reproducible, protein analysis has not had that luxury.
Protein analysis has been a bit of hit-and-miss over the last decade. It's really through the introduction of the AB SCIEX 6600 combined with the SWATH acquisition engine that we're able to bring what we call next-generation proteomics, so next-generation study of proteins to the market. So, of course, the next hurdle for the scientist is it's too much data. We're now talking about terabytes of data when you're doing population studies that not only need to be stored, they need to be processed. As such, together with Illumina, we have leveraged the Illumina BaseSpace Cloud in order to co-locate proteomic data and genomic data, and with that, create an apps environment where you can now interrogate the data without having to own all kinds of, you know, computer storage and so forth.
All this together then opens up the ability to connect the dots between disease state, create hypotheses. More importantly for us, it opens up a potential new revenue stream with software as a service on the one hand, and of course, because these are proprietary solutions, additional instrument pull-through as well. Really exciting stuff at the true edge of science already turning into a new business model. Now back to the engine room. How do we make all this happen? Our bread and butter, DBS, really helps us create value here. Whether you're talking about safety in your plants, whether they're talking about getting our products to our customers on time, or whether they're talking about enhancing productivity, the rigorous application of the Danaher Business System also at AB SCIEX has created an extraordinary amount of value.
You can see here 40 Kaizens, these continuous improvement events that help us eliminate waste and help us create value. This value, in turn, we send into growth investments as well as to the bottom line, and you'll see that here in the results. This stands for itself as the to-date proof of concept that the Danaher Business System, particularly at AB SCIEX, but also in the other operating companies in Life Sciences, creates some pretty significant value. You can see the extraordinary growth here over the time period. We continue to invest in the future. You can see the R&D investment leveraged here, not only over higher revenue, but a higher percentage. We've expanded gross margins, true value creation at the customer level.
Needless to say, about 1,000 basis points of operating margin expansion over the time period. So, in summary, you can see how we leverage the Danaher Business System throughout Life Sciences. It finds ready and appropriate application in the Life Science business as well. Here you can see it summarized. Excellent commercial execution, enhanced product innovation cadence, and even helping enable new fields of research, along with our bread and butter, delivering excellent operational performance. Thank you.
Thank you, Rainer.
Thanks, Tom.
DBS in action. DBS helping us improve our commercial execution, new product innovation that has led to unique partnerships, taking digital information, combining it for better answers to unlock some of the world's toughest diseases. All of that built on a foundation supported by a foundation of exceptional DBS implementation and operations. A terrific formula that's led to another great success story and really a foundational business in our Life Science platform. Arnd's gonna come up now. Mark's gonna come up. The three amigos are gonna take a few questions over the next few minutes.
Three Amigos.
I like it.
Which one goes first?
Thanks. Question for Arnd especially. To what extent does scale matter in R&D, in life sciences too, I suppose, diagnostics and life sciences, such that a company like Thermo Fisher or others, as they grow bigger and bigger and bigger, does it matter that they get bigger relative to your investment in the businesses? In other words, does it in any way put you at a competitive disadvantage if other guys keep getting larger and larger and having more scale in their own R&D efforts?
Answering on the diagnostics side, not so much the Thermo Fisher competitive environment, but other players. two sets of answers. The one is, I think you need to dissect and segment down what tools you develop and what capabilities you develop. I think it's important that you have the right capabilities and for that, the critical size. I wouldn't like look at the total diagnostics market as a whole, but at specific segments. At some point of time, it is important to have the right R&D capacity behind that, you know, but not across the whole board. I think the second one was said earlier by Tom. There's an element of, if you're in the right range of an investment, better processes, using DBS can give you an advantage.
Having a better strategic leverage point can give you an advantage, you know, f rom a Diagnostics perspective, we feel pretty comfortable with where we sit, the markets we serve, the technologies we serve, the additions we can do on the R&D side, I think we're in a good spot.
I would only confirm that for the life science side. We don't see that absolute scale in itself as the most important success factor. What we see is scale in the application, scale in a specific technology is probably the most relevant in order to be able to drive best-in-class solutions, particularly in life science research. Researchers are looking for the best solution. They're not as apt to just buy on brand. You can almost envision a diseconomy of scale when you have an extraordinary basket of technologies that you have to keep in a leading position at all times.
Yes. This question is for Mark. Mark, can you talk about, or maybe just give us a couple data points, these 15 systems, ballast water systems that you booked this year. Can you give us an average size, perhaps how many customers the 15 orders represented? The last, how is this market shaking out? What's the engineering content that has to go into these individual systems, or are they largely standardized systems?
It's an interesting time for ballast water. There's still a fair amount of uncertainty around the regulations. The international or IMO regulations have still not been ratified. We're close. Most people expect that will happen sometime in the middle of next year. The Coast Guard regulations, they're established, but the timing is not yet established. The way that one's going to work is five years from the day that somebody gets their system approved, then those regulations take effect. We've got this kinda nebulous situation where the market doesn't quite know when to get going. There are some ship owners who are moving ahead, and in fact, we believe the market is already about $300 million in terms of market size, even with this lack of clarity around the regulations.
In our case, to answer your specific question about the 15 systems, they come from two different customers. Typically, these fleet operators are buying systems for the next several years. Most of these have to do with an existing ship that's going to have a ballast water system added to it as opposed to a new build. These are what we call retrofit. They have to be scheduled over the next several years when these ships will be coming into dry dock. People like A.T. Kearney, who study these things, they believe that once there is regulatory certainty, that there will be a significant growth in this market, to the tune of billions of dollars opportunity.
We're excited about our system because compared to the others that are being offered out there, ours uses less power and has a smaller footprint, which gets to this engineering challenge of how do you put a system on a ship that's already crowded and doesn't have a lot of extra room for additional equipment. We have those advantages going for us. We're working hard towards being one of the first to reach the Coast Guard approval, and believe that will happen sometime next year.
Thank you. When you think about the success that you've had with the Beckman acquisition and turning around the business and some of the growth that you're recently experienced in those reference lab, central lab markets, how do you think about the strategy going forward of moving from the reference lab more towards Point- of -Care, the opportunities there, to expand the overall package that you're bringing to the hospital markets, given that's a higher growth market ultimately from a revenue standpoint?
First of all, I think on the core lab, lots of runway and lots of opportunities still for us to come. From a Point -of -Care perspective, we have a Radiometer, not just the blood gas side, but also cardiac solution, which is picking up some nice growth. I think over time, the instrument landscape will change, and you'll see hub and spokes and more opportunity to get more instrumentation to those positions. Not critical right now time-wise.
I think we're looking at the market through the lens of Radiometer and expanding what they are doing there, and we'll take it as we go.
Thanks. A question for Mark. I'd be interested in hearing more about the RTC, the real-time controls. The industry, especially municipal, is in its infancy at using any sorts of automation on this. There's all sorts of places that you all might play in. You own the test side of it, but there's areas in automation. I'd be curious to hear you talk a bit about where in the value chain on this continuous test and treatment that Danaher might be able to play in.
Thank you, Deane. We have had great success rolling out the RTC, particularly in Europe, and now increasingly in Latin America and in North America as well. We're finding the formula that works best for us is to work closely with engineering and consulting firms who are advising the municipality on how to gain efficiencies in their own operations, or the best case is when they're putting in a brand-new system and all of this can be designed in from the get-go. It can be relatively easily applied to an existing plant, but when we have the E&C working with us, our success rate, our win rate is much better. Thank you.
Thanks, guys. Okay. Let's try to wrap things up. Here's what we hope you heard today. Our focus for 2015 and the years ahead will be on the following three priorities that we think have coursed through really each of the segment presentations this afternoon. The first, driving growth by investing aggressively, selectively in the highest impact organic opportunities possible around innovation, around high growth markets, and around the digital world. Optimizing the portfolio so we can improve and sustain our market leading positions. That means improving our growth trajectories and ultimately expanding operating margins. Finally, ensuring that we maintain and sustain and enrich the tremendous capabilities, the culture, and the tools that are represented by DBS, the foundation of everything we do, and really the core of everything that represents our competitive advantage across the portfolio.
What's being passed out is a little bit more detail on the guidance. I'll take you through that here in just a couple of slides. You now have these in front of you, I think with a little backup information. The guidance represents the portfolio with the communications business included in the portfolio for the full year. It does not include Siemens Microbiology, which is still a pending transaction. It includes Nobel, includes Devicor and other smaller acquisitions. Does not include Siemens for purposes of waiting for that business to close. Our assumption going into the year is roughly 3% to 4% organic growth.
That represents probably a slight improvement in where we've been during the course of this year, but generally reflects what we believe will be a continuing slow growth macro environment. If we look across the portfolio in each one of the individual segments, they'll be in a fairly tight band, probably with Life Sciences & Diagnostics and Environmental towards the upper end of that range, and the other segments in the portfolio, probably a bit lower than Life Sciences, Diagnostics, and Environmental. Adjusted EPS growth will be between 7% and 10%. This represents that core growth number dropping through at about 35% and has the amortization excluded, which will represent about $440 million next year, or about $0.46 per share.
The productivity initiatives that we talked about here in the fourth quarter, the benefit of those productivity initiatives are in the number. As I mentioned earlier today, we talked to about $125 million. That number ticks up a little bit. We'll take you through that in January, but we're encouraged by the projects and also confident in the returns that we'll see next year. FX clearly will be a significant headwind. Going into the year, it's looking to be about $550 million in revenue and about $0.11 on the EPS line. Generally, a little bit more front-loaded towards the first half as we've seen more of that course through here in the second half of this year. Certainly a function of the shift in the Euro, but by no means only the Euro.
We've seen it with the dollar versus the yen, versus the ruble, versus the pound, and a number of other smaller currencies. Finally, the tax rate, roughly consistent with where we've been in 2014. In summary, if you look at that on a little bit of a graphical representation, to get to the jumping off point, we back out couple special items. Generally, that's the gain on securities, as well as the difference in the Euro year-over-year restructuring.
We add back into that the amortization, which gets us to that 406 as the jumping off point. We look at what we're spending from a growth standpoint, as well as any wage inflation that's offset somewhat by productivity initiatives around purchase price variance and labor productivity. That represents about $0.06. The FX I just mentioned, about an $0.11 headwind. We see the contributions from acquisitions, roughly $0.15. That breaks down between Nobel, about $0.10, and Devicor and other smaller acquisitions, roughly $0.05. We'll see that number getting to that 15%. We'll see that step up during the course of the year. That number will ramp as we come through the year, getting us to the 15% that you see here.
The benefit of the productivity initiatives here in the fourth quarter is the $0.10. I mentioned that $100 million translate, translates to that $0.10. Then when you take the 3% to 4% core growth range, drop that through at 35%, you see the $0.21-$0.31 that takes us to the $4.35-$4.45 that we're looking for in 2015. With that summary, hopefully a clear one, we will open it up to a final round of questions. Dan is here as well. If you've got something specific, he'll jump in, but otherwise I'll be happy to open it up.
Back here, Tom. It's Davis from the cheap seats.
Hey, Scott. It was a cheaper ticket, wasn't it?
Well, I like to sit in the back.
Okay.
If I fall asleep or spill something on myself, nobody notices. Anyways, good presentation. Thorough. Help us understand what's different about Danaher today versus a year ago. You know, I think I've been to about 12 of these Danaher Days or something in that neighborhood, and they all look a little bit alike. This one looks a little bit different just because there's more talk about portfolio optimization and stuff like that. From your sense, at least, being a new CEO in this role, in your first Danaher Day, I mean, what should our takeaways be that's what's different about Danaher today, you know, that makes it more interesting as an investment today versus a year ago or so before you took the job?
Sure. Thanks, Scott. Well, I certainly don't know that I'm any more interesting than Larry. That's certainly a hard act to follow, as you know, and somebody who's done just an extraordinary job for Danaher over a long period of time. I think maybe what's a couple things that maybe are a little bit different today is, we do have some acquisitions under our belt. $4 billion of capital deployed here, largely in the second half of this year or committed, if you will. I don't think we could've said that. I know we couldn't have said that around the same time last year. We hit a bit of an air pocket there.
I'd say we're that much more encouraged that we come into this year with that acquisition tailwind moving along and I think in an environment perhaps that is a bit more a bit more friendly to some capital deployment than maybe where we were a year or 18 months ago. I think we, I think we've upped the talent on the team with the addition of Mark Beck and the promotions of some of our leaders, so I think the bench continues to get strong. At least as it looked from my seat going through the strategic plans, I think many of these digital initiatives that you heard about today, Scott, have real potential.
It is early days, but the investments that we're making and I think the technologies that are being brought to bear, are very encouraging to us in terms of the ability to continue to move the organic side of the house. Those are just a few things. A lot is the same. It's the same culture. It's the same set of DBS Tools that have served us well over a long period of time. I think in many respects, there should be great confidence taken from the continuity of Danaher from a year ago as well.
Okay. As a follow-up-
Yeah.
You know, the one thing that Danaher has sometimes struggled in the past with, and I know one of my colleagues asked this earlier in a different way, but is core growth and core growth above your peer group. It's arguably been a little bit steadier than the peer group, really Danaher historically hasn't grown much more than global GDP. What is it that gives you the confidence that you can impact that, you know, and you in your new role, that you can really have a tangible impact on core growth? Is it changing compensation schemes? Is it more of an emphasis on sales and marketing from the front end initiatives? I mean, help us just bridge that gap?
Sure.
And understand, is this something new for Danaher that we can in fact think about it as being a above peer core grower as opposed to, you know, the more historical peer levels?
Sure. Scott, I don't know if I'd put the new label on it as much as I would describe it as a continuation of what's really been a story that's been evolving and building and gaining momentum over time. It wasn't that long ago, that we took more questions about why we were growing sort of below the peer average. Now we tend to get more questions about why we can't take it above the peer average. Frankly, we're encouraged by that because it is an indication of some progress.
I think, if you look at the business, particularly here in 2014, while it has been steady, I think you could also look at it and say, you know, with a couple of the things that we just did in terms of adjusting the portfolio, if you did nothing but look at the business ex the Comms business this year, you'd see an even better growth rate, and that would indicate some of that continued progress and some of that evolution of the organic engine in time. I think it's an evolving story. I don't think for one minute that a new CEO 90 days in has somehow transformed the corporation organically.
I am really encouraged that if we continue to make selective, targeted investments similar to those that I mentioned earlier and some that course through today's presentations and adjust the portfolio and optimize the portfolio, we can continue the progression towards higher numbers.
Hey.
Hey, Steve.
Just a couple questions. The first one, why the tighter range, the 3%-4% instead of, you know, usually 2%-4%? Then on the second question, I didn't really see a slide in there. You guys used to have a slide on, you know, the target financial returns, or maybe you didn't have a slide, but it was kind of understood what they were. Maybe that's, you know, an indication of a shift towards more kind of strategic and growth type of deals.
Yeah.
If that is the case, how do you balance that, and should we expect to see deals, that are kind of maybe a little more like Nobel, where great strategic opportunity, but maybe a little bit lower financial returns than that 10% hurdle you guys used to talk about? Then finally, one last one. Portfolio optimization, you know, can we generally rule out a split-up at this stage of the game? You know, by split-up, I mean either 50/50 or a third, a third , a third . It doesn't sound like there's a change in tone there, but I just wanted to, you know.
Sure.
Make sure that, we were looking at that the right way.
Sure, sure. 3% to 4% core growth, what does it mean? Why not 2% to 4%, I think was the question. I think that represents, Steve, the confidence that we have. Part of that is confidence that the environment that we're in today, the environment we've come through 2014 is roughly the same environment we'll face through most of 2015. This has been roughly a 3% core growth year, one that's also had some challenges with a couple of the portfolios, a couple of the businesses that didn't do quite as well this year. With some of the adjustments we think we've made to the portfolio, with the continuation of the existing macro and some progress across the businesses, we had some reasonable confidence in that range.
I think adjusting that range is just an indication of that. I think relative to your question about capital allocation, how we think about that from a returns perspective, we put the strategic lens first and foremost on any inorganic move we make. That's the first threshold that a deal really has to cross. We start with looking at the market. We then look at the company, and lastly, we look at that valuation. We set a very high bar strategically. In situations where those returns are perhaps a little bit more challenging, then those return thresholds that I think you're referencing that we've had in books in the past, you know, we have to look hard at those.
We have to ensure that if we are going to look at returns that might be slightly below the thresholds that we've talked about in the past, it means that they have to clear a higher bar strategically. I think the most important thing is that those three and five-year thresholds also are not the only thresholds to be considered. I think the examples we talked about today, particularly at Hach, to name one, certainly the Fluke portfolio being another, the long view is critical. If we're confident that it's a right strategic play and those returns are gonna move north of even any of those thresholds we've quoted in the past, the odds are we're gonna be all in.
Relative to your last question around any hypotheses around complete changes in structure, over any percentage, you know, I would only say what I said earlier, which is that we will continue to optimize the portfolio. We will continue to adjust it, but that really means inbound activity as well as looking to situations where we might adjust the portfolio and perhaps marry something up with something else. That doesn't necessarily suggest that we would structurally change ourselves in a more meaningful way than that. But again, I never say never to adjustments to the portfolio.
If we can create some extraordinary value for shareholders through a different structure that maybe we haven't contemplated to this point, I'm confident that we have a board that will be always supportive of making sure we do the right thing to create the highest value of shareholder returns. Hey, Nigel.
Hey, Tom. I just wanted to pick up on the narrower range because I thought it was, you know, very interesting that it's a one-point range. Do we think about this as maybe a truncated 3%-5% range? It could be better than 4%. Or is it just, you know, functional if, you know, with, you know, more consumables, less communications, that this is now fundamentally a more stable portfolio?
I think more the latter. It wasn't. We weren't attempting to get cute in reframing a 3%-5% into something that was trying to say anything more than I think what I just said to Steve. I think it's just an indication that we think we're in a fairly consistent environment at the moment, that we can continue to deliver at the rate we have, and we think there's upside to what we did here in 2014. I think no more than an indication of that.
Okay. I apologize for all the conspiracy theory questions.
No, no.
You know, seeing [inaudible] on stage with the LSC guys.
Yeah.
Just, you know, prompted a question about, you know, should we think about W ater Quality in a different light, you know, given the fact that we've always seen it, you know, along with GVR. Should we think about it differently in terms of the growth profile or acquisition opportunity set? I mean, just.
I've challenged myself to think about more conspiracy theories, but the lineup of the presenters was not one of them. You got me on that one. Actually, no, there was no intent whatsoever to communicate anything as a function of who was standing up on stage at any given time. Interestingly, in all seriousness, what you saw was group executives and Executive Vice Presidents standing up at the same time and nothing more than that. These are all great businesses. Those happen to be three great businesses. Just coincidentally, I've worked closely with a lot of them, but nothing more than that. Yep.
Thanks. Just back to capital deployment then, kind of the second leg of the stool. Once you move beyond deals, potentially opportunistic share repurchase. Just wonder if you'd share how you think about that. How do you know when it's an opportunity, right? I mean, a lower stock price might not be an interesting opportunity. Do you have a structured way in terms of the DCF value of the company or some other metric that you think about? Is it kind of just more about the pipeline on deals that you might see on the near horizon?
Sure. I'd start, Jeff, by saying it is, as I said earlier, really a situation where we try to be opportunistic about it, where we look for a dislocation. Probably the best example was post the Beckman deal, where we clearly saw that we had taken free cash flow to a very different place. We saw the runway ahead. The market hadn't reacted. Some of that was a function of the environment at that time, and we took advantage of that situation. We had issued equity during that prior period, that was an opportunity to bring it back. That's one example.
You know, relative to any sort of, you know, sophisticated modeling that we do that sets some trigger point, I'll let Dan jump in and give you his point of view on that. It's not an alert that I have on my phone, let's put it that way.
Yeah, pretty much. It's driven by the, you know, return on invested capital. We would look at a buyback three and five-year ROIC on that to make an evaluation for that.
One tiny other little conspiracy theory question, I guess. Maybe I lost track, but Motion Control is now called automation, which just kind of can mean a lot of different things. Is there, you know, is there some change in strategic direction in that business, kind of other than cleaning up some of the cats and dogs that got exited out of that business?
I don't think there's a ton to that. We do have businesses, Jeff, that are not exclusively motion businesses that are under that automation umbrella. Our sensors and controls businesses are highly aligned to automation, but are not necessarily motion businesses. Nothing more than that. Probably a little bit of a bigger umbrella that structurally organizes some of those. Dan Daniel's done a nice job actually of moving some of those businesses around organizationally to create some synergies in some cases and to create the right span of control, but nothing more than that. Hey, Steve.
Thanks, Tom.
Yeah.
Just a couple of detailed questions. One is on the waterfall chart, you have $0.10 for net 2015 benefit of 14 productivity initiatives, which I assume is restructuring and whatnot. What, what happened to core margin expansion? Is that baked into something else? Core revenue growth is just on the incremental volume. In terms of DBS driving margin expansion in your core business that's not related to restructuring and that's not related to volume growth, where is that baked in this chart?
Sure. That's in the first line item, I think the negative $0.06.
Okay.
So if you looked at-
Net.
Yeah, inflation and growth investments, it would be a lot bigger than $0.06. It is in the 2015 in-year productivity initiatives that reduces that number.
Okay. The second question is. You've talked about the guidance excluding Comms, meaning, sorry, includes Comms, excludes Siemens closing. What's the sensitivity around that for the year should those happen in a timeframe as communicated? How should we think about, what's kind of the net impact? We're talking a few pennies here. What are you thinking about?
In the case of the Siemens deal, assuming it would close, say, in the first quarter, it would add $0.02 to the EPS. The Comms deal is a little bit more complicated, and it really depends whether we do a spin or a split. If we do a spin out, we will lose the earnings, which would be roughly 3% of the earnings. Again, shareholders would get about $2+ billion in value. If we do a split, we would take down shares, at that point, it would be roughly neutral to earnings.
Okay. Maybe one last one I'll sneak in, which is, so of the $8 billion number that we key, that's a perpetual $8 billion number which we like. What's the real constraint right now on that number? You know, when you think about deal size and balancing capacity and all these other things, it, you know, numbers I work out can certainly be north of that, so, how do you think about what is really the constraining factor when you think about the opportunity set?
Yeah. Well, we put that plus sign on there for a reason. We, you know, we're capable of a variety of different things that we could do to create more capacity than that. That's certainly a number that we're comfortable with. If you think about the free cash flow that we have today at roughly the $3 billion range, and then, of course, a function of over what period of time do you wanna bring that free cash flow in and how much leverage do you want, that's a number that we feel very good about. You know, we'll spend $4 billion this year against about $3 billion of free cash flow. Still be under-levered, obviously, but, you know, I think that's a number that we feel good about.
If we needed more capacity, certainly for the right kind of transactions, we would, we'd make that happen. Okay? Thank you very much. We wish everybody a very merry Christmas and a wonderful holiday season. Thanks for being here today.