Well, thank you everyone for joining us today and welcome to New York. I'm Matt Cugino, Vice President of 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.
So here's the agenda for the day. We're going to do things slightly differently this year. Tom is going to come up, Give his opening remarks. After his opening remarks, he's going to take 10 to 15 minutes of Q and A. We'd ask that you keep your questions on the specific businesses in 2015 guidance So later in the program, you'll get your chance to ask us 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're going to have 2 separate sessions on the segments And then we'll have a Q and A after each of those sessions. The first session is going to be test and 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 to be from about 4:30 to 5:30 that will 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, and thanks very much for joining us today. Well, 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 Getting to know better. And so I thought I'd just take a minute or 2 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. And on to our Water Quality and Life Science and Diagnostic 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.
And while that may be surprising to some, Danaher for me has always been about the journey. It's never been about the destination. And 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 going to give you an update on current trading, give you a sense of kind of what we're seeing here in the Q4. I'll give you a very brief overview of Danaher, 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. And 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. And finally, I'll come back after those presentations And I'll wrap up with the 2015 guidance.
And as Matt mentioned, we'll have actually 3 chances for Q and 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. So 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 4th 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, continuing 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 4th quarter. That will cost us roughly $125,000,000 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. And so we're confident around $100,000,000 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 A 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 Devicore acquisition for our anatomical pathology business at Leica closed last week.
So that brings us up to nearly $4,000,000,000 of capital deployed year to date. That's roughly 3 times the capital that we deployed last year. And clearly, we are just getting started down the path of building and shaping the portfolio for the years to come. And we're well equipped to do that With north of $8,000,000,000 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 to $4.45 That's anchored to a core growth assumption of 3% to 4%. And we'll take you through the details behind those numbers again at the end of the afternoon. But 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. So again, for those not quite as familiar with How we run the corporation? We are organizing we have organized the corporation into 5 strategic segments.
The segments that you see horizontally Environmental Test and Measurement, Dental, Life Science Diagnostics and Industrial Technologies And 9 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. And 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 Health Care businesses as well as the Environmental platform continue to be the recipients of strong funding dynamics around the world. And of course, broad exposure to high growth markets and digital trends. And 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 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.
And each of them have terrific innovation opportunities. And 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 $21,000,000,000 run rate that we're headed towards at Danaher, but an $800,000,000 business back in those days and a business whose gross margins barely touched 30% and whose exposure to the aftermarket For 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. And that's pro form a for Nobel, which brings in a very strong consumable stream and you'll hear more of that From Hank this afternoon.
So 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 it's 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 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. So 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 Langa Business. And 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 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.
And we added capabilities around service and engineering. And then 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. $1,400,000,000 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. And 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. I think when I began at Hach, I think we had 3 people in China. And you see now the growth in high growth markets from 80,000,000 To $400,000,000 a 5x growth over the slightly more than a decade that's represented there. And then finally R and D Investments.
You'll hear from Mark Beck later today about the progress that Hach has made in product vitality. And 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. So 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 $350,000,000 that today is north of 2,000,000,000 And operating margins growing along the way. But I think what I draw your attention to most here is if you look at the growth from acquisitions at 650,000,000 And you see that the growth organically is nearly twice the growth that we've delivered inorganically.
And 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 3 years for bolt ons and 5 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. So now let's look ahead. We have 3 key priorities for 2015 And the years beyond.
Driving organic growth through the highest impact organic opportunities and I'll talk about 3 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 and I'll talk through how we think about capital allocation going forward. And 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. So 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. And making that happen starts With R and 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 and 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 3 years. And 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. And 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. But it's not all about software. The investments that we've talked about we've talked with you about in the past and Arndt Kaldowski will talk about this today around molecular diagnostics and the Verus platform. Jim will talk about Fluke and Fluke Connect and EMV and the regulations and how those are driving our growth at Gilbarco.
And And 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. So that was a big number we talked I showed you just on that last slide associated with investments in digital. And we are already seeing our digital and software related revenue growing at 3x the growth So the corporation. So 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 35% growth in digital dentistry in the last 4 years. Radiometer, which we won't talk about much today, but is doing a fantastic job continuing to be one of STAR growth engines of our diagnostic platform has really taken software and integration of instrumentation across the hospitals across hospitals to new levels. And Jim Leekle will share with you an update on Insight 360, the cornerstone of Vida Root's investments in integrating data across the fuel dispensing network. If you think about our portfolio of instrumentation today 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 and 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.
And 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 3rd dimension of driving organic growth to higher levels is continuing to invest aggressively in high growth markets. This business today in high growth markets at nearly $6,000,000,000 is dramatically bigger than the Danaher I joined in 1989. It's now 26% of the revenue of the entire corporation. But I think what's particularly encouraging about this To us and represents the growth 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. And 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 and D organization and putting product planning resources in place And R and D Resources to build products for those local markets. And 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. So with that, let me turn to our 2nd key priority, which is optimizing our portfolio.
And the goal here is to improve and sustain our market leading positions. And 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. So 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 $4,000,000,000 of capital deployed.
You'll hear a number of these examples today. Jim Leekle will tell you about our investment in ANGI expanding the footprint of our GVR franchise into compressed natural gas. And Mark Beck will talk about how we've expanded our geographic footprint By the acquisition of Aquacene in Chile and really gave our ChemTreat business a foothold in a whole new geographic market. Sure you're all familiar by now with our NETSCOUT transaction, an exciting opportunity to bring 2 terrific businesses together Highly complementary and position those businesses for long term success. Nobel Biocare that I mentioned that we closed this morning.
Hank 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. And 2 really important acquisitions 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 Devicore, 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 of things on the outbound, NETSCOUT being 1. Dan Daniel successfully took care of a divestiture of a business inside of our Motion platform.
And 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 and 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 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. And 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. So we're in terrific shape.
We're confident that with north of $8,000,000,000 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 well as operating margin expansion. So 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 3 pillars. I'll talk to you about each of these briefly A pillar around growth, how DBS drives lean, our history and leadership. So 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, sustained 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 had not worked with.
And I saw DBS alive and well across every one of those businesses. I saw the 5 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 who are 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 and an increasing focus on innovation both in terms of core new products As well as investments around the digital world. And 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 Hi, Riddey of this day a year ago on the tools of DBS.
I won't go through these in that depth again here. But 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 seen tremendous impact.
DBS also creates and helps us drive real operating leverage. And that operating leverage translates into operating margin expansion and ultimately EPS growth. Year to date, we approved for that by virtue of the 70 bps that you see there in core operating margin expansion and 3 out of the 5 segments at 90 basis points Or even better than that. 3 of our 5 segments are at 20% operating margin or roughly there already. And 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 4 or 5 years and the line of sight to get our dental platform and our life science and diagnostic Platform to those levels. And 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. And 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 Q4 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 1 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 and A With operating company OpCo centric models that allow P and 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 Laylor 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 going to see a couple of examples of that succession that really continues to support the growth of the platform.
You'll hear from Arnd Kaldowski and from Reiner Blair, 2 of our newer group executives who were able to come in right behind me and create the kind of leverage that we needed in 2 platforms and helped us with what we believe was a very successful transition into my new role. So great examples we think of where talent and the development of talent and leadership over time Continues to be a critical element of DBS. So in summary, 3 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. And 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. So with that, we'll transition into a brief Q and A period. I 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.
Meghan, 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 Core versus non core and what that word optimization means from a portfolio management perspective?
Sure. So first of all, we have very limited upstream, downstream or any other oil and gas exposure. Not to suggest that it's 0, but 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 1st 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 We're part of Danaher 5 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 5 years From now and there may be new businesses to replace them. So 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. So I think we've got tremendous support for thinking through that. The 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, Steve. Just a follow-up on that portfolio question. What's your current philosophy about the balance of medtech versus industrial for Danaher? And 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? And then I've got an R and D question.
So, MedTech versus Industrial, I don't think of the portfolio in that necessarily bifurcated way, but it's a fair question none Alas, 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 where it's a diversity today that represents 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 and 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. So there are a number of reasons why we value the diversity of the portfolio we have today.
I know 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 all in, in that direction. Sure, I love those businesses. But those businesses simply represent characteristics of businesses that we like a lot. And so I can name others whether it's our Water business or our Product ID business that have tremendous recurring revenue streams and great high growth market exposure. And 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 and D question.
I do. That's helpful. On the R and D side, so we're talking about core growth and organic growth being such an important leg and your top priority well one of your top three priorities that you've got here. R and D has I think gone up to 6% plus of sales. And the question is, is that the right number?
And are you getting the results that you want for that amount of Spend and 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 that needs to go higher or not? You're
right with the facts that we have taken R and 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 and D spend ought to be. Many of our businesses are in the right place From an R and 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 under investing in R and 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 and D and taken that number up. And And we're starting to see the result of that and Arnd will talk about that later.
So I think we want to be careful and thoughtful about where we put those. And relative to where that number would be a year from now, I think or 2 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 Frank here. Just back to the portfolio. One of the Hallmarks, I guess, if I look at the 9 platforms is each one of those had kind of its anchor acquisition at least a decade ago. And obviously, you've kind of redefined what's underneath those segment banners to some degree.
But I was wondering if you could address to what Extent there is some prospect of some new platform. I wouldn't expect you to name it by name of course, but if you think about kind of your strategic Horizon that you're looking at potential opportunities, do you see something that maybe fits the mold of what we've seen here over the last 10 years? Okay.
Jeff, thanks for not challenging me to name it. But 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. So 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.
And 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. And so I'd never say never to that. I would just say in the near term probably not our top not in our top priorities.
We have one do we have
one more Meaghen 1 or 2?
Dean?
Hi, Tom. This is not the first time we've seen software as a service on Danaher's wish list. And the fact is a number of your business 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 And heading down the road towards software as a service organically or with relatively small inorganic bets. One of the more meaningful that's in a place where we've learned a lot is at Leica Biosystems. I'm not sure Aaron will talk about this in-depth today, but the acquisition of Perio was a terrific addition to the Leica Biosystems platform and really gave us a business that is a software as a service business. We digitized The results of a the morphology on a tissue 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. So 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. So thanks for your patience. We'll try to get to as many folks as possible. So now we're going to 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. And to lead us off into the segment presentations, Jim Leko, Our Executive Vice President responsible for our test and measurement platform as well as our Gilbarco Veeder Root businesses is going to lead us off. So Jim, Welcome.
Thanks, Tom. Good afternoon, everybody. It's nice to get the lead off spot here and be done early. My I've never been able to sit in the back for 3 or 4 hours and let other people present. So this is kind of nice.
We'll talk as Tom said, we're going to lead off here with Test and 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 2 platforms as you saw in one of Tom's slides, the instruments platform, which is really Fluke and Tek and then the communications platform, which is really Tech Communications, Fluke Networks and Arbor Networks. The revenue here about $3,500,000,000 And 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. So we like the diversity here, lots of opportunity. Some of our bigger higher growth market businesses within Danaher exist in T and 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. But 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 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. So 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 their The network up and running.
Really everything about this is about keeping things up and running. And as we look to transition into 2018, We think we're pretty well positioned here for better growth in 2015. So let's talk a little bit first about 2014 and some of the highlights. I think We 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 Glenn out there with the Fluke Connect Demo, we'll run a video here as well to give you an opportunity to see Fluke Connect, but a really strong start and 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 mixed domain oscilloscope 3 ks, which is the next generation follows our 4 ks product that really is doing a great job in the mid price point of oscilloscopes. It's really The largest segment of Scopes. And then we'll hear a lot today about digital investments. Obviously, Tom gave you a good summary of that.
And really what you see here in T and 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 we're 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 one of the I think really exciting things for us into the future is that Fluke has now launched their 3rd 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.
And then finally, as Tom talked about shaping the portfolio, this combination that we've got with the communications platform We're really excited about with NETSCOUT. Really gives us a great premier position in both network management tools and in security. And I'll give you an update on that in a slide in a minute. But we think that that's 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 going to 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 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. And then finally, I'll give you an update on NETSCOUT. First around really positioning the verticals. You're going to run the video?
We're going to run the video first here.
Yes, I see the voltage.
It doesn't look too good. That's almost 20 amps across the neutral.
Can you authorize a work order? Let's get going on
Some of you may
have seen that video before and we made some changes to it. One thing that's Still true today is that Charlie hasn't caught any fish casting that way. So we'll hopefully get a little bit more time to do that. I think hopefully what you see and pictures are worth Thousand words and maybe video is worth a 1000000 words. What you really see here is the largest portfolio of instruments.
In that video, you see 3 or 4 Different instruments being used. And I think many of you know I've been associated with the Fluke business since we bought the company back in 'ninety eight. And one of the great things that we always wanted to do was to be able to build 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. And 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. And 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.
So Really also is a great safety play here as well and we're excited about it. And 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 going to do in the future. In this business today Over $30,000,000 of enabled hardware already sold, but 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 is 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 5,000,000,000 cell phones in the world and The prognosticators or predictors here are talking about 50,000,000 mobile devices. And 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 it needs to be troubleshooted with all those signals. So 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 1st in the industry to ever introduce this kind of product.
This is historically done with multiple instruments. And so 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 at a different Product format like USB and 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 $500,000,000 market.
And with the introduction of things like MDO and our new spectrum analyzer, we really now play in a couple of $100,000,000 more market And that really allows for us. And 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 A tax rate on our instruments. And this $300,000,000 business can continue to be a good strong recurring revenue opportunity for us in the future. And then 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? And we think this is just an incredibly unique way to do that, while at the same time Maximizing shareholder value. So 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 be 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. And so 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 we've talked to them. We've had about 6 7 weeks here now to be in front of customers and talk to them.
And 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. So I think that and I think the shareholder opportunity here is exciting as well. The transaction is still targeted to be about mid-twenty 15.
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're continuing to progress all of our activities relative to trying to get to a close here in 2015. So all good on the path to completing this transaction next year. So 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 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. And then finally, give you hopefully, NETSCOUT gives you really a good example Of how we're trying to reshape the T and M portfolio for higher growth as well and better margins. So with that, we'll do Questions later. I'm going to reintroduce myself.
So, I won't do that, but we'll go next to go. We're going to transition here from Test and Measurement To part of our Environmental segment, as many of you know that our Environmental segment is really 2 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 back here in a little bit. I'll take the Gilbarco Veeder Root part of our segment here I'll 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 Veeder Root, so I've had a foot in this business for a little while. And the business that I started with 18 years ago to what this set of businesses is today is incredibly Better 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 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. And we like the component here of equipment And service as well as well as software. And we're going to give you a good opportunity to understand what we're doing with Insight 360 And how that really represents a great software as a service opportunity for Veeder Root and Gilbarco. But first let's talk about 2014 and what's going on there. Bieder Root had a good year.
We were excited about some of the regulatory changes particularly Vapor recovery that occurred in many of our high growth markets and VIDA did an outstanding job in really capturing that opportunity and with good growth this year. EMV, we're going to 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 is using to read that. And 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 So that's a major regulatory environment change that we've we're going to take good advantage of in the future.
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. And I'll give you an update of Why that's important and why that's such a good thing for Gilbarco Veeder Root. And Gilbarco Veeder Root's history has always been of successful M and A. They've done 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 more better global competitor.
And 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 and we see that. We'll talk about how Insight 360 used Tools at DBS to really accelerate product development. And then in the tried and true principles of lean, our Gilbarco vita 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.
So what you're going to hear today is really about three things. 1, 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 Angie. And then really excited to talk to you about Insight 360 and what that does from the standpoint of improving the workflow And giving and really building a broader reoccurring revenue base for the business. So 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 of 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 5 year opportunity for us. We think this is about a $500,000,000 opportunity for this business over that time frame.
So it's a significant opportunity for us. And 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. And 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 really a way to solve customers' problems in a better way.
So 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. But we'll partner on the payment side. And we think that the combination of our installed base And our knowledge about the petroleum retail petroleum vertical and their capability in payment security is really a solution that customers are really going to 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 twenty fifteen. We'll see that start to play out in the second half of twenty fifteen and into well into and certainly in 2016 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 built that over time. Angie 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 as 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 and many of our customers many of our biggest customers who own truck stops. We're starting to think about putting these kinds of sites on their truck stops for the long haul logistics operations of large scale fleets.
So this was a good opportunity for us and Angie 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 just an of assets really an outstanding opportunity for growth. It gives us a common payment. If you can imagine that whole stop is going to be integrated from a payment perspective. The look and feel of the 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. And at the same time expand opportunities And on our international footprint by taking these solutions more broadly around the world.
We think it's about $200,000,000 opportunity over the next few years, A good opportunity and good adjacency for the business. Insight 360 is really our opportunity to bring software as a Servicing cloud based analytics to the retail petroleum site. And if you look on the slide on the right, What you really see here is if you can think about this is 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. And it really allows for us to leverage all of that data and integrate it into a cloud solution and then offer that as a service on a monthly basis to our customers. Now given the fact, it's a good opportunity.
We've had a good organic opportunity here to create this. And with the acquisition recent acquisition of a small company called FuelQuest, we add fuel logistics into our capability and 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 midsized 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. So 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. And in a short amount of time this year, we're already up to 2,300 fueling stations. We think this is a good recurring revenue opportunity that we can build into the business in North America. So Finally, from where we stand today, hopefully, you get a sign that get us really get the view that our large installed base And it's really a great leverage opportunity for what we want to do and it really gives us a great advantage 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 going to 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 and Angie 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. And then 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 and Insight 360 really gives us the opportunity to do that.
So 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. And 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 and 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 Tech Instruments and of course the addition of or 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. So 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 Einhoven He's coming up and he's going to take us through the dental platform. Hank? Thank you.
Good afternoon.
Let me see. Yes, that works. I'm going to talk about the Dano platform. We operate in a $15,000,000,000 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 want to keep a beautiful smile over a long period of time. And then 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 Noble Biocare, I'm very pleased that we can close that today.
We now have a $3,000,000,000 platform in that market with mid teens Profitability and we think we're well positioned around the world both in the developing and the developed markets and really 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 and 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 then importantly that allows us then to also invest in inorganic opportunities Not only with Noble Biocare, but we also acquired earlier this year a company called Dux Dental, which is a very nice tuck in for our CUR or our general Consumables business as well as 2 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 Noble 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 Curt Total Care 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. So that's a broad set of Consumable Businesses in that segment. In the specialty segments, of course, Noble Biocare It's a great business for implant lasers, 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 iCAD, Instrumentarium, Jandex, Andexis, which is really the broadest portfolio of digital imaging solutions available in the industry. And with Carville and Pelton and Crane, we have a very strong set of instruments and treatment unit capabilities that all of these dentists need.
I When you then look at that broad, broad portfolio of capabilities when we go to larger customers, 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.
And I can now proudly that we're almost up to 20% of sales now comes out of high growth markets. So that investment is really paying off And we continue to grow very well in high growth markets. We are continuing to Increased our spend on R and D this year again a year with more than 20 new products to the market. And that's really now 3 years in a row where we've been well over 20 new products to market. So Our pipeline management and also what come 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. But For us, digital dentistry really starts with the image capture. I'm very well positioned with 3 d combbeamCT technology.
It consists of treatment solutions and software where you can really plan an entire case. And then 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. And we have products and services in pretty much all of these pieces with our iCAT, With the treatment studio software set and now the addition of Nobel Clinician and custom consumables such as Nobel Prosera And Insignia for orthodontist. We're making all of these investments while we are expanding our margins. Over the last 5 to 6 years, we've almost added 500 basis points of profitability to the platform that excludes Nobel Biocare.
So 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 iCAD. ICAD was the pioneer in 3 d x-ray Or 3 d combbeamCT. When we launched this product many years ago, we created we quickly created a leading position in this space. And 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 Close to all the way down to levels that were previously seen only in 2 d X-ray.
So it's been a great success. And we've taken substantial market share with this product over the last 2 years. Let me take a minute to explain to you why digital dentistry is so important to us. And let me explain that to you Through the eyes of Noble 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 3 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.
So that takes 3 visits, 3 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 and a week or 2 later you can bring that patient back into the office And place that permanent prosthetic directly on the implant. So 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 and importantly they only have to go once back to a dental office rather than three times. So it's just a better way of practicing dentistry.
Noble Biocare, We're very excited that we could close this deal today. Nobel Biocare is a $750,000,000 Implant business, but it's more than just an implant business. It has very high gross margin 75% and importantly A substantial consumable stream as most of the business is really consumables. And 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 growth margins and such a large consumable stream, Our return on the investments do incredibly well. So we're excited about this investment.
Nobel is an incredible brand. 80% unaided awareness in the dental industry It's probably one of the strongest brands we could have ever found in the business. So we're very pleased that we can add this to the portfolio. The current team under the leadership of Richard Laube have done a very nice job Starting to turn the business into more growth and expanding the margins over the last couple of years. And 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.
But 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 threat that Nobel uses is a Software product called NobelClinician. During the break you should go check it out. We have it right here outside.
But NobelClinician is a capability That starts with taking in cone beam CT data such as from an iCAD into a software package. And 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 going to Where that implant is going to really be sitting in their mouth. And importantly through a cloud application Nobel Clinician Can not only talk to the surgeons, 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. So 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. So in summary, we think we have a very strong position with our dental platform and can truly say that we have a number 1 or a number 2 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. And of course, Nobel Biocare substantially changes Our position in the market enables us to continue to drive the business forward and for more future success. Thank you.
Thank you, Hank.
Many of you were with us out in Anaheim, California in June and you got a chance to see live and in person many of the technologies that Hank talked about and how we're bringing those technologies together into integrated workflows for digital dentistry. So A lot to be bullish about in our dental platform and Hank 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 T in another one of our segments Industrial Technologies, Dan, Daniel is going to come up. He's going to 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 going to be a terrific year for Danaher in 2015. Our Industrial Technologies portfolio has some tremendously strong brands. We Serve about $20,000,000,000 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 in a number of businesses as well. Certainly, packaging is a market that we've invested heavily in with ESCO 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. And this is a trend that we see going to 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.
So we're pleased with how that's developed. We've made investments both organically and inorganically to accelerate our position in high growth markets. And energy efficiency, as we all know, is an important element of the automation market. So it's a diverse portfolio with solid growth And very strong margin performance. And 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 It's been led by Videojet and ESCO. 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.
And as Tom mentioned earlier, we took another step to rationalize our portfolio in the industrial space with the divestiture of $100,000,000 Product line in our Kollmorgen Motion Control business, primarily serving lift trucks and electric vehicle space. I might remind you over the last 4 years we've divested nearly $1,000,000,000 in revenues starting 4 years ago with our Aerospace And most of our defense businesses, a couple of other adjustments over the years. But 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. So We strongly believe there's continued core growth and margin runway across our industrial portfolio.
Today, I'm really going to 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 ESCO software continues to gain tremendous traction with brand owners. And I'd also update you on DBS and how we're accelerating performance in both ESCO and X Rite.
We have 2 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 want to focus on product identification where we serve $8,000,000,000 in market. The acquisition of ESCO 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 ESCO and a smaller portion of the X Rite business In software, where we have a nice recurring revenue stream.
So we're about fifty-fifty 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 and high growth markets. 5 to 6 years ago when we developed the 1,000 line, it really Strengthen our portfolio of CIJ printers.
Joakim Wetimanas, the Group Executive for Product ID last year shared with you how we're using Marketing to accelerate growth. But really over the last 12 to 18 months, our product development has been one of our major initiatives for investment. And we've had 14 product launches in 2014. I'll highlight a few of them for you here. First, Our 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. So it really has us positioned well to expand our presence around the packaging line. And that's important because most Videojet customers don't buy a single technology for their facility. They have multiple technologies. So 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. And 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 PAC Expo in November our move into remote service and remote diagnostics with our CIJ printer line. Our customers' 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. So this is the 1st generation product. It's the 1st in the industry. We'll look to continue to expand that.
Service has always been a strength for Videojet. Our field service force 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. And 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.
So service has been a competitive advantage and it is certainly something that we're continuing to strengthen. And 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 ESCO and our software. As you know, we acquired ESCO 3.5 years ago. It put us deeper into the packaging market.
Part of ESCO'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. And what ESCO's 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 at a finished product on the shelf that looks like it does on the design table.
So hopefully at the break or after the presentation, Susie and Emily from ESCO can give you A full demonstration of some of the ESCO software capabilities. But some of the major elements of our software portfolio are web center, Which is workflow automation. It allows collaboration throughout the value chain within brand owners with their suppliers. Artios CAD which is structural design. Automation Engine is what takes a flat design of a package and converts it into a three-dimensional object And make 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 ESCO software. But over the last couple of years and frankly one of the first decisions we made around investment with ESCO Back in 2011 was to invest heavily in brand owner capabilities. Again, they start the packaging value chain. So our lean software development tools Have helped develop new software products and capabilities primarily around 3 d capabilities. So that's been a heavy investment And really strong feedback from brand owners of the additional capabilities that it can give us.
And I've got a little quick demonstration or video that shows the Capabilities of our 3 d software today. These are just some of them. But basically we start with a consumer in 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 an initial draft of a concept or a finished product.
But at the end of the day, it puts The consumer first and helps brand owners develop packages that are going to help them win retail shelf space. And as you all know, it's an extremely competitive environment and everything for them is about shelf space And gaining share. So we'll continue to develop additional 3 d tools. We've got some examples for you on some monitors out in the lobby. And 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 ESCO solution And we see plenty of runway ahead both in developed and high growth markets. So it's not only Christmas season here in New York, but it's also color season. And 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.
But 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 and 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. So Pantone has been a wonderful growth business for us in the last two and a half years since we acquired X Rite.
And in 2014, our growth will be in the very high single digits in Pantone. So it's a portion of the X Rite portfolio that That's really, really solid for us and we see lots of opportunities in the future, including with Pantone Live, which we shared with you at our Product Identification Investor Day in Chicago last year, Pantone Live is really digital color standards in the cloud. So 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. So Pantone Live 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 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 ESCO 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, but we're really focused on growth in these two businesses And using our DBS tools to accelerate growth in ESCO and X Rite. ESCO has been a mid single digit grower for a long time. We've been able to take that in High single digits, we see that continuing.
X Rite has been more of an inconsistent grower in the past before Danaher. So we're currently driving that business into the mid single digit growth rate. So our growth tool focus whether it's speed on the street and go to market, Expanding our high growth market teams, product development, this is all underway at ESCO and X Rite and it's been a wonderful accelerator and expansion for Product Identification. So 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 ESCO has brought us has been a real boost to our growth and margin improvement And the DBS journey like it is across all of Dan Hur and industrial technology continues to generate opportunities for improvement and we're excited about the future. Thank you. And I think Tom is going to come back up and we're ready for another Q and A session.
Thanks, Dan. Yes. It's a good looking tie. I'll look for my tie under the tree in a couple of weeks. Product identification, I think another great example of building a platform along multiple strategic vectors, building out from an exceptional position in Marketing 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.
So I think but one more great example of how we build out strategically robust portfolios This is Danaher. So nice job to that team. So at this point, I'd ask Jim Leko will come back up. Hank's going to come back up. And our 3 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 going to 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 overly enamored with the High end dental implant market before. Then obviously Nobel Biocare happens. So is it a change in the market view or it's a change of It's really a view that you can bring a lot of change to the market share of Nobel itself. Yes.
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 ImplantDirect, the joint venture that we have today. As we look at Implant Dentistry And we look at long term the market growth drivers in that business. And what will happen to that market over a long period of 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 underpenetrated segment of the dental market. Markets like North America and particularly here in the U.
S, But also markets like China are going to grow for a long period of time. And 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. And We clearly believe that within that premium segment Nobel is incredibly well positioned not only because of their they were the pioneer of implant dentistry, but also because of their digital
Thanks. And then Dan, just quickly, the automation business has had a lot of sort of tweaks Changes to the portfolio. The business as it is today, how's the organic growth there been in the past 3 or 4 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 Kromorgan 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. So we see some good runway there.
But 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 Tech Instruments end markets? We had Modest improvement in order rates this year as that continues. And then Tom talked about going through the portfolio And strengthen the walls around businesses. I'm just wondering how do you strengthen the wall around tech?
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. So I think that and then I think it's really a twofold strategy at Tek around building walls. I think number 1 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 2 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 and the value proposition that we offer in that place I think in those places really gives us an opportunity to continue to do that. So 1 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. And 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?
And you want to go out to Why
don't you start?
Okay. 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 3 d x-ray capabilities It's clearly more advanced when you look at the actual treatment opportunities and the treatment workflow is still in its earlier stages. And 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. So 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 wide perhaps we see the broadest range of opportunities. Some are clearly incremental, But we also believe some are much more significant. Pantone Live is one example, connecting devices That we have in our installed base, it's really just going to open up a lot of opportunities to add value to help change workflows. So 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.
And 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 the 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. And when as you migrate to sort of these software businesses, if you understand the workflow, there's a lot Value you can add. Now that means we may have to augment that with M and 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 Is a good example.
So I think the combination of organic and innovation investment and with what we're doing on the M and A front positions us pretty well because of our strength in the installed base.
Hi. Just a question for Jim and then one for Hank. Jim on the Tektronix side, one of your big competitors earlier this year recently kind of spun out and Now stands alone and sort of an independent player for the first time in a while. At the same time, they would argue at least that they were somewhat starved for resources to keep up with the innovation curve. So how do you guys look at the kind of competitive landscape on that front into 2015?
Do you need to ramp up your R and D spend to Stay ahead of a stronger competitor?
Well, I think that We have ramped our R and D spend in our business on our side of the house for a while now. I think that It's not just about ramping up your R and D spend. I think it's leveraging strategically the advantages you have in the business. We have a lot of good competitors. And I wouldn't whether they're independent And they're private or they're part of a publicly traded company.
I think good competitors are throughout the industry and 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.
And Henk a question for you on just the U. S. Central market. It seems like and you touched on this briefly, the DSOs side of things. There are some of these Organizations that look to be kind of having very aggressive plans to double maybe more than that kind of their store counts.
And so it seems to me that The channel in U. S. Dentistry could be changing significantly perhaps to your favor. So how important is our DSOs to sort of your ability to grow At or faster than the U. S.
Market. And what do you guys what's the operating plan there?
Yes. We the 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 profit 10% of the market.
So it's still relatively small. But 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. And 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 Hank. So 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? And then on Nobel, gross margin 75%, sounds like operating margins are mid teens.
So what's the opportunity to kind of take operating margins up there? Could it be a significant expansion of margins here? Yes.
Let me try to answer that in 2 or one go. I've been running the dental platform now for a while and I think Many of you have heard us before. We continue to find the right balance between investing in places This is 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 5 to 6 years. So in the core business, if you want to think about it that way, that Operating that operating approach is not changing at all. We're going to continue to drive the margins up On our way to 20% and that will be a constant.
With Nobel Biocare, Very high gross margin business and a team that Has been working on and you've seen their margins improve over the last couple of years. But we really believe that by Handing that team DBS or teaching that team DBS and working collaboratively with that entire team, we can substantially accelerate the rate of improvement. So That in turn should help the entire platform accelerate the margin expansion.
This looks like the hook coming.
All right.
Thanks guys. I think we'll take about a half an hour break here. Got a great set of product demos representing all 5 of our segments outside coffee, food. Let's be back here at 3 o'clock to get started with the rest of the program. Thanks.
We could have everybody take their seats. Thanks and 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 and that is driving organic growth through new product innovation and Product Development.
And 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. And Mark Beck is going to 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 early this year and I think represents The commitment that we have to continuing to build great talent and deepen the talent bench across the corporation.
So Mark welcome and let Let's 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.
But Immersion is a unique program. I haven't seen it at any other company Where you get the opportunity to devote in my case 3 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, learning 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, it 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? And although I have done this Immersion program and I've 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. And 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 sense of personal humility.
And And so I just want to say how grateful I am to be a part of the Danaher team and how honored and humble I have been to be invited to join this great company. As Jim mentioned earlier, the environmental segment is made up of 2 platforms and he already covered Gilbarco, Veeder Root. And so I'll be talking to the Water Quality platform. As you heard, this is a great platform with a wonderful track record and history. And 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 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. So 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 3 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 then Hoch Lange where it all began He's 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.
And lastly, 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 AguaSine acquisition just a little bit later. So So it's a great platform with a great history. But what I want to 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 going to take this business, this platform to a whole new level by focusing on the three things that you see here. And I will elaborate on each of these starting with innovation and new product development. Over the past 3 years across the Water Platform businesses, We have launched over 100 new products. I'd like to highlight one of those, which Saum mentioned earlier, which is called PPA.
To understand PPA, let me first describe what it is our customer is 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 is being tested to make sure But it's still clean after it was delivered to you. And so 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. So typically they would carry 2 to 3 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. And so we applied a DBS principle to a customer problem.
There's a DBS concept called poke 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. And so 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 2 minute video, Which highlights the old way versus the new way. Let's run the video. So 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 third the time.
Now this technology is only available from HAWK and none of our competitors have anything like it. Now Hach has been the leader for decades in providing state of the art sensors and instruments for Testing Water. So 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, See 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. And then 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 customers' cost for things like energy and chemical usage. Prognosis 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 prognosis, 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 Prognosis, 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. Now our customers like everyone in the world Are increasingly turning to the Internet to get the information they need to do their jobs better. And so we've been Building our capabilities in the digital realm as well.
We now have over 1,000,000 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 HAWK, 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.
And 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. And 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 AguaSine. AguaSine 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 chemistry geographically. However, as we did this acquisition, we've learned that AguaSine has a very broad set of capabilities and other water quality companies have now began to identify opportunities through working with AguaSine to help them grow their businesses in the region as well. We are applying DVS as well as the ChemTreat Commercial sales model to this business and we're already beginning to see some results from those activities.
So 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. And 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're 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.
Arndt Kaldowski, who has led the Beckman Coulter Business for the last couple of years and now has responsibility for the diagnostic platform. And Rainer Blair who's come up from AB SCIEX now leads our life Science platform, both two great examples of talent taking on added responsibility and both doing a terrific job. Arndt's going to kick us off with a look at what's going on in diagnostics.
All right? 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 3 segments of the IBD market through the 3 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 the Quest or the LabCorp And you get your blood drawn there and the test done. Radiometer in critical care in blood gases throughout the hospital More on point of care positions.
And then 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% in consumables as well as in services and often ties into 5 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. And then 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 health care 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 Diagnostics business, which came to us more than 3 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 And then an OP margin expansion above 150 basis points really to the benefit taking full advantage of DBS. Radiometer and Leica Biosystems continue to grow share in their market segments. Radiometer with the 5th 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 times 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 and 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 Debitcore, which closed last year Excuse me, which closed last week. And I'll get to the strategic rationale for the Devico acquisition in a second And then the pending acquisition of Siemens Microbiology allowing us to enter another lab within the hospital where 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'll 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 Devicore acquisition and the strategic rationale and how that fits to the Leica Biosystems franchise we have. And last but not least, want to share Progress with DBS in the Beckman Diagnostics environment. From a growth investments perspective, Significant progress in EKBN 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.
And this year really a breakthrough with regard to the number of sizable new products we're bringing to market. Three vectors, which I want to talk over. 1, 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 of what 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 Xpress which 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. And here having a higher throughput And the fast turnaround is important for the customers.
The Power Express relative to the pre deceiving 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 1,000,000,000 people in the world have vitamin D deficiency, want more testing and want more Input into the right treatment particularly on own 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, So, a significant size market where the diagnosis helps to decide if that couple needs Support with regard to fertility and the right treatment path.
So a significant market and with the automation of the product the availability to Standard Laboratory being able to conduct this test. The 3rd vector here not yet launched, But as Thomas pointed out, a significant investment organically for Beckman and Danaher with The various 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 hospital over time. We're going to launch with the virology panel in Europe next year and then we'll broaden the menu.
The product has that capability to further To see this. From a revenue perspective, we do expect that to be a business for us above the €100,000,000 mark over time. So really an exciting opportunity to broaden what we bring to the customers as well as to our P and L. Leica BioSystems 2 significant launches this year FDA clearance for HER2 IHC broadening our menu in the breast cancer environment and 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. 2nd topic I want to touch is on the acquisition side.
You may have seen that we've acquired Devicore. Devicore the market leader in vacuum assisted breast biopsy, A market which is about €400,000,000 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. How does it fit together with the Leica Biosystems business? A big issue in cancer diagnostics is degradation of tissue. When 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 deteriorate your diagnostic result maybe That's 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. So 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 MOMENTHUM sales as the product name of the Devicore product as well as the Leica Biosystems sales. Last point on Delacore. Certainly an attractive business model, high margin and very high consumable share in their revenue. That's the workflow.
I don't want to 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 3 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 long time 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. Significant achievements over the last 3 years, 4 of which I want to highlight. First one, the remediation of our quality management system. 2 major impacts. A, we were able to close out the 4 warning letters we had.
Secondarily, we got the troponin back on our instruments and able to sell that in the U. S. Last year. 2nd 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 We deliver reagents and getting them out of the manufacturing and towards the customer. And 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 3 years, we Reduced the number of stock outs of reagents by more than 75%. And 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 Danner 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 3 years after starting that engine To improve the reliability of our instruments by a factor 2 reducing the number of failures by more than 50% in average across the Product portfolio more to come. Clearly a place where we want to differentiate against the competition because it's critical for the customer. And 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 There's an external party who does that for the industry IMV. We've moved from a number 4 position in chemistry and IA to a number 1 position In the ranking of the customers of our service delivery over the last 3 years, which is quite an improvement and very important for our customers. So Clearly DBS driving the customer satisfaction and Beckman ultimately translating into better customer retention as well as At our competitive win rate and with it we were able to turn the tides from losing revenue in the U.
S. Year over year 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 1st year above 300 basis points since then 150 every year. Working capital return improvements above Half a turn every year. And while we're improving the operating margin, we were able to invest about 200 heads every year Into R and D or Feed on 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.
2 acquisitions this year to broaden addressable Market as well as in the Devicore case improved the quality of the diagnosis. And then DBS really an engine to drive the improvements in Beckman Coulter DX. We're somewhat at the beginning more to come, but definitely good performance over the last few years. Thank you.
Thanks, Arren.
Speaking as somebody who had the privilege of being the President Beckman Coulter for 2 years post the acquisition. It's really exciting for me to see the great progress that Arndt and the team have made Really starting to kick organic growth into gear on the back of some terrific new product innovations and now really adding The second significant bolt on to Beckman Coulter, we did the Iris acquisition, which added your analysis Not long after the acquisition and now with the addition of Siemens Microbiology, I think continuing to build out a terrific portfolio around Beckman and 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 ABCIEX, Reiner Blair who took my spot after leading that business For a period of time is going to give us an update on the Life Science platform. Rainer?
Thanks, Don. Not sure how to interpret it top grade in that context there. Thanks a bunch, Tom. So for 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, but also such big tasks as protecting the food supply or the water supply. So the life science industry is Broadly set up and it's a pretty exciting place to be chock full of innovation. And I'm really happy to be here this afternoon with you to share some of the good news so to speak. The Danner Life Science platform consists of 4 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 Tommetry, centrifugation, automation and some other lab solutions. We operate in about a $15,000,000,000 market.
I'll come back to that in just a little bit. And we're about $2,500,000,000 platform. Please have a quick look here. We have a nice balance in our geographic distribution of the $2,500,000,000 you can see Also a very large respectable position already in the high growth markets which we continue to strengthen. And 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, accessible market $15,000,000,000 mid single digits and great macro drivers. The continued increase of chronic diseases and infections Or increased regulatory oversight and testing requirements really are driving higher testing volumes. So we really do see that growing In developed markets as well as high growth markets. Well, our customers, some of them you know well, they're the classic government institutes such as the DA or the CDC, but there's also academic research institutions and reference labs. But increasingly in the applied markets, we also see food companies And they're testing their food quality to ensure that their brand isn't impacted.
So large variety of Applications here in the life science industry. So 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 2nd tier of high growth markets for instance in the Middle East with in excess of 15% growth but also Brazil. And now we're approaching a 30 Percent level of investment in digital marketing really enhancing our reach into markets using digital means. So 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. And then perhaps just as exciting another Nobel Prize winner here Professor Stefan Held.
In this particular case he's also a Collaborator of Leica Microsystems helped develop parts of this technology for us the stead confocal technology which is the high resolution Microscopy. This by the way is the 3rd year in a row that a Nobel Prize winner has used Leica Microsystem Solutions. So we're really excited and very proud of that. If we look at AB Thiag 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.
And then of course a next generation collaboration we call it 1 Omics with Illumina. For those of you who are not familiar with life sciences, Illumina is a leading company and the leader in genomic instrumentation. And I'll come back to that in a little bit more. So we're pretty excited about how we finished 2014 and we feel good about how that sets us up for 2015. I'm going to take A.
B. Sykes if I can as an example of how we try to drive growth Both at the top and the bottom line and create value. We'll talk about really 3 pillars here commercial 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. And then we'll talk about DBS, the engine room and how we make things happen. Let's start with the commercial execution.
We leveraged Danaher Business System at AB SCIEX in order to Form 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 with 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. So 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 2 dimensions. 1 from a regional perspective, 2 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 rate. And 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. And that is what Gives us the leverage here in order to outperform the market in a sustained way. So 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 three and a half years. And again the Danaher business system is at 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 6 To 24 months depending on the type of platform or whether you're face lifting or doing a fundamental change. So 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. So all of the innovation that we're talking about here of course includes Best in class software that accompanies these instrumentation solutions.
I'm going to 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 one omics? Well, when we talk about omics, we talk about genomics, Proteomics of the study of genes, the study of proteins, you might speak of metabolomics, the study of metabolites. And 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.
So 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. So let's pick a disease state. Let's call it lung cancer. And 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.
And so 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. So you can see how exciting that would be. Well, there's some 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 a hit and miss Over the last decade and it's really through the introduction of the ABCI 6,600 combined with the Swath's acquisition engine that we're able to bring what we call next generation proteomics, so next generation study of proteins to the market. So So of course the next hurdle for the scientists 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. And as such together with Illumina, we have leveraged the Illumina base space 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 computer storage and so forth. So all this together then Opens up the ability to connect the dots between disease state, create hypotheses.
And more importantly for us, There's 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. So really exciting stuff at the true edge of science already turning into And new business model. Well now back to the engine room, how do we make all this happen? Our bread and butter DBS Really helps us create value here. And whether you're talking about safety in your plants, whether they're talking about getting our products to our customers on time, Over there talking about enhancing productivity, the rigorous application of the Danaher Business System also at ABCIX has created an extraordinary Amount of value.
You can see here 40 Kaizen, 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. So here this stands for itself as the 2 date proof of concept At the Danaher Business System particularly at ABCIEX but also in the other operating companies in life sciences Create 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 and D investment leveraged here not only over higher revenue, but a higher percentage. We've expanded gross margins, so true value creation At the customer level and then needless to say about 1,000 basis points of operating margin expansion over the time period. So in summary then, you can see how we leverage Danaher Business System throughout life science. 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, Reiner.
Thanks, Tom.
DBS in action. DBS helping us improve our commercial execution, new product innovation that then has led to unique partnerships Taking digital information, combining it for better answers to unlock some of the world's toughest diseases And 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. Arndt's going to come up now. Mark's going to come up. And the 3 amigos are going to take a few questions over the next few minutes.
Thanks.
Question for Arndt especially. To what extent does scale matter in R and 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 and D efforts.
So answering on the Diagnostics side, not so much the Thermo Fisher Competitive environment, but other players. 2 sets of answers. The one is, I think you need to dissect And segment down what tools you develop and what capabilities you develop. And I think it's important that you have the right capabilities and for that the critical size. So I wouldn't look at the total diagnostics market as a whole, but at specific segments.
But at some point of time, it is important to have the right R and D capacity behind that, Yes. 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. Yes.
From 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 and D side, I think we're in a good spot.
Yes. 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. And so you can almost envision a diseconomy of scale When you have an extraordinary basket of technology 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 of 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. And 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?
So 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 5 years from the day that somebody gets their system approved Then those regulations take effect. So we've got this kind of nebulous situation where the market doesn't quite know when to get going. Now there are some ship owners who are moving ahead. And in fact, we believe the market is already about $300,000,000 in terms of market size Even with this lack of clarity around the regulations.
Now in our case to answer your specific question about the 15 systems, they come from 2 different customers. And typically these fleet operators are buying systems for the next several years. There's 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. So these are retro what we call retrofit. And so 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 1,000,000,000 of dollars of 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. So 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 from Slab 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.
So 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, but not critical right now time wise. I think we're looking at the market through the lens of Radiarmad and expanding what they are doing there. And we'll take it as we go.
Thanks. A question for Mark. Interested in hearing more about the RTC, the real time controls. The industry, especially municipal, is in its It's infancy using any sorts of automation on this. And 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 and hear you talk
a bit about where in
the value chain on this Continuous test and treatment that Dan or might be able to play in.
Thank you, Dean. 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. But it can be relatively easily applied to an existing plant. But when we have the E and 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 We'll be on the following three priorities that we think of course 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 And that means improving our growth trajectories and ultimately expanding operating margins. And 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, but 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.
So it includes Nobel, includes Devicore 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 Science and Diagnostics and Environmental towards the upper end of that range and the other segments In the portfolio, probably a bit lower than Life Science Diagnostics and Environmental. Our adjusted EPS growth will be between 7% 10%.
This represents that core growth number dropping through at about 35% and has the amortization excluded which will represent about $440,000,000 next year We're about $0.46 per share. The productivity initiatives that we talked about here in the 4th quarter, The benefit of those productivity initiatives are in the number. As I mentioned earlier today, we talked to about 125,000,000 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 $550,000,000 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. And finally, the tax rate Roughly consistent with where we've been in 2014.
So 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 A couple of special items. Generally, that's the gain on securities as well as the difference in the year over year Restructuring, we add back into that the amortization which gets us to that 406 as the jumping off point. Then 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. And then we see the contributions from acquisitions, roughly $0.15 That breaks down between Nobel about $0.10 and Devicore and other smaller acquisitions roughly 5. 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 Q4 is the $0.10 I mentioned that $100,000,000 translates to that dime. And then when you take the 3% to 4% Core growth range dropped that through at 35%. You see the $0.21 to $0.31 that takes us to the $4.35 to the 4.45 that we're looking for in 2015.
So with that summary, hopefully a clear one. We will open it up to a final round of questions. Dan is here as well. And 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 It's Davis from the Chief
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 in myself nobody notices. Anyways, good presentation thorough, but Help us understand what's different about Danner today versus a year ago. I think I've been to about 12 of these Dan or 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. But From your sense at least being a new CEO in this role in your first Danner Day, I mean, what should our takeaways be that's what's different about Danner today 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. There is 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 of things that maybe are a little bit different today is We do have some acquisitions under our belt, dollars 4,000,000,000 of capital deployed here largely in the second half of this Dear or committed, if you will.
And I don't think we could have 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. And so 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 friendly to some capital deployment than maybe where we were a year or 18 months ago. I 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. And at least as it looked from my seat going through the strategic plans, I think many of these digital 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. So 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. And so I think in many respects, there should be great confidence taken from the Continuity of Danaher from a year ago as well.
Okay. And as a follow-up, the one thing that Dan or I 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. But really Danner historically hasn't grown much more than global GDP. What is it that gives you the confidence that you can impact that 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 some of the front end Initiatives, I mean, help us just bridge that gap 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 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 get tend to get more questions about why we can't take it above the peer average. And frankly, we're encouraged by that because it is an indication of Progress. And 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 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. So 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. But I am really encouraged that if we continue to make selective targeted investments similar to some of 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.
Hi. Just a couple of questions. The first one, why the tighter range the 3% to 4% instead of Usually 2 to 4. And then on the second question, I didn't really see a slide in there. You guys used to have a slide on The targeted financial returns or maybe you didn't have a slide, but it was kind of understood what they were.
Maybe that's an indication of a shift towards more kind of Strategic and growth type of deals? And 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 Nobel where great strategic opportunity, but maybe a little bit lower financial returns in that 10% hurdle you guys used to talk about. And then finally one last one. Portfolio optimization, can we generally rule out A split up at this stage of the game?
By split up, I mean either fifty-fifty or a third, a third, a third. It doesn't sound like There's a change in tone there, but I just wanted to make sure that we're looking at that the right way.
Sure, sure. So 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 continuing continuation of the existing macro and some progress across the businesses, We had some reasonable confidence in that range. So 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. So 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. So we set a very high bar strategically. In situations where those Returns are perhaps a little bit more challenging than those return thresholds that I think you're referencing that we've had in books in the past. 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 cut Clear a higher bar strategically. But I think the most important thing is that those 3 5 year thresholds also are not the only thresholds to be considered. I think the examples we talked about today particularly at Hach Longan to name 1 certainly the Fluke portfolio being another. The long view is critical. So we're if we're confident that it's the right strategic play and those returns are going to move north of even any of those thresholds we've quoted in the past then the odds are we're going to be all in.
Relative to your last question around any hypotheses around complete changes in structure Over any percentage, I would only say what I said earlier, which is that we will continue to optimize the portfolio. We will continue to adjust 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. But 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. And 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.
Hi, Nigel. Hey, Tom. So I just wanted to pick up on the narrow range because I thought it was Very interesting. This is a 1 point range. So do we think about this as maybe a truncated 3% to 5% range?
It could be better than 4% or is it just Your function of with 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 and reframing a 3 to 5 Into something that was trying to say anything more than I think what I just said to Steve. So 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 had been an indication of that.
Okay. And I apologize for all the conspiracy theory questions, but Seeing water quality on stage with the NSD guys, just prompted a question about should we think about Water quality in a different light. Given the fact that we've always seen it along with GVR, so should we think about it differently in terms of the growth profile or Acquisition opportunities, sir, I mean just
I've challenged myself to think about more conspiracy But the lineup of the presenters was not one of them. So 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.
So These are all great businesses. Those happen to be 3 great businesses. Just coincidentally, I've worked closely with a lot of them, but nothing more than that.
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? Or 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. So that was an opportunity to bring it back. So that's one example. Relative to any sort of 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. But it's not an alert that I have on my phone.
Let's put it that way.
It's driven by the return on invested capital. So we would look at a buyback 35 year ROIC on that to make an evaluation for that.
A 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 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. So Nothing more than that, probably a little bit of a bigger umbrella that structurally organizes some of those. Dan Daniel has done a nice job actually at 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.
Just a couple of detailed questions. One is on the waterfall chart, You have $0.10 for net 2015 benefit of 2014 productivity initiatives, which I assume is restructuring and whatnot. What happened to core margin Stanshan, is that baked into something else? Because core revenue growth is just on the incremental volume. And so in terms 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 So if you looked at That's
net.
Yes, inflation It would be a lot and growth investments, it would be a lot bigger than $0.06 And it's in the 2015 in year productivity initiative that reduces that number.
Okay. And then the second question is, so you've talked about the guidance excluding comps meaning sorry includes comps, excludes Siemens closing. What's the sensitivity around that for the year? Should those happen in a timeframe as Communicate it. How should we think about, okay, so what's kind of the net impact?
We're talking a few pennies here. What are you thinking about?
So in the case of the Siemens deal, Assuming we would close say
in the
Q1, it would add a couple of cents to the EPS. The comps deal is a little bit more complicated And it really depends whether we do a spin or a split. So if we do a spin out, we will lose the earnings which would be roughly 3% of the earnings. Again shareholders would get about $2,000,000,000 plus in value. If we do a split, we then would have a we would take down shares.
So at that point it would be roughly neutral to earnings.
Okay. And maybe one last one I'll sneak in which is so of the $8,000,000,000 number that we key that's a perpetual $8,000,000,000 number Which we like. What's the real constraint right now on that number? So when you think about deal size and Balance sheet capacity and all these other things. 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.
Yes. We put that plus sign on there for a reason. 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 $3,000,000,000 range and then of course a function of over what period of time do you want to bring that free cash flow in and how much leverage do you want.
That's a number that we feel very good about. We'll spend $4,000,000,000 this year against about $3,000,000,000 of free cash flow still be under levered obviously. But I think that's a number that we feel good about. And if we needed more capacity certainly for the right kind of transactions, we would 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.