Xylem Earnings Call Insights: Scaling a Service Business and Restructuring

Xylem Inc (NYSE:XYL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Scaling a Service Business

Deane Dray – Citi Research: It was interesting hearing more about the PIMS acquisition moved into services, it does complement the equipment model. But could you comment on how do you scale a service business. There is a lot of headcount (indiscernible) that business model. So, how much is it growing and how do you scale it and do you get a flow through of your aftermarket products through service organization like PIMS?

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Gretchen W. McClain – President and CEO: Let me step back a little bit. We’ve been talking about our aftermarket strategy for quite some time. We’ve been spending enormous amount of time driving what we call our TotalCare program is and so in all of our businesses where we have a large install base our sales teams have been working aggressively to make sure that we are capturing the parts and services but also bringing advance services where we can bring the broad portfolio of products that we have and our ability to go in and do energy audits and so forth. What we get with PIMS is; one, some very nice processes. We also get a very talented group of folks that have a core competency that we can help train geographically our teams that are positioned very well. So, not only do we get a great position in the U.K. which complements where today we play into public utilities and 90% of their customer base is non-public utilities. We also get a core competence of talent that we can actually use to help our teams geographically expand.

Deane Dray – Citi Research: Just a quick follow up from Mike. Can you comment on the lower tax guidance, what’s driving that as sustainability?