Flying below the radar, Fortive is now one of Washington’s largest public companies, roughly twice as valuable as Nordstrom or Alaska Air Group. Its wide range of businesses includes Fluke Corporation, a stalwart that dates back to the early years of local tech.
Everett’s newest publicly traded company has 24,000 employees and is worth more than $16 billion. But chances are, you’ve never heard of it.
That’s partly because Fortive Corp. has existed only for a few months — since July, to be exact — after a series of complicated steps in corporate reorganization.
And, even if you may have been following the maneuvering, the company has been flying under the radar, entirely by choice.
Businesses: Professional instrumentation and technical equipment, including automotive tools, gasoline dispensers and electrical testing equipment. Businesses include Fluke, Tektronix, Matco Tools, Gilbarco
Spun off: July, 2016
Headquarters: Everett, Wash.
2015 revenue: $6.2 billion
Employees: 24,000, including more than 1,000 in Washington
Instead, Fortive wants you to know the company by the businesses it operates — electronic instrumentation from Fluke Corporation, auto tools from Matco and gasoline dispensers from Gilbarco, to name a few.
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Fortive is the parent company to these three businesses, as well as 18 others. It doesn’t brand any of its products with its name. Rather the company deploys a set of guidelines to manage corporate culture and strategy, and then it largely stays out of the way of its entrenched businesses.
“In most cases, our customers don’t even know the Fortive name,” Fortive CEO Jim Lico said. “They might know who owns the business, but they might not.”
Fortive’s 21 business units were part of the Washington, D.C.-based manufacturing conglomerate Danaher before being spun off in July to form a separate public company.
But Fortive’s roots in the state stretch back even further to the birth of the state’s technology industry decades ago. The company’s headquarters in Everett are nestled in a corner of the sprawling office of Fluke, a mainstay of electronic testing tools since predecessor John Fluke Manufacturing was formed in 1948.
It may not be the flashiest technology company in the region, but Fluke’s tools make up the backbone of many of the services we use every day.
After the dust settled from Fortive’s spinoff from Danaher, it had 24,000 employees around the world, including more than 1,000 in Washington state, largely centered in Fluke’s operations.
The company considered various locations to establish its headquarters, including Portland, home to Fortive measuring-equipment company Tektronix. But Everett won out because of its position within a growing tech center and Fluke’s presence.
In the spinoff, many of the businesses remaining as part of Danaher are in life sciences, selling equipment and consumables that go along with it.
Fortive’s businesses are, in some ways, in more established businesses — instrumentation, sensors and equipment. The companies generally hold strong positions in their respective markets, but face challenges in an increasingly high-paced, changing technology world.
Operating as a separate company may mean more flexibility for each Fortive business to try new things and expand its technologies.
“The mandate to grow, instead of generating cash for the parent, is a motivator for the management and employees,” said Richard Eastman, a senior analyst at Robert W. Baird.
Fortive posted strong third-quarter earnings Thursday, beating analysts’ expectations. The company reported revenue of $1.57 billion, a nearly 3 percent increase from the same time last year. Profit increased more than 15 percent to $226.9 million.
That news lifted its shares by 5.7 percent in Friday trading, giving the company a market capitalization roughly twice that of local stalwarts Nordstrom or Alaska Air Group.
Fortive, which itself has fewer than 100 employees, tries to keep a low profile.
Its name mostly appears only on corporate materials, and many customers of the company’s various businesses likely don’t even know its name.
“It’s slightly different than in today’s day and age where it seems like shouting louder should be the goal of everyone,” said Lico, the CEO, who was with Danaher since 1999. “We like to shout silently.”
Each of the 21 businesses runs its own shop. Nothing is centralized, not even sales or human resources.
It would be insulting, Lico said, to slap the Fortive name on something that has the legacy and reputation of a Fluke or Gilbarco. (Gilbarco Veeder-Root, based in Greensboro, N.C., makes dispensers and payment systems for gas stations and is Fortive’s largest unit.)
That’s not to say Fortive completely checks out and leaves its companies alone. It deploys a set of tools and guidelines called the Fortive Business System, adapted from Danaher’s similar policy. The system sets out strategy for everything from culture to acquisitions to career development.
Fluke President Wes Pringle said the company has been using a component of the system, called the speed design review, to monitor a team’s daily schedules while developing a new product.
“We’ve seen huge gains,” he said. “It dropped our product-development timeline in half.”
New employees go through training on the system for various periods of time, including three months for new executives.
“What differentiates Fortive is having a common management set of protocols,” Eastman said. “…This common approach to managing the various businesses is one kind of hallmark.”
That set of protocols can extend outside the company, according to Arif Kareem, CEO of ExtraHop, a Seattle tech company. Kareem previously served as president of Fluke and vice president at Tektronix.
Fortive’s companies get successful results from using the company’s management system, he said.
“Their playbook is one that all companies, including ExtraHop, can pull from for best practices,” Kareem said in an email.
Many of Fortive’s businesses are deploying the best practices into their developing technology.
Ten years ago, software sales made up zero percent of revenue. Now, it is 5 percent of total sales.
As technology grows and changes, Fortive’s businesses have been adapting. Their instruments and measuring tools, for example, collect a massive amount of data, and they’re trying to develop ways to process and understand that. “Helping monetize that is a big part of a strategic plan over time,” Lico said.
The companies may develop their own software, but many, including Fluke and Tektronix, have turned to a common Danaher model: Acquire someone who already does it well.
Analysts are expecting Fortive to grow largely through acquisitions, a strategy that Danaher has employed for years.
“…we expect (Fortive) will be a ‘growth by acquisition’ story,” analysts at Barclay’s wrote in a July note. “Meaning, whatever cash flow is not invested in the businesses will (ideally) be deployed via M&A.”
Fortive is on it. The company has set aside $2 billion to $3 billion to buy companies in the next couple years. Many would be rolled into Fortive’s existing businesses, though some would continue to exist as their own entities.
Many of Fortive’s businesses hold strong positions in their markets, but Fortive still faces a larger economic issue.
The industrial economy overall has been sagging in the U.S., making up less of the country’s gross domestic product than in the past. As a result, Fortive companies had seen slowed growth recently within Danaher, Eastman said.
That could change, in part because of a U.S. law requiring implementation of chip-reading technology for credit cards.
Gilbarco is deploying such technology. That growth, plus a growing telematics industry and Matco’s auto-tools business, could mean Fortive will outperform the general industrial environment, Eastman said.
Fortive will likely never be on the trendy cutting edge of technology, inventing the next way to harvest water from Mars or creating a drone-delivery technology. But the company provides many of the tools needed to do these things, or something like it.
“We don’t make the surgical instrument, but we make the mini-motor technology to allow that tool to work,” Lico said. “We don’t make data centers, but we help the electrical engineer with Tektronix design the next generation of centers.”