Strong Numbers for Illinois Tool Works

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Byline: Matthew Johnson Medill News Service

The 80/20 simplification process that's been a key strategy for Glenview-based Illinois Tool Works Inc. since the 1980s has helped drive growth even as manufacturing suffered in the early part of this decade.

Its success is reflected in the company's recent results.

In the second quarter, net income rose 31 percent to $300.4 million, or $1.16 a share, on revenue of $3 billion, up 17 percent. The stock now trades for about $92, up almost 50 percent from the 52-week low.

"The numbers continue to come in relatively strong," said Eli Lustgarten, senior vice president of the New Jersey-based investment bank J.B. Hanauer & Co.

The strategy posits that 80 percent of revenues are derived from 20 percent of a company's product line. ITW's myriad subsidiaries drop products that generate smaller profits and focus production on goods that fatten the bottom line.

Another prominent feature of ITW's grand strategy involves continual acquisition of smaller businesses.

"We take a look at prospective companies and we ask questions about their customers and products, then we assess whether or not we can successfully implement the 80/20 process," Chief Executive Officer W. …