How United Technologies Corporation (UTC) Makes Money?

United Technologies Corporation (UTC) is a leading high technology product company. It offers safe and reliable mode of transportation for moving people from place to place and provides safer, smarter and sustainable building solutions. UTC is also a leading aerospace company that provides innovative, safe and convenient air travel and space exploration products. UTC offers its products and services to individuals, commercial aerospace, defense and building industries around the world.

Business Segments Of United Technologies 

United Technologies has operations in more than 160 locations in 26 countries. UTC business is organized into following four major business segments.

  • Otis
  • UTC Climate, Controls & Security
  • Pratt & Whitney
  • UTC Aerospace Systems

Understanding Otis Business Segment

UTC offers people-moving products under the brand name of Otis. Otis operates as an elevator and escalator manufacturing, installation and service company. Otis provides modernization products to upgrade elevators and escalators, as well as maintenance and repair services for both its products and those of other manufacturers. Company serves commercial and residential property industries globally.

Understanding UTC Climate, Controls & Security Business Segment

UTC offers heating, ventilating, air conditioning (HVAC) and refrigeration solutions under the Carrier, Bryant, Payne and Totaline brand names to building contractors and owners, homeowners, transportation companies, retail stores and food service companies. Company is a leading provider of large-scale integrated fire and security products and services to government, defence, banking and commercial companies

Otis, UTC Climate Controls & Security segment generates revenues by selling Heating, HVAC, Intruder alarms, specialty hazard detection and fixed suppression products to individuals, building developers, aircraft manufacturers and government agencies. Revenues are generated per transaction from the customers. To generate recurring revenues, company signs contractual service agreement with the customers along-with the sales of the product. This contract helps the company ensure recurring after sales service and MRO revenues from the targeted customer segments.

Understanding Pratt & Whitney Business Segment

UTC offers aircraft engines and auxiliary power units for the commercial and military segment under Pratt & Whitney segment. Pratt & Whitney’s products are marketed to aircraft manufacturers, airlines, aircraft leasing companies, and the government agencies. Revenue model innovation by Prat & Whitney has helped it achieve high margin long term revenues from airline customer segment. Prat & Whitney offers it’s jet engine free to the airline customers and charges them for the MRO services at a premium.

Understanding UTC Aerospace Systems Business Segment

Company also offers aerospace products and aftermarket service solutions for aircraft manufacturers, airlines, military and other government agencies. To generate recurring revenues, company signs contractual service agreement with the customers along-with the sales of the product. This contract helps the company ensure recurring after sales service and MRO revenues from the targeted customer segments

Visualizing UTC Revenue Models

UTC utilizes three revenue models to generate revenues.

Transaction Revenue Model: UTC generates product revenues from Otis, UTC Climate Controls & Security and UTC Aerospace Systems by selling  industrial products to individuals, aircraft manufacturers, building developers and government agencies.

Recurring Revenue Model: UTC generates product and services revenues from Otis, UTC Climate Controls & Security and UTC Aerospace Systems by contractual service agreement. This contract helps the company ensure product and recurring after sales service and MRO revenues from the targeted customer segments.

Product as a Service Revenue Model: Prat & Whitney offers it’s jet engine free to the airline customers and charges them for the MRO services at a premium.

Following diagram shows how the money flows-in from the different customer segments.

utc-revenue-model

UTC Revenues By Business Segment FY’15

In FY’15 (fiscal year ended December 31, 2015), UTC generated $56.9 billion of total revenues. Of these total revenues, UTC generated.

  • $16.7 billion revenues, 29.4% of the total, from UTC Climate, Controls & Security segment
  • $14.1 billion revenues, 24.8% of the total, from the UTC Aerospace Systems segment
  • $14.1 billion revenues, 24.8% of the total, from the Pratt & Whitney segment
  • $12.0 billion revenues, 21.1% of the total, from Otis segment

utc-revenues-by-business-segments

UTC Profits And Profit Margins FY’15

Of the $56.9 billion of UTC total revenues in FY’15, $40.4 billion were the costs of goods sold. This resulted in $15.7 billion of gross profit and a gross margin of 27.9%. UTC other operating costs were $8.2 billion. These include marketing & administrative expenses, research and development (R&D) expenses. This resulted in $9.8 billion of operating profit and an operating margin of 17.4%. After interest and other non-operating income and expenses and income taxes, UTC had a net profit of $4.0 billion and a net margin of 7.1%.

utc-profits-and-profit-margins-fy15

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