Industrial conglomerate Tyco International (NYSE: TYC) is looking more and more like a service company these days and less conglomerate-like. This change is good for margins and should reward investors in the long run.

Tyco just reported on its fiscal fourth quarter, showing 4% revenue growth year-over-year to $4.5 billion and 25% stronger earnings from continuing operations at $0.74 per share. Recent moves have included selling off the underperforming European waterworks division (here's a box of tissues, dude) and buying security giant Broadview. And alongside this earnings report, Tyco took the next step by selling a majority stake in its fast-growing but low-margin electrical and metal products segment to private equity firm Clayton Dubilier & Rice.

Once again, Tyco becomes less industrial and more service-oriented, handing the day-to-day responsibility of running the metals business to the new majority owner. The $720 million of cash proceeds from this transaction will be pumped right into financing Tyco's generous share buyback program.

Simplification seems to be the general trend in today's industrial conglomerates scene. We've discussed Tyco's change of direction already, and General Electric (NYSE: GE) is selling more and bigger businesses than it is buying these days including the pending spinoff of media giant NBC Universal to cable giant Comcast (Nasdaq: CMCSA). 3M (NYSE: MMM) is bucking the trend with a number of large deals on the buyer's side in recent months, but even there, 3M targets Cogent (Nasdaq: COGT) and Arizant are firmly established security and health care businesses rather than heavy industry operations.

The markets took Tyco's one-two punch of ho-hum results and business simplification with a shrug, but I think we're looking at a very positive net effect. Tyco is grabbing its margins by the horns and steering the unwieldy multi-headed beast in a new and more manageable direction. This is not an exciting story about organic growth, but a tale of smart management of Tyco's considerable assets.

I'm giving Tyco a thumbs-up rating in my CAPS portfolio right now to capture the spread I see between improvement opportunities and market response. You can follow my all-star lead in just a couple of clicks.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. 3M is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.