Pall (NYSE:PLL) may be a filtration company, but we're not talking about just simple air and oil filters here. One of the company's main areas of expertise is in medicine; it provides filtration, separation, and purification devices for biotech and drug development companies. Another of its specialties is ultra-clean air-filtration systems for microelectronic clean rooms. You could say that the company is diversified, but each segment is still firmly within its sweet spot of filtration.

That doesn't necessarily lead to excellent results, however. The latest quarterly and full-year report was rather flat year over year, and both sales and earnings are slow to grow. Annual revenues rose by only 6% from the 2005 level, which is barely faster than the current inflation rate of about 4%. Pro forma net earnings increased by only 1.2%. You have to look a bit closer to find out what's ailing the company, though. Dig into the segment reports, and you'll see that the bread-and-butter general industrial filtration segment, which represents about 38% of total revenues for the fiscal year, brings in only about a quarter of the operating profits. It's also among the slowest-growing divisions.

Management does have a plan for reversing that trend, though. You'll recognize the concept from a golden oldie by Gillette, now a subsidiary of Procter & Gamble (NYSE:PG): Give away the razor handles and profit from the blades. In Pall's case, the handles are low-margin filtration systems that need high-margin consumables to work. The company has sold an inordinate amount of new systems lately, and the hope is for a wave of orders of replaceable filter materials to show up soon. It's the same business model that Rule BreakerIntuitive Surgical (NASDAQ:ISRG) has implemented to great effect, for example, with its da Vinci robots. Intuitive Surgical secures a steady reoccurring stream of revenue from the maintenance and training for these robots.

With that in mind, we can see that gross margins, which have become the main focus for Pall's management team, should mean that it lets up on new-system sales for a while. Pall's margins are trailing those of competitors Millipore (NYSE:MIL) and Qiagen (NASDAQ:QGEN), and these companies are also growing faster than Pall. If consumable orders pick up soon, that could change on both counts, and judging from the generous P/E ratio of more than 30 on the stock, it looks as though the market expects that to happen sooner rather than later.

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Fool contributor Anders Bylund is an Intuitive Surgical shareholder but holds no other position in any of the companies discussed here. He really should shave more often. You can check out Anders' holdingsif you like. Foolishdisclosure keeps us squeaky clean at all times.