Twin Titans of the New Industrial Revolution
Yesterday, I promised to review the giants leading the 3-D printing industry forward. They offer the best clues as to how this new era of manufacturing will unfold from a business perspective.
Two companies in particular have caught investors’ attention. They could be the “Microsoft” and “Apple” of the 3-D printing industry.
There’s even talk floating around the Web saying Apple may be considering an acquisition of one of them. Regardless of whether there is any truth to the rumor, the 3-D printing industry — one way or another — must reach both the industrial and consumer markets for it to reach its full potential.
If you tuned in last time, you’re familiar with the terms “rapid manufacturing” and “additive manufacturing.”
Inventor S. Scott Crump coined the former. He went on to found Stratasys (NASDAQ:SSYS). As of this writing, its market cap is $2.87 billion.
Inventor Charles “Chuck” Hull coined the latter. He founded 3D Systems (NYSE:DDD). Its current market cap is $2.86 billion.
The inventors who founded these companies were there at the genesis of the 3-D printing industry. They’ve since witnessed each of their babies go through an organic growth spurt.
Stratasys is catering to industrial clients. It has worked with toymakers Disney (NYSE:DIS) and Mattel (NASDAQ:MAT), automotive company BMW (ETR:BMW) and high-tech Honeywell (NYSE:HON).
3D Systems has placed a heavy emphasis on the consumer market. While most 3-D printers range from $15,000-$300,000, the Cube’s price is $1,299 (about five years ago, the lowest cost was around $15,000). Its products are limited by the printer’s smaller size, but it remains one of the best 3-D printers for the home market.
Both companies have gained strong numbers with little to no debt. And the twin titans are eating up whatever they can with acquisitions of private companies.
Stratasys, for example, acquired Objet…a deal finalized in December 2012.
Objet was planning a $75 million IPO as a stand-alone company, but canceled and did the merger. It was an all-stock deal that leaves Stratasys owning 55% of the new entity.
This was their biggest power move yet.
After the merger, shares jumped up past 50%. It doubled the product offerings in concept models. They now have an annual combined growth rate above 20%.
Objet provides to 70 foreign markets, and they enjoy a tax of 9.8% from their Israeli headquarters.
But most importantly, the company brings 500 patents and its proprietary PolyJet technology… said to be the only 3-D printer in the world able to print multiple materials simultaneously.
For example, the printer can produce a wheel of high-quality plastic and line the outside with rubber in the same go-round.
Combine this with Stratasys’s 285 granted or pending global patents and you are faced with the 3-D printing industry’s top dog.
However, 3D Systems has been far from idle.
During the last couple of years, it picked up about 24 3-D companies. They range from small home devices that make toys to larger ones…such as the $137 million acquisitions of Vidar Systems and Z Corp.
But the most exciting of their acquisitions so far has been Paramount Industries, which is arguably in the same league as Objet. Paramount is a seasoned veteran in the manufacturing sector, especially in aerospace and medical devices. This move has done the most to strengthen 3D Systems’ presence in commercial applications.
But 3D Systems’ release of the Cube seems to be the greatest push toward affordability and convenience…the two obstacles that have kept 3-D printing on the fringe for so long.
Terry Wohlers, a widely cited industry consultant, had this to say:
“Low-cost 3-D printers affect both the professional and consumer markets. The increased sale of these machines over the past few years has taken additive manufacturing (AM) mainstream more than any other single development. 3-D printers have helped spread the technology and made it more accessible to students, researchers, do-it-yourself enthusiasts, hobbyists, inventors and entrepreneurs.”
Enabling this powerful technology to be put into the hands of the people will stimulate its own evolution. 3-D printers will then be used in ways that the original inventors would never have been able to predict.
Here at our Baltimore headquarters, for example, we bought a CubeX from 3D Systems… and we have a friendly competition to see who can design the most useful products for the office. It’s a lot of fun.
So how can you potentially profit from this emerging trend?
Wohlers also projects that market growth for 3-D printers will double in the next five years. So there’s no doubt we’re going to see a lot of innovation from competitors. There should be many more startups in the works — some that get bought out by the “two titans” and some that don’t.
You’ll definitely want to stay tuned into Tomorrow in Review as we explore opportunities with smaller companies down the road. But for now, both of these companies have seen a pullback in stock price since their meteoric rise. That means, if they continue to grow in the long run, now may be a good time to get in. At the very least, keep an eye Stratasys and 3D Systems.
Managing Editor, Tomorrow in Review