3-D Printing Giants Eyeball Buyouts
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Stratasys (NASDAQ: SSYS) is reported to be in takeover talks with Brooklyn-based 3-D printing company Makerbot. If Stratasys does purchase the company, it would be one more acquisition in a long line for 3-D titans.
Both Stratasys and 3D Systems (NYSE: DDD) have continued to make purchases over the last several years. This is a sign of confidence in the sector, even though many analysts have had their doubts about the valuation of these top 3-D printing firms.
The rumored Makerbot purchase
Does acquiring Makerbot make sense for Stratasys? If the deal is in the works, it would likely mean Stratasys is making a move into the consumer market, something it hasn't previously attempted. The company's lowest-priced printer is $9,900, while competitor 3D Systems sells its Cube for about $1,300 at Staples, making it affordable for many individuals. But because Makerbot focuses on the average user, and generated about $50 million in the last year from that niche, a purchase by Stratasys would mean the company is ready to compete head-on with 3D Systems for the consumer market.
Mergers and acquisitions
Stratasys merged with Objet in April 2012, but will have to increase the number of acquisitions it makes in order to compete with 3D Systems, which since 2007 appears to be on a mission to buy out any 3-D-related company it sees. The firm started its buying frenzy after an acquisition program that was initiated in 2007. It intended to collect the best designers, engineers, materials, software, printers and printable content it could in order to lead the future of this disruptive technology. 3D Systems bought 16 companies in 2011 alone, right before its share price began to surge. The purchases essentially put the industry under one roof, with the exception of Stratasys, though that company is on course to become a niche provider of 3-D technology to large companies.
The desires of a shopaholic
3D Systems could even buy the third-largest publicly traded 3-D printing company, ExOne (NASDAQ: XONE). The firm, which just released its IPO in February, mainly caters to automakers, aerospace and heavy-equipment industries. The company is certainly confident, which could be cause for concern of 3D Systems and could prompt a buyout. In April, ExOne's CEO Kent Rockwell said he is targeting a whopping 50% gross margin in the next three years. This is part of the firm's attempt to increase revenue to $100 million per year. Three new production service centers are slated to be opened by 2014. And the firm doesn't seem concerned with the acquisitions being made by the big players 3D Systems and Stratasys, as it looks to open operations throughout the world, including in Japan and South America. Like Stratasys, ExOne is focused away from the consumer market, opening up a wide pasture in which 3D Systems can gallop.
Consumer market monopoly
While 3D Systems has so far been the most active buyer, it is also the only one of these three large 3-D printing companies that has shown keen interest in the consumer market. The number of purchases the company is making sets it apart from others, and allows the firm to gain major control of the various facets of 3-D printing, including the devices, software and parts. However, everything could be different if Stratasys is in the process of refining a desktop printer for the consumer market with the suspected upcoming purchase of Marketbot. Stratasys does manufacture desktop printers and refining the manufacturing of that product will mean a decrease to the price tag and make it more attractive to retailers like Staples. If that happens, 3D Systems could see its lead in the race to become a household product vanish.
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.
Phillip Woolgar owns shares of 3D Systems. The Motley Fool recommends 3D Systems, Stratasys, and The ExOne Company. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. 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. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!