Researchers expect the worldwide 3D printing market to grow around eight times in five years’ time starting 2014. Sensing this, Hewlett-Packard (HPQ) has decided to enter the business by the middle of this year. With HP's entry, will things change for the second-largest 3D printer company Stratasys (SSYS), or is it doing enough to defend market share? Let’s find out.
Stratasys seems to be doing the right thing at the right time. During the first week of April, it made three back-to-back acquisitions to boost its portfolio and business growth. This will help Stratasys to hold ground while competing with its peers.
During the middle of the week, Stratasys announced the acquisition of Solid Concepts and Harvest Technologies. These two North America-based firms specialize in providing additive manufacturing services and are expected to enhance Stratasys’ digital manufacturing service business RedEye. With these units, Stratasys will be able to add capabilities such as SLA (stereolithography), SLS (selective laser sintering) and DMLS (direct metal laser sintering) to its existing FDM (fused deposition modelling) capability.
Also, it can have a wider exposure to areas like aerospace and medical. It is important to note that 3D printing has tasted remarkable success in prototyping prosthetics (body parts), dental and hearing aids.
Stratasys exited the week with the acquisition of Interfacial Solutions, a provider of thermoplastics research and development (R&D) and production services. Interfacial has been a supplier of plastic filament (just like ink in traditional printers) to Stratasys. Interfacial operates a 42,000-square-foot factory and has acquired more than 50 patents.
Currently, Stratasys offers more than 130 materials that are used by its 3D printer customers. The acquisition will enable the company to expand its material production space, strengthen R&D for material development and offer improved thermoplastic materials for printing.
The acquisition of Solid Concept and Harvest Technologies would be completed during the third quarter of 2014 and is expected to contribute toward the adjusted earnings per share within a year of full integration. Stratasys expects to wrap-up the Interfacial acquisition by the end of the second quarter.
Synergies from MakerBot
Last year, Stratasys bought a leading desktop 3D printer manufacturer MakerBot Industries mainly to focus on the consumer space. Earlier Stratasys had been a key player in selling 3D printers to industrial clients. During the fourth quarter ended last December, Stratasys witnessed robust demand for MakerBot’s Replicator desktop 3D printers, which helped it to record 62% revenue growth in the quarter.
Although enterprise spending will be the trump card, experts are also optimistic about consumer spending. The price for the entry-level 3D desktop printers is going down and experts are predicting demand to go further up. Consulting and advisory services provider Strategy Analytics mentioned in its latest report that household demand for 3D printers could go up in the U.S. and Western Europe and that the market could generate $10 billion in annual revenue by 2024 and roughly $70 billion by 2030. With MakerBot, Stratasys is poised to benefit more from this market.
It’s true that Stratasys made some big moves last week, but its archrival was not exactly sitting idle. Market leader 3D Systems (DDD) acquired Medical Modelling, which is an additive manufacturing service provider specializing in personalized surgical treatment and medical devices.
On the other hand, Palo Alto-based PC giant HP announced plans to enter the burgeoning 3D printing business in its shareholder meeting. Its 3D printing road map will be made public sometime in June.
The gap between the two top players in the 3D printing market is not very significant. The three acquisitions made by Stratasys will help to lower the gap further with access to advanced capabilities like SLA, SLS and DMLS. Although HP’s entry is expected to intensify competition, Stratasys’ solid position in industrial and consumer space, as well as efforts to boost its service business (RedEye) will help it maintain its edge.