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3D Systems Corporation: Strategic Analysis and Recommendations
MGMT 3519: Strategic Analysis: Capstone Project
Professor N. MacGregor
March 14, 2015
Submitted by Team Agreement:
Martha Andrews
Monica Argenti
Cathy Le
Victor Phan
Jen Visscher
Brian Zias
Executive Summary
The Additive Manufacturing (AM) industry, more commonly referred to as 3D printing, consists
of firms who market machines, materials, and services that transform raw consumables into real,
physical models of digital design data1. While there are myriad competitors in this moderately-
highly favorable industry, each firm’s business model varies in how it answers fundamental end-
user questions: How do I get the digital model? How do I send it to the printer? What printer is
right for me, if any? How can I enjoy the benefits without owning hardware?
3D Systems Corporation created the AM industry in 1988. Almost three decades later,
they have grown to offer “7 core 3D printing technologies and more than 50 3D printers to
enable everyone to start 3D printing” (3D Systems). More critically, they have expanded beyond
their core hardware businesses and now attempt to serve a variety of end-to-end user value
chains. Fueled by acquisitions, they earned revenues of $653M in 2014.
In order to address the wide spectrum of wants and needs up, down, and across the AM
market, 3D Systems continues a ramped-up acquisition strategy that started in 2009. In the last
six years 3D Systems has acquired over 45 hardware, software, and service firms as a vehicle for
growth and differentiation. 3D Systems’ first mover advantage does not entitle sustainable
competitive advantage in today’s highly competitive and commercialized industry. To both
defend industry leadership and exploit growth opportunities, 3D Systems must:
Combat shrinking net margins by realizing synergies of acquisition portfolio.
Leverage VRIO resources and capabilities to refine and market focused digital threads.
Grow market share and generate new value through alliances and open ecosystems.
Outlined in this paper are five recommendations, which suggest the ability for 3D Systems to
double their 2020 enterprise value from $538.3MM to $1,374.31MM2.
1 Team A’s 2-minute intro video: https://www.youtube.com/watch?v=xofbadeVbuw&feature=youtu.be
2 See 3D Systems valuations 2015-2020 before and after recommendations: Figure 52 and Figure 62
Contents
BACKGROUND .......................................................................................................................................... 1
Additive Manufacturing Technical-Application Summary ...................................................................... 1
Founder, Chuck Hull ................................................................................................................................. 2
3D Systems Corporations ......................................................................................................................... 3
Business Definition and Mission Statement ............................................................................................. 5
EXTERNAL ANALYSIS ............................................................................................................................. 6
General Environment ................................................................................................................................ 6
Industry Definition .................................................................................................................................... 9
Additive Manufacturing User Value Chains ........................................................................................... 12
Market Growth Trends ............................................................................................................................ 13
Industry Life Cycle ................................................................................................................................. 14
Porter’s 6 Forces Analysis ...................................................................................................................... 16
Competitive Landscape ........................................................................................................................... 19
INTERNAL ANALYSIS ............................................................................................................................ 22
Product Portfolio ..................................................................................................................................... 22
Organizational Structure ......................................................................................................................... 24
Strategy Diamond ................................................................................................................................... 25
VRIO Resources and Capabilities........................................................................................................... 27
Financial Performance, 2006-2014 ......................................................................................................... 29
ISSUES AND RECOMMENDATIONS .................................................................................................... 34
1. Reducing Costs and Growing Revenue by Integration ....................................................................... 34
2. Defending Industrial Market Share ..................................................................................................... 39
3. Large Growth in Medical Sector ......................................................................................................... 44
4. Stuck-in-the-Middle Professional Software ........................................................................................ 47
5. Stuck-in-the-Middle Consumer Offering ............................................................................................ 53
Implementation Timeline ........................................................................................................................ 57
CONCLUSION ........................................................................................................................................... 58
Appendix A: Additional Figures ................................................................................................................. 60
Appendix B: Financial Analysis ................................................................................................................. 74
3D Systems WACC Calculation ............................................................................................................. 74
Current Valuation .................................................................................................................................... 76
Valuation of Arcam Acquisition ............................................................................................................. 79
Valuation of 3D Systems After Recommenations .................................................................................. 82
Appendix C: Complete List of 3D Systems Acquisitions, 2009-Feb 2015 ................................................ 88
Works Cited ................................................................................................................................................ 91
List of Figures
Figure 1 – Summary of Additive Manufacturing Technology, Applications, Pricing .................................. 2
Figure 2 – Chuck Hull, Founder ................................................................................................................... 3
Figure 3 – CEO Avi Reichental. ................................................................................................................... 4
Figure 4 – Sampling of 3D Systems Hardware Portfolio ............................................................................. 5
Figure 5 – Private Investment and R&D Expenditure Forecasts .................................................................. 6
Figure 6 – Summary of Primary Segmentation with Examples .................................................................. 10
Figure 7 – Gartner’s Hype Cycle for Additive Manufacturing Applications ............................................. 11
Figure 8 – Additive Manufacturing User Value Chains, Professional (top) and Consumer ....................... 13
Figure 9 – Summary of Analyst Forecasts for Additive Manufacturing Industry ...................................... 13
Figure 10 – Additive Manufacturing’s Industry Life Cycle (IBISWorld) .................................................. 15
Figure 11 – Volatility vs. Growth for Additive Manufacturing .................................................................. 16
Figure 12 – Summary of Porter’s Six Forces Analysis ............................................................................... 17
Figure 13 – Summary of Additive Manufacturing Competitors with 2014 Revenues ............................... 20
Figure 14 – 3D Systems Complete Portfolio of Acquisitions, Through Feb 2015 ..................................... 23
Figure 15 – 3D Systems Current Strategy Diamond ................................................................................... 26
Figure 16 – 3D Systems Current VRIO ...................................................................................................... 27
Figure 17 – 3D Systems Revenue Mix, 2013-2104 .................................................................................... 29
Figure 18 – 3D Systems Income Statement, 2006-2014, $MM .................................................................. 30
Figure 19 – 3D Systems Income Statement, 2006-2014, as % of Revenue ................................................ 31
Figure 20 – 3D Systems Profit Margins and Mix, by Offering, 2008-2014 ............................................... 31
Figure 21 – 3D Systems Cash Balance and Spending on Acquisitions ...................................................... 36
Figure 22 – 3D Systems and Stratasys ROA, 2009-2014 ........................................................................... 37
Figure 23 – Survey of Additive Manufacturing Service Providers (Stratasys) ........................................... 40
Figure 24 – Gross Profit Mix, 2014 and 2016 Target ................................................................................. 42
Figure 25 – 2015 Estimate of Additive Manufacturing Market by Industry (IBISWorld) ......................... 45
Figure 26 – Forecasted Healthcare Market for AM by Technology, 2012-2020 ........................................ 45
Figure 27 – 3D Systems Current Professional Design Ecosystem ............................................................. 50
Figure 28 – Proposed 3D Systems Professional Design Ecosystem with Connector Platform .................. 52
Figure 29 – Recommendations Implementation Timeline .......................................................................... 57
Figure 30 – 3D Systems VRIO After Recommendations ........................................................................... 58
Figure 31 – 3D Systems Strategy Diamond After Recommendations ........................................................ 59
Figure 32 - Additive Manufacturing Technology ....................................................................................... 60
Figure 33 - Technology Landscape by Patent Holders (Patent Insight Pro) ............................................... 60
Figure 34 - Comprehensive Technical Listing ............................................................................................ 61
Figure 35 - Summary of External Trends ................................................................................................... 62
Figure 36 - Summary of Porter’s Forces Analysis. ..................................................................................... 62
Figure 37 - Summary of 3D Printing Application Hype (Gartner) ............................................................. 63
Figure 38 – Example of Healthcare “Digital Thread” and Trailing 9 Months Revenue from Vertical ...... 63
Figure 39 - Summary of 3D Sytems SWOT Analysis ................................................................................ 64
Figure 40 - 3D Systems Financials, through 2014 ...................................................................................... 65
Figure 41 - 3D Systems and Stratasys Comparative Financials, through 2014) ......................................... 66
Figure 42 - Articles Showing New Entrants to Industrial Segment ............................................................ 67
Figure 43 - 3D Systems stock performance vs. Stratasys, S&P 500 Index, Dec 21 2012 through Feb 26
2015 ............................................................................................................................................................ 68
Figure 44 – Summary of 3D Systems Major Issues, Opportunities, and Indicators ................................... 68
Figure 45 - Set of Options Considered for Each Issue and Opportunity..................................................... 69
Figure 46 – Highest User-Rated Industrial Printers, Indicating 3D Systems Products (3D Hubs) ............. 70
Figure 47 - Highest User-Rated Industrial Printers, Desktop (3D Hubs) ................................................... 71
Figure 48 – Professional CAD User Survey (Market Share) and Competitor Revenues (CIMdata)
(Warfield) .................................................................................................................................................... 72
Figure 49 - Strategic Tests for Strategic Success ........................................................................................ 73
Figure 50 - Assumptions for Base Valuation of 3D Systems ..................................................................... 76
Figure 51 - Component analysis of 3D Systems for FCF Valuations. ........................................................ 76
Figure 52 - Base valuation of 3D Systems with projected revenue to 2020. .............................................. 77
Figure 53 - Sensitivity Analysis of the Base Enterprise value with respect to Discount rate and Terminal
Growth rate assumptions. Sensitive Analysis shown in term of per share basis. ...................................... 78
Figure 54 - Base Valuation Assumption of Arcam AB .............................................................................. 79
Figure 55 - Arcam AB FCF Component Analysis for 4 years. ................................................................... 79
Figure 56 - Base valuation of Arcam AB using FCF Analysis .................................................................. 80
Figure 57 - Sensitivity Analysis of Arcam AB Enterprise value with respect to Discount Rate and
Terminal Growth Rate Assumptions ........................................................................................................... 81
Figure 58 - Valuation Assumptions changes based on successful implementation of synergies strategies.
Target COGS is 40% of Revenue and SG&A is 26% of Revenue. ............................................................ 81
Figure 59 - Valuation worksheet for 3D Systems based on successful implementation of targeted
strategies. .................................................................................................................................................... 82
Figure 60 - Sensitivity Analysis of 3D Systems Valuations: COGs as % Revenue and SG&A as % of
Revenue. ..................................................................................................................................................... 83
Figure 61 - Assumptions for Valuation of 3D Systems .............................................................................. 84
Figure 62 - Valuation Worksheet for 3D Systems ...................................................................................... 85
Figure 63 - Sensitivity Analysis of 3D System Calculations: Product growth rate and Material growth rate
assumptions. ................................................................................................................................................ 87
1
BACKGROUND
Additive Manufacturing Technical-Application Summary
Some say the first product ever product printed was a prototype of a small eye-wash cup
in 1984 (3D Printer World), a legacy that remains today as prototyping is still the predominant
additive manufacturing use case by designers and engineers. Early commercialization indicated
viability beyond prototyping: as print speeds increased in the late 1980s, automobile and
aerospace industries took early interest for manufacturing support such as generating complex
wax models for metal casting. For the manufacturing industry, AM increasingly offered a
potential substitution for traditional subtractive and formative manufacturing methods3 due to
ever-increasing variety of materials, including high-strength metals, as well as reductions in cost.
In the last two decades, industry improvements have focused on new technologies as well as
enhancing order-winning features such as precision, speed, and material (Hessman).
Today’s additive manufacturing industry has grown far beyond prototyping and niche
manufacturing to include applications in personalized medicine, mass customized retail goods,
desktop consumer full-service bureaus and packaged software solutions marketed towards a
variety of applications in various lifecycle stages. Below in Figure 1 is a snapshot of the most
prolific 3D printing technologies in commercial use as of 20154. The implication of this
spectrum of technology is that it creates a possibility for multiple corporate strategies for
industry players. 3D Systems is on one end of the spectrum: owning technology in 7 of the above
8 architectures allows them to serve a wide variety of customers. At this end of the market, there
are high barriers to entry and high technological requirements, which is why there are really only
3 subtractive is cutting away material from raw stock: machining, milling, turning; formative is conforming raw
material to shape: injection molding, casting, stamping
4 More comprehensive technical background can be found Figure 32 and Figure 33.
2
two of these large firms: 3D Systems and Stratasys. On the other end of firms are those who
offer one or two technologies and focus narrowly on specific user segments and/or industries.
Figure 1 – Summary of Additive Manufacturing Technology, Applications, Pricing
Founder, Chuck Hull
As a design engineer, Chuck Hull was plagued with slow processes for prototyping and
he hoped 3D printing could address this lag. Known as the ‘father’ of 3D printing Hull not only
invented and patented stereolithography (SLA) technology in 1987 (Hickey), but one year later
also completed the first commercial installation in the world (Wohlers). The first product ever
printed was a small prototype and prototyping remains the predominant use case in the industry.
As CEO, Hull led the rapid internal development and marketing of a stream of incremental
3
enhancements and new architectures. Many enhancements focused on order winners such as
precision, speed, and variety of material.
As speeds increased, the automobile and aerospace
industries took early interest for supporting detailed metal
parts casting. This was a marked departure from earlier
formative manufacturing methods such as wax casting
(Hessman). Hull led development and commercialization of
technologies such as SLA and SLS in the early phases of
3D Systems. Today, these two technologies create the majority of 3D prints world-wide
(IBISWorld). From its small start in the late 1980s, Hull has grown 3D Systems over the last 30
years to provide customizable materials, parts and service solutions to a diverse landscape of
customers including dental, medical, automotive, aerospace, defense, and consumer (Hessman).
Hull remained CEO until Avi Reichental took the helm in 2003. Hull attempted to retire
but was lured back into the C-suite as chief technical officer and executive vice president. Hull’s
original vision, which he still holds today, is providing everyone, everywhere access to 3d
printing technologies. This is, and always has been, the core of 3D Systems’ mission. Today Hull
is still active, totaling more than 1,700 patents and recently winning a European Inventor award
in 2014 (3D Printer World).
3D Systems Corporations
3D Systems was incorporated in 1993 and headquartered in California. After going
public in 1996, 3D Systems moved to the NYSE as symbol ‘DDD’ (SPAR Point Group). In
2005, current CEO Avi Reichental relocated corporate headquarters to Rock Hill, South Carolina
(Reuters). 3D Systems operates through subsidiaries in the US, Europe and the Asia-Pacific
Figure 2 – Chuck Hull, Founder
4
regions, selling printers, materials, software, and services (3D Systems). Roughly half of 3D
Systems’ revenue are from global operations and the firm plans to continue to expand facilities
and manufacturing globally (3D Systems).
Although they had begun an acquisition strategy in 2001 with an initial handful of service
bureaus, in 2009 3D Systems initiated their first cycle of rapidly raising and spending cash on
acquisitions. With over 45 acquisitions between 2009 and 2015, their portfolios of hardware,
software, and service bureaus are all extensive. In 2014 alone, 3D Systems spent $354.4 MM in
cash on acquisitions; up by 113% over 2013 (Barney). 3D Systems is pursuing these acquisitions
not only to grow revenue and diversify but also for the potential to increase willingness to pay
with integrated solutions. They have acquired software companies, on-demand parts service
providers, competitors in hardware and the print materials
businesses, scanners, product development and
manufacturing firms, cloud technology solutions, and
medical device designers. This has enabled 3D Systems to
differentiate itself by offering not just hardware and
materials, but complete “concept-to-print” solutions for
specific verticals, which they refer to these as “digital threads” (3D Systems).
3D Systems’ current value proposition is to: “provide the most advanced and
comprehensive 3D design-to-manufacturing solutions, including 3D printers, print materials and
cloud sourced custom parts. Our powerful digital thread, a seamless information exchange across
design and manufacturing, empowers professionals and consumers everywhere to bring their
ideas to life in material choices including plastics, metals, ceramics and edibles.” (3D Systems).
Figure 3 – CEO Avi Reichental.
5
3D Systems describes their mission as broad democratization of AM technology from consumers
to industrial manufacturing5,
Business Definition and Mission Statement
3D Systems provides a “concept-to-print” solution that participates in all steps of the
value chain including design, development, manufacturing and marketing of 3D printers,
materials, parts, and complementary products and services. Though 3D Systems offers nearly 50
unique printers [Figure XX], their core hardware uses stereolithography (SLA) printers, selective
laser sintering (SLS) printers, multi-jet modeling (MJM) printers, film transfer imaging (FTI)
printers, selective laser melting ( SLM) printers, and plastic jet printers (PJP). 3D Systems also
provides content creation using CAD software and digital workflow preparation and
management software tools through content management (GlobalData).
3D Systems uses materials including plastics, metals, ceramics and edibles. In addition to
printing, their “products and services replace and complement traditional methods and reduce the
time and cost of designing new products by printing real parts directly from digital input. These
solutions are used to rapidly design, create, communicate, prototype or produce real parts,
empowering customers to manufacture the future,” (3D Systems).
3D Systems defines itself as a pioneer of 3D design and fabrication--an appropriate
distinction considering the legacy of Chuck Hull. They aim to provide the most advanced and
5http://www.3dsystems.com/es/3d-printers
Figure 4 – Sampling of 3D Systems Hardware Portfolio
6
comprehensive solutions that democratize 3D printing. 3D Systems hopes this more open
process allows users to, “rapidly design, create, communicate, plan, guide, prototype and
produce functional parts, devices and assemblies” (3D Systems). Ultimately, 3D Systems is
betting that their integrated design threads (end-to-end experiences in specific segments) and
user’s ability to enter into any part of the 3D printing process with 3D Systems will eliminate
technical barriers to adoption of 3D Systems tools and platforms.
EXTERNAL ANALYSIS
General Environment
The general external environment trends are relevant since they can lead to threats and
opportunities in the AM industry6. Globally, the economic environment is in a state of recovery
and uncertainty following the financial crisis of 2009. In the US, we have been in a slow yet
steady recovery since the end of 2009: Forbes notes that, “The average quarterly rate of increase
of physical
investment over
all that period
save the last year
has been 9.5%.
This falls well
below the 15%
mentioned above
as the post-1950 average, but it is still considerably stronger than the 5.6% of our last expansion
6 here we apply the PEST framework to analyze general environment
Figure 5 – Private Investment and R&D Expenditure Forecasts
7
(2002-2007)” (Forbes). Ideally, expansion includes enterprise and industrial customers
continuing to spend on capital equipment such as printer. Firms who increase their capital
expenditures and expand R&D investment are target customers for AM. The benefits of AM,
including decreasing time to market and innovating product design, are becoming more
recognized, and adoption of the technology has become standard in manufacturing processes (JP
Morgan). Globally, investment in industrial equipment as well as R&D is projected to grow
steadily through 2020 (IBISWorld). In an expanding economy 3D Systems has a chance to
exploit their strengths in industrial offerings, as well as capture consumers who might be able
and willing to experiment with desktop printing. This growth projection also serves as a fresh
opportunity for new high-capital entrants such as existing 2D printer manufacturers.
Technologically the environment is experiencing several significant trends. First is the
saturation of internet connectivity in developed economies. In countries such as the United
States, UK, Germany, and Japan, internet saturation of the population is quickly nearing 90%
(Internet Live Stats). This means that user needs and wants can be addressed using online tools
and platforms to deliver value, and that most of the population can be reached using the web.
More applicable to the AM industry, the ubiquity of modern desktop computing means that
across segments, everyone should have access to either a PC or a Mac in order to run software
programs or access content services. They also should all be able to connect to printers using
standardized USB or Wifi protocols. There is even an accepted universal file format for 3D
printer data that can be output by nearly every modeling software, the .STL file, which 3D
Systems invented in late 1980s. Today, users can log in to websites and search and download a
wide variety of .STL models.7
7 eg www.grabcad.com, www.thingiverse.com
8
Closely related to the standard .STL file and modern digital connectivity are the political
implications of AM. Two are most important: one is the polarizing political divide between gun
control and the right to bear arms8. In 2013, a university student and self-proclaimed anarchist
designed and printed a 3D printed plastic handgun. Cody Wilson also started a website, Defense
Distributed, and posted the files online, which were downloaded 100,000 times before the U.S.
State Department stepped in and applied enough pressure to force Cody to take them down. With
stronger technologies available during the last two years, it is now feasible to print an entire
lower receiver of an AR-15 rifle. Solid Concepts, now part of Stratasys’ service network, has
also successfully fabricated a .45 caliber semi-automatic pistol out of metal using SLS
technology9. At the federal level, Congress attempted to address this in 2013 when the
Undetectable Firearms Act of 1988 came up for renewal. Fortunate for the AM industry, this
language seemed only to impact manufacturers of 3D-printed guns, not the suppliers of the
manufacturing technology themselves (Peters). Indeed the resulting law extended the act 10
more years and “largely leaves 3D-printed guns untouched by regulation” (Mead). This indicates
low political risk for AM firms, at least for now.
As medical applications are a large emerging trend for additive manufacturing, it is worth
considering the current and future regulatory environments. Currently, 3D-printed medical
devices are treated similar to other products, but in the future there could be more scrutiny: “Two
FDA laboratories are looking into ways 3D printing could affect the way medical devices are
manufactured in the future” (T. Lewis). While actions by regulatory agencies such as the FDA
8 https://www.youtube.com/watch?v=DconsfGsXyA
9 https://www.youtube.com/watch?v=zJyf1IrHtcE
9
may not impact AM firms directly, this should be considered when estimating risks in healthcare
vertical.
Socially, additive manufacturing is met with general optimism and has spurred
conversation around “issues of intellectual property, questions of design methods and processes,
and possible business possibilities and outcomes” (Ratto). AM is also entering the mainstream at
a time where the young adult generation may be poised to exploit it in new ways. Today’s
environment is “one in which the crowdsourcing, sharing, and ‘mash–up’ practices that are
already mainstream around other digital media forms become instantiated in material
artifacts...also disrupted are the professional roles of designers, the relationships between
producers and consumers, and the nature of work itself” (ibid). There are many positive,
emerging applications that are generally viewed as exciting and beneficial by society. As
McKinsey director Katy George puts it, “[e]merging markets’ consumption of manufactured
goods is surging and becoming more sophisticated… Simultaneously, we’re experiencing a
range of technological changes, including advanced robotics, large-scale factory digitization, and
3-D printing,..” (McKinsey & Company). This could apply to the AM industry in several ways,
but might begin with more innovative products coming to market or mass customization of
consumer products.
Industry Definition
The additive manufacturing industry was built to support designers and engineers by providing
them with innovative tools for rapid prototyping and low-volume high-complexity component
creation. The industry is worldwide, and consists of hardware (printers), software (modeling),
materials, supplies, and professional services to individual consumers and both large and small
firms. The industry can now be segmented primarily by five user categories ranging from those
10
requiring the capabilities for complex solutions in high-volume, scalable manufacturing at the
industrial level, down to the at-home hobbyist. Figure 6 defines the user categories which are one
dimension of segmentation for AM users. An alternative way to segment is by industry-
application for the printed product. In this report, primary segmentation is by user category,
ascending in complexity, cost, and volume of production from hobbyist to industrial.
Figure 6 – Summary of Primary Segmentation with Examples
While the market for traditional AM, especially around rapid prototyping for
professionals, has largely matured, there has been interest and significant investment in
potentially disruptive applications. Recently, AM has expanded beyond prototype creation and
into other arenas including full-scale industrial fabrication, customized medical devices,
prosthetics, edibles, and consumer products (Stephens). Figure 7 illustrates the variety of AM
applications and where they lay in a timeline from inception to hype to commercial maturity:
11
3D Systems currently addresses each of the mature markets included in Gartner’s “Slope
of Enlightenment”. They have also started to craft integrated offerings which address each of the
four areas near the “Peak of Inflated Expectations.” Neither the technology nor the business
models of these applications are commercially viable just yet. 3D Systems needs to examine
each of these emerging trends in light of its strengths, resources, and capabilities.
Innovation in newer applications is preliminary, and commercialization is anticipated to
take two to ten years (P. a. Basiliere). Expectations are highest for the growth within the AM
industry are in advances within consumer, medical, and industrial 3D printing. In Riding the
Wave, Christensen suggests addressing disruptive trends through strategic management, but an
AM firm is faced with several potential choices to invest in. In essence, they must now manage a
portfolio consisting of a range of technologies, serving a variety of user types, and exploiting a
Figure 7 – Gartner’s Hype Cycle for Additive Manufacturing Applications
12
list of viable and emerging applications. In fact, this is how 3D Systems has approached
constructing their diverse product portfolio.
Offsetting this promising growth is hampered by the technologies speed and economics:
3D printing is not as economical as traditional subtractive and formative manufacturing methods
(eg. milling, injection molding, and casting) for most high-volume fabrication jobs. Replacing
industrial production methods remains at the peak of expectations in 2015 (ibid). However, there
is a trend toward incorporating some 3D technology in traditional manufacturing. A recent
survey of 100 industrial manufacturers showed that 67% of them were using 3D printing in some
way with 25% declaring their plan to implement 3D printing in the near future. This is a
promising projection for 3D Systems and the broader AM industry as a whole. (Stratasys).
Additive Manufacturing User Value Chains
Within the AM industry, the value chain varies in length depending on the specific segment or
industry. Regardless of segment, all value chains begin with the design and modeling of the
desired 3D shape. The idea is sketched, scanned, or created using consumer or professional
design tools and software. After design, the software will output an .STL digital file that can be
read by a printer pre-processor or a local or web content platform. Content management
platforms enables communication, replication, and shareability of parts and designs either inside
an organization or across the world10. The file may be emailed or uploaded at this point to a
printer or service bureau who will complete the printing. Service bureaus provide complete
services for printing as well as any necessary post-processing and delivery. The actual
“printing,” or physical additive creation of the component uses an installed or desktop 3D printer
with compatible, separately-purchased material. The output for a consumer or prosumer is often
10
eg see Thingiverse: http://www.thingiverse.com/
13
a trinket. On the professional, enterprise and industrial side, the output is typically used as a
design prototype, manufacturing support piece, or end-use part.
Figure 8 – Additive Manufacturing User Value Chains, Professional (top) and Consumer
Market Growth Trends
The AM market has a variety of growth projections from various industry analysts. On
average it is predicted to more than double from $3.1 to $7.7B from 2015 to 2020 -- a CAGR of
19.9%:
Figure 9 – Summary of Analyst Forecasts for Additive Manufacturing Industry
14
In the past 5-10 years, growth has been a product of macro-economic acceleration (JP
Morgan) as well as increasing availability of cost-effective solutions, particularly in prototyping,
desktop, and manufacturing. As the overall industry grows, certain verticals, particularly the
newer applications, will experience growth at different rates. 3D printing for consumers,
manufacturing, industrial and personalized medicine all show growing demand and the potential
to go mainstream in the 2-5 year horizon11. 3D Systems strategic acquisitions over the past five
years of hardware, design software, scanners and service bureaus was in support of increasing
the reach of 3D printing and desire to offer integrated solutions. The growing AM industry is
moderately favorable for new entrants on the low end (consumer applications), but not as
favorable due to high capital requirements at the high end (industrial and manufacturing
applications).
Industry Life Cycle
Today’s landscape is favorable for current participants to develop and meet new demands
for emerging applications. Examining AM’s life cycle stage reveals they are potentially more
than half-way through the growth phase. IBISWorld refers to this as the “quality growth” and
notes that this phase is indicated by revenue growth faster than the economy, many new entrants,
rapid technology and process change, growing customer acceptance, and rapid introduction of
products and brands (IBISWorld). As noted with the industry estimates of market size, the 3D
printing industry demonstrates a greater percentage growth of the economy than nearly all other
adjacent industries. Figure 10 shows the industry is younger in life cycle than other traditional
manufacturing types, indicating it may face tough power of substitutes from established
technology.
11
Specifics of these growth rates will be discussed in each vertical recommendation
15
Life cycle in the AM industry could also be thought of as unique to each architecture and
application (see Figure 7). For more mature technologies, such as 3D Systems’ SLS and SLA,
the features are well-
developed and accepted in
the market. It would take a
huge capital investment to
compete in this tech with
market leader 3D Systems,
just as the barrier would be
equally high to compete on
FDM printing with their
primary competitor
Stratasys. However, new
entrants still have
opportunities to be first-
movers in marketing more unique applications of AM.
The AM industry’s favorability can also be characterized through measures of return-to-
risk measured as revenue growth vs. volatility. Emerging markets, new endeavors, technological
advances and new applications undoubtedly create uncertainties and volatilities. However, given
the pace of advancements and growth, AM experiences no greater risk or variance of returns than
the average industry and enjoys premium returns. Growth shows a strong 28% five year
annualized rate, but the AM industry revenue volatility is at economy average of 10%:. This
yields a risk-return ratio of almost 1:3 and puts the AM industry in a favorable space (Figure 11).
Figure 10 – Additive Manufacturing’s Industry Life Cycle (IBISWorld)
16
Given the recent historical
growth, projections for future
growth, moderate risk and phase
of the industry life cycle, the AM
industry provides a favorable
landscape for 3D printing
solutions firms to continue to
enter, innovate and deliver
products and services. However,
with such favorable conditions, both new and existing firms will need to carefully attune to the
forces influencing their strategic position and the uncertainty of market size and dynamics of
emerging applications and verticals.
Porter’s 6 Forces Analysis
For 3D printing manufacturing to be considered favorable, Porter’s Six Forces offers a more
detailed framework for delineating threats, risks and rewards industry-wide. Figure 12 shows a
summary of Porter’s forces analysis, and the full analysis can be found in Figure 36.
In the AM industry the favorable conditions have led to, and fuel, high and increasing
rivalry among current participants. Across industry segments, competitors vie for adoption and
provision of technologies and products. Only two same-sized firms support and provide a full
complement of products and services to meet varied customer needs (3D Systems and Stratasys)
and therefore dominate the market. This duopoly has created intense competitive pressure
between the two firms although the differentiation in technology offerings is helping to mitigate
Figure 11 – Volatility vs. Growth for Additive Manufacturing
17
the direct pressure of rivalry. 3D Systems’ development of digital threads and integrated
solutions captures addresses these conditions through further differentiation.
While 3D Systems and
competitor Stratasys dominate the
comprehensive offering of 3D
printing technologies across all
segments, smaller more industry-
specific firms operate and threaten
entry into the AM industry,
especially with the attractiveness of
economic growth in those
applications. Increasingly, 2D
printing firms such as HP are threatening industry penetration as well in industrial and medical
applications. What is slowing the entry into AM for many is the initial capital investment and
necessary economies of scale required to truly compete against established giants 3D Systems
and Stratasys. There are also a myriad of entrants on the desktop level serving hobbyists and
prosumers. Many of these are smaller, more agile and crowd-funded independent firms who
differentiate based on those characteristics.
The power of both buyers and suppliers is currently moderate though moving in opposite
directions. The power of suppliers is decreasing while the power of buyers is increasing.
Suppliers in the AM industry ensure that materials, machine parts and other components for 3D
printing manufacturing are available and enable the subsequent value chain components to
operate. Global availability of printer components has increasingly commoditized these
Figure 12 – Summary of Porter’s Six Forces Analysis
18
components and nearly erased switching costs for purchasers. It is highly unlikely that materials
providers would forward integrate to build whole printer or service systems. Simultaneously
firms in the industry are increasingly acquiring their own supply chains (backward integrating)
slowly relying less on 3rd parties for components and assembly.
Converse to suppliers’ trajectory, buyer power is increasing. Most buyers of 3D printing
machines and services do not immediately threaten backward integration into production or
supply nor do buyers easily switch due to high purchase costs. Despite these pressures that
suggest low buyer power, the majority of the value in 3D printing manufacturing is captured by
the buyer once they have the printed part. As firms in the industry make strategy considerations,
attentiveness to buyers’ preferences and demands (and therefore value) will be especially
important. If demands are not well attended to, the moderate threat of substitutes could pose a
risk for the present players and potential entrants. While there are more traditional modes of
modeling and production, 3D printing is becoming the norm for prototyping, and modeling and
producing are being incorporated into the digital threads of more comprehensive 3D printing
solutions. Concurrently, traditional manufacturing methods are getting more economical for
production and until 3D printing technology can offer the speed and low cost of traditional
methods, the threat of substitutes on the enterprise and industrial levels will remain.
Porter’s final and often overlooked ‘sixth force’ relates to complements. As the
popularity of 3D printing--especially for prototyping--increases, file types for all kinds of 3D
printer work has been standardized. The standard file type (.STL) can be created, stored,
communicated by complements before the printing stage. The power of complements is similarly
high and increasing in the production phase as service bureaus reach more and more customers.
19
Porter’s forces demonstrate what Wohlers, Gartner, IBISWorld and other industry
analysts have identified: the AM industry has moderate to medium to high favorability. Though
the threat of entry challenges current industry firms to make defensive decisions, the
opportunities for deeper penetration into the industrial and medical segments and delivery of
solutions to the consumer and prosumer are also present. Though 3D Systems is constrained by
the same forces as the rest of the AM industry their focus on building comprehensive and well-
integrated solutions address these very forces both offensively and defensively.
Competitive Landscape
Porter’s Five Forces highlighted the growing threat of new entrants into the AM industry
as well as increasing rivalry. Currently, 3D Systems (26.6% market share) and Stratasys (30.4%
market share) are the largest players, each with a comprehensive offering of 3D printing
manufacturing solutions across almost all segments and industries. Stratasys and 3D Systems
have diversified portfolios of products and offerings and each has a market capitalization of over
$3 billion, with the nearest competitor (ExOne) at $212 million. The remaining 43% of the AM
industry is made up of a growing number of more industry- or segment-specific offerings
including ExOne, HP, Arcam, formlabs, Lulzbot, Zortrax and others with the largest number of
firms operating in the consumer sector. See Figure 13 for a summary of significant competitors.
Though 3D Systems and Stratasys are the major players in the AM industry, more
industry-specific players such as Arcam, EOS and ExOne are introducing new technologies and
potential threats to the current operators. Their participation in the medical and aerospace
industries (which is incorporated into both the enterprise and industrial segments of the AM
industry) is specifically of interest to 3D Systems. This is because of 3D Systems’ hope to scale
further in these segments and ride the growing trend in medical and healthcare revenues.
20
`With a growing, favorable industry, new entrants and innovating existing players, firms will be
motivated to take defensive and offensive actions. 3D Systems and Stratasys have both made
similar moves, most notably with their acquisitions of integrated solution technologies. They also
see emerging growth similarly. According to current Stratasys CEO David Reis, Stratasys is
focused on the growth drivers for 2015 that will look very different from 2014, with a focus on
materials, production grade printers, and adding to SSYS production “ecosystem,” which will
increasingly include a software component (Stratasys).
Stratasys’ current strategy addresses multiple segments across industries, similarly to 3D
Systems. However, Stratasys’ focus on low-volume production for manufacturing stands out
against 3D Systems’ desire to develop cost-effective and faster industrial production solutions.
Additionally, continuing to cultivate an “ecosystem” that enables 3D design to manufacturing
(including plugs into traditional manufacturing) is essential to Stratasys’ long-term strategy
(cite?). Stratasys is focused on promoting and expanding their role in manufacturing support,
Figure 13 – Summary of Additive Manufacturing Competitors with 2014 Revenues
21
from jigs and fixtures (which aid in traditional manufacturing processes), to casts and molds
(which assist in the same), to tools for plastic injection molding and sheet metal fabrication
(Baruah).
One differentiator between 3D Systems and Stratasys has been the level of forward
integration of the user value chain. Since 2001, 3D Systems has acquired 21 service bureaus
across the world, giving them a global network of service locations consolidated under their
Quickparts brand (J.P.Morgan). Stratasys, on the other hand, initially encouraged its distribution
reseller channel to offer services as part of a sales strategy, but very recently has started to
acquire major service bureaus such as Solid Concepts. 3D Systems has first-mover advantage in
forward integration. This helps them capture profits from using the machines to create finished
outputs for customers who have not yet, or may not ever, purchase a printer. Given Stratasys’
new direction into production printing and materials, and increasing acquisitions of service
bureaus, this will create more direct competition between these two firms, therefore increasing
rivalry between 3D Systems and Stratasys. This will be further compounded by the news of a
new entrant into the industrial market.
In late 2014, HP announced its Multi Jet Fusion Technology with an intended launch in
2016 (Reuters). This technology lays down a thin layer of powdered plastic and then uses its
thermal inkjet technology to print a chemical agent on top. While this is similar to 3D System’s
Z Corp (ZPrinters are now the Projet x60 series) or voxeljet’s plastic printers, it appears that the
differences are threefold. First, HP dispenses not just a binder or “fusing agent,” but also a
“detailing agent” that makes edges smoother and could simplify post-processing. Second, HP
uses “fusing energy” on each pass, which could increase the strength of the part as well as
increase the speed of the printer. HP did not specify what type of technology was used for this.
22
Lastly, HP implied that its inkjet printheads are superior to competitors, leading to finer details
and greater speed. The technologies that would allow specific comparison to current printheads
were not named.
HP’s shift from 2D printing to 3D printing threatens to disrupt the current 3D printing
process by introducing a significantly faster process for printing stronger parts with finer details .
However, quite a bit of uncertainty remains regarding the precision of HP’s technology and their
ability to rise to or surpass the current industry standards. In the long run, HP’s success will be
measured by its ability to capture market share away from the established firms and provide a 3D
printed solution that is faster, more cost effective, and more precise than today’s solutions.
In total, 70% of 3D Systems’ product line is exposed to new entrants, but little impact is
expected over the next two years (Jefferies). As most rising segments of the AM industry are
anticipated to develop within 2-5 years, there is no immediate threat to 3D Systems. However,
with anxious new and developing enterprises working in the wings to capture more of the AM
industry, 3D Systems strategy moving forward will need to obstruct the progress of these
segments or capture the value away from their competitors.
INTERNAL ANALYSIS
Product Portfolio
3D Systems has both developed and acquired a highly diversified portfolio of hardware and
software offerings that serve a range of user segments and industries. Recalling the end-user
value chain above, Figure 14 illustrates how 3D Systems has expanded both forward and
backward from their initial core competencies in printer hardware and materials:
23
Figure 14 – 3D Systems Complete Portfolio of Acquisitions, Through Feb 2015
3D Systems’ core competency lies closest to their hardware, which has evolved internally as
well as through numerous acquisitions. In 2014, selling printers represented 43% of revenue,
and on average earned gross margins of 36% (3D Systems).
3D Systems’ initial acquisitions were forward-integration of service bureaus. These are
independent companies that typically provide either broad additive and traditional
manufacturing services, or specific niche additive only services. This forward integration is a
classic example of capturing more profits by applying VRIO resources. 3D Systems
manufactures and sells the printers, and can benefit from capturing variable profits that come
from the end product and services profits. Services earned revenue of $205.63MM and gross
margins of 47% in 2014 (3D Systems Corporation).
Extension backward in Figure 14 illustrates 3D Systems’ attempts to democratize AM
for any user at any phase of the concept-to-print process. This extends 3D Systems outside of
its core competencies in hardware and services, but does offer a chance to claim value from
24
the beginning of the process. .The portfolio and “digital thread” strategy is key to 3D Systems’
economic logic of increasing willingness-to-pay and seeding users by offering integrated
solutions.
Organizational Structure
Organizationally, the firm is led by President and CEO Abraham (Avi) Reichental and
the independent Chairman of the Board of Directors Walter Loeenbaum II who joined in 1999.
Reichental is supported by C-level reports in distinct functional areas including technology
(Chuck Hull, CTO and founder), Finance (Ted Hull, CFO, EVP of Finance), Operations (Mark
Wright, COO, EVP), Marketing (Cathy Lewis, CMO), Legal (Andrew Johnson, CLO),
Accounting (David Robert Styka, CAO, VP) (Google).
In 2014 two long-serving members of the executive team were repositioned into
functional areas to better manage 3D Systems current strategy. Damon Gregorie, former CFO
became the new Vice President of Mergers and Acquisitions and former COO Dr. Kevin McAlea
became the COO of Healthcare. The movement of key executives into the new roles signaled a
renewed focus on integrating the company’s recent M&A activities and its increasing interest in
the lucrative medical device industry and healthcare market.
Beyond the leadership in the firm, 3D System had 2,136 full time employees on its
payroll at the end of 2014, representing an increase of more than 50% from 2013, and an
increase of 540% from 2008. This growth is both organic and fueled by acquisitions. This is a
large factor in increasing the company’s costs and has contributed to their shrinking operating
margins. Manufacturing and assembly of their 3D printers are managed in three eastern US
locations and Israel. Material manufacturing and distribution is also mainly handled from three
plants in the US and one in Switzerland, with some partnerships around specialized materials.
Because of 3D System’s aggressive acquisition cycle they have the added challenge of
25
integrations. Integrating and realizing synergies of a single merger or acquisition is difficult
(Christofferson). Taking these steps almost monthly (45 over 5 years) has been costly for 3D
Systems. Realizing synergies around technologies and services has been slow, evidenced by
rising SG&A and falling ROA. Some of these acquisitions have also been defensive, and finding
a place for the technology and people involved can be difficult. Difficulties are exacerbated by
geographic proximity (or lack of), and incorporating the different cultures of the acquired
companies, many of which are smaller startups and move at a very different pace than 3D
Systems. There is also the difficulty of making sure high level managers in acquired companies
stay with the company by giving them an appropriate amount of resources and responsibility.
All of these challenges often put acquiring companies in the position of taking on costs,
without yet realizing synergies. 3D Systems is currently struggling to realize all the available
synergies available through these 45 acquisitions.
Strategy Diamond
During the past 5 years of acquisitions, 3D Systems has expressed their economic logic
along three factors: (1) increase willingness to pay by offering a differentiated concept-to-print
or “digital thread” extensible solutions, (2) using a razor-razor blade model for printing and
materials, and (3) destroy the value of their competitors by defensively acquiring technologies.
With high rivalry, differentiation is especially important. 3D Systems sets themselves apart from
major competitor Stratasys with this particular model that integrates both forward and backward
along the value chain. Materials’ provision enables the physical printing, without which, there
would be no end-product. By integrating materials into their business model, 3D Systems is able
to capture value of return customers who purchased machines, and return to purchase materials.
26
This razor-razor blade model of selling the machines and the materials was key to the economic
mix for 3D Systems in the past, with materials making up 68% of the gross profit mix in 2008.
There has been a year-over-year decline in the materials segment and today materials make up
only one third of 3D
Systems’ revenue mix.
Forward and backward
integration is also
represented in the
creation of “digital
threads.” 3D Systems
has acquired a number
of companies, both
defensively and offensively. They integrate these companies along these threads to produce an
end-to-end solution. In this way, 3D Systems makes their own solutions more robust, and they
are able to keep some technologies from their competitors. Their main economic logic is made
possible by a clear set of differentiators led by the digital thread solution. To create digital
threads and meet the diverse needs of the market, 3D Systems provides the widest breadth of
technologies, patents and materials. With experience on their side from decades in the industry,
3D Systems has created high economies of experience that can only be matched over time.
As a corporation, 3D Systems operational arenas could be described along four
dimensions: industry vertical, usage category, technology, and geography12. They are certainly
12
To simplify, this analysis deals predominantly with the first three dimensions, i.e. not an international analysis
Figure 15 – 3D Systems Current Strategy Diamond
27
global with 44.5% of their revenue coming from sources outside the U.S. Technologically, 3D
Systems focuses primarily on seven core technologies that they leverage for 3D printers, on-
demand parts, software and services. They serve consumer and hobbyists, prosumers,
professional, enterprise and industrial segments of the manufacturing, medical, automotive,
aerospace and defense, architectural, dental and consumer industries. Between its inception in
1986 and 2009, 3D Systems grew steadily, but slowly. Rapid growth started in 2009 leading to
40-50% sales growth in 5 years. This seemingly accelerated pace of staging is aimed at future
success. However, their success has been limited by the ability to scale the distribution channels
on either side of the core business of making printers. This limitation has shaped its economic
logic. Moving forward, strategic moves for 3D Systems may continue to include offensive and
defensive acquisitions, investment in closed-source (internal) R&D, and seeking alliances. With
the wide breadth of offerings across these corporate dimensions, 3D Systems will need to focus
intensely on its core capabilities, available resources and leverage their key differentiators to be
successful and continue to grow in their target technologies and industries.
VRIO Resources and Capabilities
Figure 16 – 3D Systems Current VRIO
28
3D Systems VRIO captures a comprehensive list of resources and capabilities. Figure 16
identifies 13 resource and capabilities deemed most critical to strategic analysis. In the long term
victory quadrant, 3D Systems’ Chuck Hull, patents, proprietary materials, and industrial and
enterprise experience and knowledge are valuable, rare, difficult to imitate, and the organization
fully exploits these resource and capabilities. Other resource and capabilities that are valuable,
rare, and the organization exploits these resource and capabilities but these items have medium
to low level of difficulty to imitate means they only have a temporary competitive advantage
consist of cash, customer/user base, organic hardware portfolio, internal R&D, brand
reputation/identity, and global HR and facility.
Based on the current assessment of 3D Systems capabilities and resources, they are
experiencing short-term supremacy and are on the cusp of long-term victory. The focus of this
paper is on five key resources and capabilities, indicated by underline in Figure 16 that are most
important to position the company for long term victory. To make the shift into true sustained
competitive advantage 3D Systems needs to position itself more defensively against new entrants
and current rivals by bettering their resources and reducing imitability while offensively
developing innovative solutions that are more valuable and better utilized by the organization.
Currently consumer acquisitions and software acquisitions are under-exploited due to
lack of realized synergies, add little value to 3D Systems due to lack of full integration into the
digital threads and are neither rare nor inimitable, evidenced by competitor Stratasys’ ability to
make similar acquisitions but on a smaller scale.
Currently internal R&D is exploited by 3D Systems and highly valuable but not
particularly rare or inimitable. According to 3D Hubs Trends, 3D Systems industrial printers are
preferred to competitors due to their superior print quality (3D Hubs). However, with the
29
increasing threat of entrants such as HP, to actualize the benefits of the R&D for sustained
competitive advantage 3D Systems will need to develop faster and more cost effective
technologies that are unique.
Finally, the industrial and enterprise experience and knowledge is a key resource and
capability for 3D Systems. Decades of experience, development, investment, acquisition, trial,
error and re-discovery has garnered a clear advantage in the industry with the most valuable and
time-tested experience.
Financial Performance, 2006-2014
A shift in revenue mix shows significant growth in medical, but shrinking software and stagnant
consumer verticals. Services, including parts and post sales, also remained about the same. 3D
Printers not attributed to verticals decreased in the mix.
Figure 17 – 3D Systems Revenue Mix, 2013-2104
In 2014, 3D Systems earned profits of $11.637MM on $653.652MM of revenue – a net
income margin of 1.780%. 2014’s bottom line was an anomaly given the average of 11.8% in
the past four years. At the corporate level, this was caused by ballooning COGS and OPEX.
Increased SG&A, R&D squeezed profits to their lowest level since 2009.
30
The following chart is 3D Systems’ income statement from 2006 to 2014. Between
2006 and 2008, 3D Systems had negative net income. In 2009, 3D Systems started to
aggressively acquire companies and 3D Systems showed multiplying growth in profitability
between 2009 and 2013. At the same time, while the net income was growing, acquiring
companies also increased COGS, R&D Expense, and SG&A expense. And in 2014, for the
first time in 5 years, and for the first time since the company started to aggressively acquire
companies, there was a significant decrease in net income at only $12M, compared to the year
before which was $44M. As a percentage of revenue from 2013 to 2014, the COGS, R&D
expense, and SG&A expense increased from 27.9% to 33%, 8.5% to 11.5%, and 47.9% to
51.4% respectively. With all 3 expenses increased as a percent of revenue, the net income as a
% of revenue was only 1.8% in 2014:
Figure 18 – 3D Systems Income Statement, 2006-2014, $MM
31
Figure 19 – 3D Systems Income Statement, 2006-2014, as % of Revenue
The traditional 3D Printing business model of razor-razor blade is exemplified in 2008’s
profit mix: as illustrated in Figure 20 below almost 70% of bottom line came from materials. As
3D Systems forward integrated to appropriate value from service bureaus, 3D Systems has seen
strong growth in Services profit mix. Today’s mix is split almost evenly into thirds.
Figure 20 – 3D Systems Profit Margins and Mix, by Offering, 2008-2014
One would think that materials business would become commodity after so many years;
however, since 3D Systems has over 100 patent protected materials that is required to be used
with 3D Systems’ printers, this recurring revenue product has helped 3D Systems to both
32
decreased costs and increased willingness-to-pay; this is illustrated by the increasing gross
margin on materials.
Examining 3D Systems’ balance sheet with Ratio analysis demonstrates three important
trends between 2009 and 201313. First, is that three equity issuances14 in the last five years have
raised over $620MM and buoyed liquidity drastically. Similarly, the second salient trend is the
reduction of debt reflected in the leverage ratios. These both indicate that 3D Systems has the
flexibility to make strategic moves and can continue to amass returns if it can keep its cost
structure from ballooning further. Working to inflate the cost balloon and squeezing the bottom
line are higher OPEX and COGS resulting from the vast number of 3D Systems subsidiaries.
This appears in the trend of decreasing returns on assets, equity, and capital.
In summary, 3D Systems is ostensibly a healthy firm from a financial perspective.
However, recent volatility in stock prices for both them and Stratasys indicate there is high
uncertainty ahead as the AM industry addresses growth opportunities and competitive threats. As
the Wall Street Journal summarized in an October 2014 article, “3D Systems is investing heavily
in an attempt to capitalize on rising demand for 3D printing technology, …but the company has
been having trouble reaching its sales goals as well: It lowered its 2014 revenue forecast by
about 7%... the stock is now off about 60% for the year to date…” (Wall Street Journal). As of
March, 2015, 3D Systems stock is still down over 70% in the past 13 months (see Figure 43).
Beyond experiencing the ups and downs of investor behavior, 3D Systems has grown well with
current vehicles in light of high levels of threat. However, they face several threats from new
entrants, shrinking margins, and higher rivalry.
13 See Figure 40 for full Financial Analysis 14
March 2011, $54MM. May 2013, $250MM. May 2014, $317MM.
33
3D Systems has been able to leverage their strengths to exploit the value chain in additive
manufacturing by forward integrating into service bureaus and capturing their profits. They have
also built an array of acquisitions and begin to formulate cohesive digital thread solutions. This
may uniquely place them to address emerging applications. However, they first must bring down
cost structure by integrating more effectively and sharing activities. They must not stray too far
from VRIO capabilities as they expand solutions. They must take advantage of innovative
business models – such as platforms and spin-offs – to reach and address the widest array of
customers and achieve their mission of truly democratizing 3D printing. This must all be
accomplished in an environment poised for growth and characterized by high levels of rivalry
and threat of entrants15. To further compel new entrants, 3D Systems will see the expiration this
year of several key patents around their SLS technology. Start-up entrants are defining the lower-
end of the desktop market as well-funded firms enter on the top end. As each disruptive
application of additive manufacturing reaches commercial viability, additional rivalry will
follow. 3D Systems faces decisions of how, where, and when to compete in each segment,
industry, and application.
15 See Figure 39 for a summary of 3D Systems SWOT analysis
34
ISSUES AND RECOMMENDATIONS
As 3D Systems’ VRIO indicated, they are sitting in between the short-term supremacy and long
term victory. Helping them move from a temporary to sustainable competitive advantage will be
important as the market continues to grow and new entrants threaten 3D Systems market share.
There are many opportunities for improvement, growth, and innovation as evidenced by the
symptoms (see Figure 44) that are resulting from issues that were uncovered. While many
options were considered (see Figure 45) there are five critical components that will be crucial to
success:
1. Combat shrinking margins by realizing synergies of acquisition portfolio.
2. Defend industrial market share through increased research and development and sales
and marketing expenditures.
3. Acquire a leader in EBM technology to fill a gap in 3D Systems medical portfolio.
4. Create an open platform that connects professional design tools to the 3D Systems
ecosystem.
5. Spin off and rebrand the consumer solutions side of 3D Systems to focus on technology
improvement and recapture market share.
1. Reducing Costs and Growing Revenue by Integration
As mentioned above, to remain competitive in the AM industry, 3D Systems’
acquisitions have aligned with specific digital threads that can help them gain market power in
these digital threads (Barney). These integrated solutions will increase switching costs for
customers, and make it harder for rivals and potential competitors to capture 3D Systems’ market
share. Though these acquisitions have the potential to move 3D Systems into a more competitive
position, they also increased their operating expenditures, which were 44.5% of revenue in 2014,
35
up from 36.4% of revenue in 2013 (3D Systems). Most recently, COGS for 3D Systems made a
notable increase in 2014 after steady decline between 2009 and 2013. This has increased
pressure on their net income, which from 2010-2013 was 10x what it was in 201416.
With the pace of acquisitions over the past six years, 3D Systems must carefully direct
their resources and capabilities into developing or steering these subsidiaries towards their larger
strategic goals. If 3D Systems maintains status quo they will continue to make acquisitions
without full integration and realization of synergies, resulting in further profit pressures. As
illustrated in their 2014 financials, merely acting as a holding company leads to climbing
operating expenses and eroding profitability. Alternatively, 3D Systems could divest the various
acquisitions to more narrowly focus their business. This retraction; however, from segments or
industries risks suggesting poor financial health and will negatively affect their share price. With
significant sunk costs and the associated goodwill that would be lost in the divestment, short
term profitability would be damaged. The option that holds the most future value is for 3D
Systems to more fully realize cost and revenue-enhancing synergies between the core business
and their various acquisitions through aggressive integration and sharing of activities.
To continue to build a sustainable competitive advantage through increased willingness
to pay, 3D Systems must decrease their operating expenditures and cost of goods sold,
particularly in relation to their main competitor, Stratasys. Currently, their operating
expenditures as a percentage of revenue are lower than those of Stratasys, but this only creates a
temporary competitive advantage. Decreasing operating expenses by eliminating redundancies
such as human resources, legal, finance, accounting etc., 3D Systems would build upon their
economic logic by lowering their costs through scale and creating efficiencies. This would also
16 Refer to Figure 40
36
allow 3D Systems to focus their energy and resources on the core competencies of the businesses
they have acquired.
Realizing synergies won’t come without challenges. Given the expansive scope of
acquisitions over the last six years, 3D Systems will need to figure out where to start in order to
realize the gains with the
least barriers. They face
potential risks of
increased costs and loss
of key human capital if
integration doesn’t go
smoothly. However,
since all these
acquisitions already
contribute $589.5MM in
goodwill to 3D Systems, they will need to look at integration in order to decrease the impact of
writing down the goodwill of each acquired firm (3D Systems). To compare, Stratasys had to
mark down their bottom line by $102M in Q4 of 2014 for goodwill impairment. This drastically
affected their net income and consequently, earnings per share. This is an outcome 3D Systems
hopes to avoid. Figure 22 shows decreasing ROA at 3D Systems – this is also evidence of
unrealized benefits of the acquisitions. The pace of acquiring assets, has not been commensurate
with profit growth. Similarly, Stratasys is also challenged with a decreasing ROA. An upswing
in ROA would indicate 3D Systems is becoming more efficient in leveraging their assets and
Figure 21 – 3D Systems Cash Balance and Spending on Acquisitions
37
therefore realizing synergies to capture a sustainable competitive advantage. They key for 3D
Systems will be to do this faster than Stratasys.
Additional to increasing
ROA, COGS and SG&A as %
of sales are important metrics
to gauge the integration
strategy. Just recently in a 3D
Systems’ Q3 earnings call
they indicated that they
wanted to decrease their
COGS to 40% (3D Systems
Corporation). In addition, they
should try and decrease their OPEX back down to their 2010 percentages at roughly 26%. This
indicates a healthier cost structure which will positively affect their net income.
In order for 3D Systems to capture these synergies, they need to compartmentalize their
costs into their respective categories to understand where to begin sharing activities. Cost
synergies will most likely be realized by sharing sales and marketing, HR, finance and
accounting, and distribution activities. These feed into the overall SG&A expenses of 3D
Systems. By eliminating redundancies across their acquisitions, they should see their SG&A
costs drop relative to revenue.
The COGS can be further reduced by decreasing manufacturing and purchasing costs
through pooled buying power--a shared activity among businesses. This will help them realize
economies of scale within verticals.
Figure 22 – 3D Systems and Stratasys ROA, 2009-2014
38
Through sharing activities, 3D Systems will gain better economies of scale, which
decreases the threat of entry into the market and provides some security for 3D Systems.
Through focusing their core competencies and creating more enhanced digital threads, they can
also create higher switching costs for consumers. Given the high level of rivalry already,
increasing profitability by lowering SG&A and COGS will allow 3D Systems to respond more
effectively to price wars. 3D Systems already shows a temporary advantage over Stratasys, but
by finding the way to decrease both the COGS and SG&A, they can gain a more sustainable
competitive advantage.
While not inclusive of all activities within the firm, these cost saving and efficiency
measures are the most salient for 3D Systems growth and defense against competition. Since all
activities cannot be integrated simultaneously, a proposed timeline is below:
3D Systems Acquisition Activity Timeline
Activity Timing Risks (pg. 198)
Purchasing 2016 Inefficiencies
Human Resources 2016 Employee morale and attrition, organizational gridlock
Manufacturing 2018 Lack of customization available to meet customers
needs
Distribution 2019 Inability to deliver to all previous customers
Marketing & Sales 2020 Cost to rebrand, inconsistent messaging
This timeline is supported by Mr. Reichental in his 2014 Q4 earnings call as he described a
potential shift in strategy that actually aligns closely to ours (3D Systems Corporation).
39
The actual integration of these activities does carry some risks, but if they can be
anticipated and managed, the company will benefit from the reduction of costs associated with
all these activities which will lead to a more sustainable competitive advantage in the AM
Industry.
2. Defending Industrial Market Share
Manufacturing end-use parts has long been a niche application for AM, but today it is
becoming more cost effective. McKinsey & Company recently noted, “The advantages of 3D
printing over other manufacturing technologies could lead to profound changes in the way many
things are designed, developed, produced, and supported….McKinsey Global Institute research
suggests that it could have an impact of up to $550 billion a year by 2025” (McKinsey &
Company). 3D Systems faces the threat of entry by Hewlett-Packard into this growing 3D
printing segment of enterprise and industrial customers using printers for full-scale fabrication.
In Q4 2014, HP announced it will enter the 3D printing space with a new multi jet fusion
technology which will print ten times faster than anything out in the market (Andronico).
Although the HP printer will not be released until 2016, the threat of entry has already
put downward pressure on 3D System revenue growth and margins. The revenue growth is
affected because HP is working on a trial-run with key customers in 2015 so many companies
are holding off in investing in any printers until customers see HP’s 3D printer prices and full
technological specifications (Seeking Alpha). Margins will be affected because 3D Systems will
need to invest heavily in R&D and/or acquire companies with technology to compete with HP.
If HP’s 3D printers can really print ten times faster with the same quality, ease of use,
and competitive pricing, then HP will have a significant game changer technological advantage.
The industry as a whole struggles with the speed of printing and it is one of the main reasons
40
why customers stay with traditional manufacturing method instead of 3D printing. According to
Larry Kaplan, CEO of Impossible Objects, “Current technologies are 20 or so years old. They
are great for prototyping but too slow compared to volume manufacturing. The parts coming out
of 3-D weren’t as good as traditional manufacturing. To make a dent in manufacturing, you have
to overcome the challenges of 3D printing: speed of production, using a wider range of materials
and coming up with superior mechanical properties” (Anderson). Although 3D printing has not
eliminated traditional manufacturing, 3D printing for manufacturing is a fast growing industry.
With current advancement in technology, the growth of the 3D printing industry has the
capability of disrupting traditional manufacturing process. As summarized about in Figure 9, the
global 3D printing market size is expected to grow 300% in 8 years (On 3D Printing). Much of
this growth will come from this segment. Wohlers Report stated that 67% of industrial
manufacturers surveyed are using 3D printing in some way, with 25% stating they plan to
implement 3D printing in the near future (Wohlers). Figure 23 shows that 29% are using 3D
printers for manufacturing of functional parts.
3D Systems’ design
and manufacturing
portfolio is 3D
System’s bread and
butter. As of Q3 2014,
3D Systems’ design
and manufacturing
portfolio represents 92% of the company’s total revenue as unit sales increased by 57% year over
year (Flynn). This aligns with 3D Systems’ core competency. 3D Systems industrial and
Figure 23 – Survey of Additive Manufacturing Service Providers (Stratasys)
41
commercial printers for production can be printed in plastic or metal and uses SLA, SLS, Direct
Metal printing, or FTI, CIP, PJP technology. 3D Systems’ founder, Chuck Hull, was the first
inventor of SLA. With his leadership and 3D Systems proven R&D team, 3D Systems has built a
reputation for its high precision and resolution prints that can be used in medical and aerospace.
Just last month, 3D Systems was awarded two research contracts to develop advanced aerospace
and defense 3D printing capabilities at high scale. The first contract is partnering with University
of Delaware’s Center for Composite Manufacturing (UDCCM), Sandia National Laboratory
(SNL) and Lockheed Martin Corporation (LMCO) and the second contract is partnering with
Applied Research Laboratory of Pennsylvania State University in partnership with Honeywell
International and Northrop Grumman Corporation (3D Systems Corporation). Partnership with
these highly reputable companies shows how valuable and rare 3D Systems’ high precision
technology really is that it can be used in aerospace and defense where lives are dependent on the
manufactured parts.
User survey data (see Figure 46) shows that 3D System’s industrial printers hold second,
third, and fourth place (3D Hubs). This ranking takes into account over 12,000 printers in over
150 countries. This supports the idea the 3D Systems’ core competencies are these higher-end
offerings. According to our VRIO analysis, the industrial and commercial printers for
manufacturing are highly valuable, rare, and the firm is organized to exploit the full competitive
potential of its resource and capabilities. Imitability is an issue since HP has threatened to enter
in 2016. Additionally, on March 5, 2015, ExOne, a global provider of 3D printing announced
that it will be entering the industrial and production market (ExOne). With more competitors
expected to enter in the industrial and production 3D printing space, 3D Systems only has a
temporary competitive advantage.
42
3D Systems must combat the increasing number of competitors in their bread and butter
space. We recommend to increase R&D spending 100%, which aligns with how their past
history year-over-year spending, but focus on speed. We need to improve speed to compete with
HP’s 10x’s faster print speed. The worst thing that 3D Systems can do is abandon the space but
from the latest financials we see that 3D Systems is not planning to abandon this space; in fact,
3D Systems is planning to expand in the metal printers and quadruple capacity by adding
facilities in the U.S. It is also a terrible idea to abandon this space because it will be losing out on
its materials sales. 3D Systems follows a razor and blades business model where 31% of total
revenues come from over 100 proprietary print materials such as plastics, nylon, metals, and
biocompatible materials for medical printing.
The materials sales are high-margin, recurring revenue and with the installer printer base
expected to grow, then the material sales is expected to grow exponentially because one extra
printer sale would mean a lot more
materials can be sold. As illustrated in
Figure 24, our goal is to grow our
current market share and increase our
printer gross profit from mix 35% to
40%. And increase materials gross
profit mix from 31% to 35%.
Growing the printer market will help
us grow the material where the gross
margins are high and have been growing from 63% to 73% from 2008 to 2014 as shown in the
graph below. This backwards integration will also help to build a barrier to competition.
Figure 24 – Gross Profit Mix, 2014 and 2016 Target
43
Sticking to the status quo and continuing as if HP, ExOne, or others is not a threat is also
a mistake. We suggest that 3D Systems should heavily invest in their proven R&D team to
improve the print speed. The scope of change to 3D Systems’ strategy diamond will be to the
differentiator. 3D Systems key differentiator is their print quality but will need to increase speed
through R&D. Although HP and others has threatened to enter the space, we do not know if they
can match 3D Systems’ print quality. We also suggest that 3D Systems focus on the sales and
marketing and increase spending by 100% which also aligns with 3D Systems’ previous SG&A
expense increase year-over-year. Sales and Marketing should change the marketing strategy to
emphasize that 3D Systems is the inventor of the SLA technology and has been a market leader
in the industrial market, so it will be a high switching cost for customers who already use 3D
Systems. 3D Systems has a proven technology already and since HP and ExOne is new to this
industry, we do not know how reliable the printers will be. The sales and marketing team should
downplay HP and ExOne and plant the seed of doubt of reliability and print quality and up-play
3D Systems’ proven technology, history, and reputation as market leader of industrial printers.
The pro is that an increase R&D will build a superior product that will have not only
quality but also increase print speed. Another pro is that increasing S&M will increase market
share, awareness, and sales. The cons is the lost in opportunity cost from investing somewhere
else if HP’s printer turns out to be a failure. However, it is still best to invest in R&D and S&M
to be able to compete if HP’s or other competitor’s printer is successful. Superior quality print
and speed will increase WTP and more printers made or sold will reduce cost. Quality print and
high print speed is highly valuable, rare, hard to imitate, and the company will utilize the
organization to exploit will make a sustaining competitive advantage and a high barrier to
imitation. The timing and staging of increased investment in R&D and S&M should be an
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immediate implementation. We anticipate HP and other companies to be ramping their R&D and
S&M efforts and it will not be a surprise if the competitors to criticize our current speed
capabilities. The medium to long-term is to change the S&M to align with what R&D comes out
with. Evaluating the impacts of these adjustments to the industrial segment, assuming a year over
year growth rate of 15.7% (market average), the enterprise value would increase roughly
$200M17.
3. Large Growth in Medical Sector
Given the high benefit and the long-term impact of 3D printing in healthcare market, 3D
Systems must take a preemptive approach in this sector to create a long-term competitive
advantage. While 3D Systems has made inroads in this market with the acquisition of Medical
Modeling, Bespoke modeling, and Layerwise, the company needs to expand its footprint to
anticipate any rapid change in technology and role that 3D printing plays in personalized
medicine. 3D Systems can further cement its position in the medical industry with any one, or a
combination of three strategies: acquisition of firms with strong technological footprint,
partnering with these firms, and through internal R&D investment.
The medical applications for AM are expanding rapidly – Figure 26 shows this segment
worth $1.2 billion by 2020. Additionally, twenty percent of the current 3D printing market is
healthcare related (Figure 25). An example of a medical application is the creation of custom
implants. Before the advent of 3D printing, surgeons would shave metal pins to desired shape
when performing bone graft surgeries. The ability to produce customized surgical tools, implants
and prosthetic limbs has enabled surgeons to perform complex surgeries in less time. Due its
biocompatibility, light weight and strength characteristics, titanium is the metal of choice for
17 See Figure 62
45
many surgical implants. 3D printed titanium implants are made by melting thin layers of titanium
powders one layer at a time. Electron beam melting (EBM) and laser beam melting are two
technologies that are suited for 3D printed titanium parts. In addition, these two technologies
make up about half of the healthcare 3D printing market. 3D Systems possessed three of the four
technologies that make up the healthcare 3D printing market with the exception of EBM.
In order for 3D Systems to have a sustainable competitive advantage, they must have a
complete technology
portfolio for healthcare
3D printing market. 3D
Systems should acquire
Arcam AB. Arcam AB
is a Swedish firm that
originally patented and
developed EBM
technology. Arcam AB
have a strong market
position in both the
orthopedic implant
market, as well as
aerospace. This
acquisition would
enabled 3D Systems to
Figure 25 – 2015 Estimate of Additive Manufacturing Market by Industry
(IBISWorld)
Figure 26 – Forecasted Healthcare Market for AM by Technology, 2012-
2020
46
complete its healthcare digital thread for all technologies in the 3D printing medical industry.
By introducing EBM technology into 3D Systems portfolio, 3D Systems can market itself
as one stop shop for 3D printing solution for any medical applications. This will enhance the
firm’s willingness to pay. Customer can now utilized 3D Systems string of technologies to
convert CT scan to 3D models, visualize real models though anatomically, performed simulated
implant surgeries using its Simbionix system , and print actual implantable parts. The firms will
be able to expand its arenas into Arcam AB’s dominant market, as well as compliment is current
economic logic.
This acquisition is currently in line with 3D Systems current strategic position. It fills a
technology gap they currently have. The hard resources required to develop EBM technology
internally are extensive and may be cost prohibited. In addition, internal development will take a
considerable time while the market continued to grow. Arcam AB patent EBM technology is
also a competitor to some of 3D Systems technologies, particularly SLS. This would be a
potential to take out a rival in the market place. The different technologies of the two firms
would allow reciprocal synergies that lends itself to an acquisition strategy.
The success of Arcam AB acquisitions hinges on the growth of the medical industry
portion of 3D Systems revenue stream and its ability to reduce overall COGS for Arcam AB
business. The health care portion of 3D Systems is currently at 20% of revenue. As a metric of
success, the goal is to increase this portion to 25 - 30% of revenue. For Arcam AB, material and
personnel cost consist of 73% of total cost and 68% of revenue. With the acquisition, 3D
Systems should be able to utilize economy of scale to reduce titanium material cost and eliminate
redundancy to reduce personnel cost. The goal is to reduce this to below 50% of sales for Arcam
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AB business. The long-term goal of 3D Systems is to capture a least 50% share of the 3D
printing healthcare market in 2020 from its current estimated of 30%.
The resource required to acquire Arcam AB would be roughly $350M per our valuation.
Due to 3D Systems cash reserves, this would be finance through equity. Since the focus is to
integrated Arcam AB EBM technology into 3D Systems, management would need to institute a
task force in charge of integrating EBM technology into 3D System digital thread for healthcare.
Arcam AB would need to be trained in 3D Systems modeling software and Simbionix simulation
system to expose Arcam AB customer base to 3D Systems value proposition.
The risks with Arcam AB acquisition are primarily associated with integration, buy-out
offer, and financial viability of 3D Systems to move forward the acquisition. Arcam AB may not
accept the offer to join 3D Systems, unless there is a big premium attached to the offer, due its
currently positive earnings per share and its dominance in EBM medical and aerospace niche
market. As with any acquisition, integration of core technology from Sweden to US is a
challenge that requires comprehensive planning.
4. Stuck-in-the-Middle Professional Software
Professional design software tools consist of Computer Aided Design (CAD), Computer
Aided Manufacturing (CAM), and Product Data Management (PDM) solutions. These tools
allow designers and engineers to create manufacturing-ready 3D models of their products,
communicate with production machines, and manage information throughout business processes.
Consistent with 3D Systems’ economic logic of offering end-to-end vertical solutions, they have
made several acquisitions to enhance their own professional design software portfolio. This
solution is an attempt to both increase competitive advantage through providing integrated
offerings as well as and capture profits – and customer lock-in – from the software design
process.
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Particularly relevant acquisitions for this vertical are Alibre, Geomagic, and SYCODE.
Geomagic was the most significant outlay, costing 3D Systems $52.6MM in February 2013; this
was slightly more than a quarter of total acquisition spend in 2013 of $179.6MM (2014 10-K).
Since then, the first two subsidiaries have been merged in to a single offering, Geomagic/Alibre
Design. However, a look at their product website reveals the poor level of integration between
the two entities, both technically and brand-wise18. In order to successfully market integrated
solutions, the individual pieces should be competitive; as one analyst points out about 3D
Systems software portfolio, “a pile of sticks does not make a tree” (Citron Research). Focusing
corporate resources on developing and marketing a product outside of VRIO capabilities has the
opportunity cost of the alternative: enabling and creating partnerships and alliances amongst
professional design software firms, such as Dassault Systemes, Siemens, Autodesk, and PTC.
Entering the software market, 3D Systems is competing against large, established players. In the
last two years it does not appear 3D Systems’ horizontal expansion strategy in to design software
has been successful. In fact, the Geomagic/Alibre product indeed seems to be stuck-in-the-
middle. This weakness is primarily indicated by their absence from market user surveys of
profession CAD users (Warfield), as well as revenue analysis of this segment (CIMdata)19.
The lack of penetration could be attributed to very high switching costs and low data
interoperability as well as customer loyalty. Currently the top three leaders (Dassault Systems,
PTC, Siemens) enjoy a stable combined 77% market share (CIMdata). However, the solution
could also simply not have enough differentiation to warrant any willingness-to-pay. While they
do not appear relevant to the professional market, market survey did reveal that Alibre/Geomagic
18 http://www.alibre.com/products/ad_compare.asp
19 See Figure 48 for market survey and revenue data
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earned an 18% market share in the ‘midrange’ or mid-market CAD in 2014. While seemingly a
promising static foothold, this market share has fallen from almost double that in only two years:
“Comparing to 2013, the first thing we see is a big drop off for Alibre, which had been the #1
Mid-Market choice. It’s gone from 30% share down to 18%, a big change” (Warfield).
Externally, there has abeen a surge in the variety of free or near-free design tools. The
consequence is diminishing willingness-to-pay for mid-market tools. 3D Systems’
Alibre/Geomagic Design is a product stuck in the middle: it is not a cost leader (free), nor is it
providing enough differentiated value to unseat any of the current market. At a price point of
$1,000-$2,000, Alibre/Geomagic Design can’t truly compete and win in cost leadership with the
selection of high-quality free tools – this results in high buyer power. Indeed, cost leadership is
not consistent with 3D Systems’ core economic logic. Likewise as shown above, this offering is
not of any significance to the high end of the professional design market. 3D Systems has several
options to address this lack of competitiveness and potential missed market share.
First, they could continue as-is and adjust their marketing strategy. This might lead to a
moderately-growing segment that was worth $26.2MM in revenue in 2014. The downside,
however, is two-fold. First, they will be competing in a high-rivalry market without the core
competencies necessary for sustained competitive advantage. Second, focus on their own
solution may cause them to miss a growth opportunity by partnering with existing market
leaders, or at a minimum distract sales and marketing from focusing on competitive offerings.
Second, they could acquire more competitive technology. This would involve purchasing
a design tool with higher capabilities, brand equity, as well as existing market share. However,
this purchase would exceed 3D Systems’ cash balance of $284.8MM considerably: PTC,
Autodesk, and Dassault Systemes have market capitalization of $3.9B, $14.05B, and $17.25B,
50
respectively. Aditionally, when analyzing any acquisition, When to Ally and When to Acquire
advizes the strategist to “weigh each factor depending on its importance to their industry”
(Dyer). For software, soft resources trump all and therefore indicates equity alliances in favor of
acquisitions. Additionally, modular synergies, low redundant resources, medium degree of
market uncertainty, low competition for resources, indicate non-equity alliances or partnerships.
Third, they could divest or discontinue these acquisitions. This is a passive play and
would yield recovered operating expenses. The downside would result in impairment of goodwill
as well as potential organizational trauma with other un-integrated subsidiaries. It certainly does
not allow them any closer proximity to the millions of professional CAD users globally.
Fourth, and our recommendation, is that 3D Systems should focus on building an open
platform that connects to the widest variety of most popular design tools. The potential benefit of
these connections is creating an open ecosystem that forms the end-to-end solution instead of a
proprietary offering, enabling 3D Systems to stay within its core competency while growing
market share and brand loyalty. This requires a new focus from their current strategy, shown
below in Figure 27:
Figure 27 – 3D Systems Current Professional Design Ecosystem
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The objective of this recommendation is two-fold: first, grow revenue by exposing 3D
Systems hardware and services system to the entire professional design community through a
web-enabled, open 3D printing platform; second, pro-actively integrate with existing
professional design solutions with add-in applications. The success of this strategy would be
measured by these milestones: Year 1: Add-in commercially available for top 5 CAD tools; Year
2: 100,000 unique users on platform; Year 5: 1,000,000 unique users on platform.
The CAD add-in would give 3D Systems the chance to leverage their VRIO knowledge and
experience in professional and industrial 3D printing to a software solution, but in the form of a
complement to existing tools instead of a direct competitor. Here there is a huge need for value
by the average engineer: when an engineer completes his design, his software has no knowledge
of whether his model is ready for printing. As Deelip Menezes points out, “The printability of a
3D model is dependent not just on the geometry, but also on the printer chosen, material used,
printer settings selected, post processing done and a host of other parameters, which quite
frankly, are way beyond the scope and experience of most CAD operator and engineers...”
(Deelip). Basically, engineers who have spent decades mastering how to design for subtractive
and formative manufacturing lack the experience to design for additive manufacturing.
Fortunately, this is exactly the knowledge and experience that 3D Systems has mastered. This
VRIO knowledge could be packaged into an add-in application for CAD tools that provides
value add tools to analyze, prepare, and optimize models for additive manufacturing.
Fortunately, 3D Systems has a rare, valuable resource: their SYCODE acquisition.
SYCODE had spent years developing add-in applications for over a dozen mainstream CAD
software before being acquired in 2011. This capability would be the foundation of the add-in
application we recommend for 3D Systems. In effect: create a killer app that can plug in to any
52
CAD tool, grow the pie of 3D printing while helping CAD tools add value to their users, and
then appropriate market share as brand equity increases and 3D Systems becomes the go-to name
in AM.
Next, 3D Systems should strive to open their web-based platform to any partner or
innovator and strive to by leaders in crafting a 3D printing innovation ecosystem. Professor Jain
defines innovation ecosystems as “[c]ollaborative arrangements through which firms combine
their individual offerings into a coherent customer solution”20. In this case, 3D Systems should
strive to offer its end-to-end solution by partnering with those who have competitive advantage
and market share already in the software industry. Since 3D Systems is still essential and can
differentiate itself on core competency in printers and services, they don’t risk losing out on the
design value chain by crafting an open platform. Instead, this platform could expose millions of
CAD users to 3D Systems offerings. Their new ecosystem is illustrated above in Figure 28.
20 SCU MGMT 3504 Session 14, Jain
Figure 28 – Proposed 3D Systems Professional Design Ecosystem with Connector Platform
53
Thirty years ago, 3D Systems successfully invented the standard that still stands today for
sending data to printing hardware, the .STL file. Once a standard becomes a commodity, then it
is up to the innovator to add value in new ways. 3D Systems needs to create the next standard
interchange, but should craft a value-add application platform to do this that is much more than a
file format. 3D Systems should recognize its competencies are in a different direction from
backward-integration into user software in an end-to-end sense. Capturing value from innovative
business models requires at least one of these four items: novelty, lock-in, complementarities, or
efficiency. 3D Systems can attempt to lock-in users by creating a software that only connects to
their printers, but as just covered this requires winning the software decision from the buyer as
well as printing. Efficiency, or cost leadership, is not part of their economic logic, and no doubt
novel solutions don’t fare well in cost-competitive manufacturing firms. The best remaining way
to capture value is to create undeniable value from complementors – a platform open to all tools
could achieve just that.
There are potential risks to this strategy, most notably loss of services revenue. Service
bureaus are able to command high margins because of their value-added knowledge. The price
for a designer to have a part printed typically includes a mark-up for pre-processing and model
preparation time. If customers are connecting and uploading ready-to-print models, this could
lower the willingness-to-pay for the full service. There is also the risk that CAD software
vendors will not wish to partner with 3D Systems. However, this risk seems low since these add-
in applications would be subsidized differentiators for their own products.
5. Stuck-in-the-Middle Consumer Offering
The Consumer Thread is made up of hobbyists, schools, and small businesses for
prototyping. 3D Systems consumer machines, often referred to as “desktop” printers, range in
price from $1,000 to $5,000. Competitor machines can sell as low as $400. Most “plug and play”
54
solutions cost around $1,000, so 3D Systems is competitively priced. For the consumer, an
increased budget will allow for bigger print area (larger objects to be printed) and types of
materials that can be used. Filament is usually bought from the manufacturer of the printer and
can come in a variety of colors and materials (PLA/ABS/Nylon).
Competition in the consumer sector is also very different compared to industrial and
medical. Because capital costs are so much lower on the consumer side, there are many more
players in this space. Along with increased rivalry, the buyer on the consumer side also has more
power, and are often vocal about brand quality and loyalty.
The hype around consumer 3D printing seems to be somewhat overstated. Thought
leaders in the space, like Autodesk’s CEO Carl Bass think that applications and adoption will be
slower than originally thought. He, like many in the industry, think that the democratization and
mass adoption of consumer 3D printing will likely come not in the form of “a printer in every
home,” but rather on-demand, web-enabled printing from small local shops or “hubs”
(Terdiman).
There are already well-established web-enabled hub portals21 who sell both designs that
can be printed on a local computer, and finished products that can be printed sell finished
consumer products. 3D Systems plays in this space with it’s Cubify store22. One of their recent
acquisitions is FreshFiber that now operates on Cubify and sells jewelry and housewares.
Larger 3D printing companies are very interested in keeping a hand in the consumer
market. Consumers are using 3D printers more and more, through personal ownership or hubs,
and own 3D printed items, but there is still no consumer application that is unique to 3D printers
21 See, for example, https://www.3dhubs.comand http://www.shapeways.com/ 22 http://cubify.com/home/c?utm_expid=54557154-16.MbczTxfJSdy7HzF61vdnTw.2
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or cheaper than traditional access to these items (P. Basiliere). Applications today range from
tschokies and jewelry, to models and home accessories. Despite having no breakthrough
application, this the consumer market is growing (Hern).
3D Systems does not want to miss the opportunity to be a part of the growth and
democratization that may come in the next decade. To do so, 3D Systems has been acquiring
consumer side 3D printing related companies, eight since 2012. But despite this type of growth,
it has not seen substantial bottom line contributions. The consumer side of 3D Systems
commands less than 7% of revenue. Value in this space and customer loyalty is heavily tied to
reputation and favors startup shops and open source hardware and software. “Open source”
simply means that the end user has access to the products design or blueprint, this gives the
ability to manipulate the product in order to make changes to it. Many think having hardware and
software open sourced is essential for the democratization of 3D printing and is valued by the
consumers in this space (Brown). Currently, all of 3D Systems consumer side hardware and
software is closed source. This is one of the reasons it is not popular in the consumer market.
They don’t rank on the top 20 consumer printers according to 3D Hubs (see Figure 47).
Divesting this entire thread is an option. 3D Systems could put more effort into its core
competencies, and not participate in consumer 3D printing. But it is part of their core mission, to
bring 3D printing to everyone. And the breakthrough application will come, and they don’t want
to be left behind. Divesting completely would very likely be met with opposition in the C Suite.
An option that should be considered is to treat the consumer thread as its own entity, and
operate it in a more agile and startup mentality. They could then focus on one line of consumer
printers and make them the easiest to use, and create open source software. But this is hard to do
within the confines of a large multilayered company.
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Companies have had some success in creating innovative entities that are separate from
the corporate bureaucracy of large, slow moving companies (Hendricks). Stratasys took this
approach with the MakerBot acquisition in 2013 (Clay). MakerBot was allowed to continue to
function as a subsidiary of Stratasys, allowing for better and faster innovation. Our
recommendation for 3D Systems is to make the consumer thread its own profit/loss center with
its own unique branding and autonomy from the larger parent company.
Along with the first recommendation around organizational integration, this can start
immediately. The first step would be to suspend purchase of any new consumer related
acquisition. If 3D Systems would like to seriously compete in the consumer thread they need to
make a thorough assessment of what is already available in house. They need to first look for
synergies on the technical, retail and consumer delivery. Once assessed, set-up a spin off
company that is a subsidiary. This new company, we’ll call 3DC (3D Consumer) will count on
3D Systems for support around administrative functions, but will run it’s own R&D, marketing
and outreach. Allowing for autonomy, plus access to 3D Systems vast network.
The benefits of re-branding the consumer segment would be to make a re-entrance into
this market, and separate themselves from the larger company. They would set up a smaller
nimbler subsidiary that can function like a startup, and compete on the same level as some of the
other players. It would be a difficult and there is a risk - it will take time to develop, and separate
themselves from the corporate reputation of 3D Systems, as well as learn how to use their
breadth of knowledge without being weighed down by it.
One critical important piece of this new model would be to have an effective outreach
program into the very vocal and involved consumer 3D printing community. In growing sectors
like this, having the backing of influencers in the space can make or break a brand (Wong).
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Implementation Timeline
Below is the proposed implementation timelines associated with the five presented
recommendations. It is color coded according to recommendation, outlining the major milestones
associated with each year from 2015-2020. Each one of the recommendations is categorized by
short term (12-24 months), medium term (24-48 months), and long term (48-60 months).
The implementation timeline indicate decreasing COGS to 40% and also decreasing
SG&A to 26% from current 6 year average of 29% (as a percentage of revenue). Given our
assumptions, the enterprise value of 3D Systems will more than double to $1.3B. COGS and
SG&A have a larger impact on enterprise value than revenue growth, (see Figure 60) it is
imperative that 3D Systems continues to work on decreasing these costs as quickly as possible.
Figure 29 – Recommendations Implementation Timeline
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CONCLUSION
The VRIO and shifted strategy diamond are bleo.dsaf ksadf;lsakdjflsajfd
Monica writes epic conclusion here : )) thank you ! <3 and kisses.
Figure 30 – 3D Systems VRIO After Recommendations
59
Enterprise valuations heavily dependent on cost of capital. Cost of capital consist of 99.6% of the cost of equity component. For valuations of pre and post implemenation strategies, we used 19% WACC and 4% terminal growth value. See sensitivity analysis for range of valuation with respect to cost of capital and terminal growth value.
COGS and SG&A sum average is 81% of Total revenue.
COGS and SG&A component have a greater impact on enterprise value than than Product and Material growth
Recommendation #1 will double 3D Systems enterprise value if we successfully achieved the COGS and SG&A target by 2017
If we increase product and material revenue above the industry growth rate at 20%, we expect the enterprise value to increase by $200 above recommendation #1.
Figure 31 – 3D Systems Strategy Diamond After Recommendations
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Appendix A: Additional Figures
Figure 32 - Additive Manufacturing Technology
Figure 33 - Technology Landscape by Patent Holders (Patent Insight Pro)
61
Figure 34 - Comprehensive Technical Listing
62
Figure 35 - Summary of External Trends
Figure 36 - Summary of Porter’s Forces Analysis.
63
Figure 37 - Summary of 3D Printing Application Hype (Gartner)
Figure 38 – Example of Healthcare “Digital Thread” and Trailing 9 Months Revenue from Vertical
64
Figure 39 - Summary of 3D Sytems SWOT Analysis
65
Figure 40 - 3D Systems Financials, through 2014
66
Figure 41 - 3D Systems and Stratasys Comparative Financials, through 2014)
67
Figure 42 - Articles Showing New Entrants to Industrial Segment
68
Figure 43 - 3D Systems stock performance vs. Stratasys, S&P 500 Index, Dec 21 2012 through Feb 26
2015
Figure 44 – Summary of 3D Systems Major Issues, Opportunities, and Indicators
69
Figure 45 - Set of Options Considered for Each Issue and Opportunity
70
Figure 46 – Highest User-Rated Industrial Printers, Indicating 3D Systems Products (3D Hubs)
71
Figure 47 - Highest User-Rated Industrial Printers, Desktop (3D Hubs)
72
Figure 48 – Professional CAD User Survey (Market Share) and Competitor Revenues (CIMdata)
(Warfield)
73
Figure 49 - Strategic Tests for Strategic Success
74
Appendix B: Financial Analysis
3D Systems WACC Calculation
Part 1: Cost of Equity
Capital Asset Pricing Model (CAPM) is used to calculate Cost of Equity for 3D Systems:
Re = Rf + β* Rm
Assumptions:
Risk Free Rate (Rf) is 10-Year Treasury Constant Maturity Rate as of Dec 31st, 2014 equals to
2.17%. Source (US Department of the Treasury, 2014). End of year date is used to be consistent
with financial annual report.
Market risk premium (Rm) is the expected return of the market. S&P 500 returns 11.4 % for 2014.
Rm = 11.4%. (FPResearch.Com)
Beta (β) is the average 3D Systems β
Beta (β) Calculation:
Sources Beta
NASDAQ 1.33
Yahoo Finance 1.02
Google Finance 2.07
Average 1.47
Cost of Equity (Re) = Re = Rf + β* Rm = 2.17% + 1.47 * 11.4%
Cost of Equity (Re) = 18.9%
Part 2: Cost of Debt
Calculated as Interest Expense divided by the latest two-year Book Value of Debt.
As of Dec. 2014, 3D Systems Corp's interest expense was $8.928Mil. Book value of debt (D) is simplified by
adding the latest two-year average Short-Term Debt and Long-Term Debt together. Book Value of Debt (D)
is $14.234 Mil.
Book Value of Debt (Thousands) as Dec. 31st 2104 (Yahoo Finance)
Year 2014 2013 Average
Short-term Debt $684 $187 $435.5
Long-term Debt $8,905 $18,693 $13,799
Total $ 14,234
75
Cost of Debt = 8.928 / 14.234 = 62.72%.
Part 3: Tax Rate
Tax rate is calculated using the average latest two-year tax rate. Tax rate is income tax expense divided
income before tax.
Tax Rate (Yahoo Finance)
Year 2014 2013
Income Before Tax 17,387 64,006
Income Tax Expense 5,441 19,887
Tax Rate (t) 31.07% 31.18%
Average (t) 31.12%
Part 4: Weights
The market value of equity (E) of 3D Systems as of Dec. 31, 2014 is $3.656 Billion. (ychart.com)
The market value of debt (D) is the book value of debt calculate in Part 2.
Total Capital Invested (V) = E + D = 3670.23
Weight of Equity = E/V = 3656 / 3670.23 = 0.9961
Weight of Debt = D/V = 14.234 / 3670.23 = 0.00387
Part 5: WACC Calculation
WACC = (E/V) * Re + (D/V) * Rf * (1 – t)
Weight of Equity 99.61%
Weight of Debt 0.39%
Cost of Equity 18.9%
Cost of Debt 62.72%
Tax Rate 31.12%
WACC 18.99%
76
Current Valuation
Figure 50 - Assumptions for Base Valuation of 3D Systems
Valuations Notes:
Cost of Capital consist of 99.6 % weights toward Cost of Equity.
Cost of Equity component is affected by Betas assumption. There is 29% variation is Beta value from Yahoo Finance, Google Finance,
and Nasdaq
Enterprise value is heavily affected by WACC. There is $700M valuation difference between 19% and 11% with same 4% terminal
growth rate assumptions. See sensitivity analysis for valuation ranges.
Figure 51 - Component analysis of 3D Systems for FCF Valuations.
77
Figure 52 - Base valuation of 3D Systems with projected revenue to 2020.
78
Figure 53 - Sensitivity Analysis of the Base Enterprise value with respect to Discount rate and Terminal Growth rate assumptions. Sensitive
Analysis shown in term of per share basis.
79
Valuation of Arcam Acquisition
Figure 54 - Base Valuation Assumption of Arcam AB
Figure 55 - Arcam AB FCF Component Analysis for 4 years.
80
Figure 56 - Base valuation of Arcam AB using FCF Analysis
81
Figure 57 - Sensitivity Analysis of Arcam AB Enterprise value with respect to Discount Rate and Terminal Growth Rate Assumptions
Figure 58 - Valuation Assumptions changes based on successful implementation of synergies strategies. Target COGS is 40% of Revenue and
SG&A is 26% of Revenue.
82
Valuation of 3D Systems After Recommenations
Figure 59 - Valuation worksheet for 3D Systems based on successful implementation of targeted strategies.
83
Figure 60 - Sensitivity Analysis of 3D Systems Valuations: COGs as % Revenue and SG&A as % of Revenue.
84
Figure 61 - Assumptions for Valuation of 3D Systems
Based on expected growth above industry growth rate through renewed company focus. Assumptions included COGS and SG&A target.
85
Figure 62 - Valuation Worksheet for 3D Systems
86
87
Figure 63 - Sensitivity Analysis of 3D System Calculations: Product growth rate and Material growth rate assumptions.
88
Appendix C: Complete List of 3D Systems Acquisitions, 2009-Feb 2015
Date Company Cost, $MM, if listed WHY?
Feb-15 Cimatron Ltd
The combination of Cimatron’s products with 3DS’ portfolio, strengthens 3DS’ position in the fast-growing 3D design and
manufacturing space. The transaction adds complementary products and technology and extends 3DS’ direct and reseller
sales coverage globally.
Jan-15 botObjects
The botObjects ProDesk3D will immediately be folded into 3DS’s new CubePro C printer family and deliver a true full-color
experience at the affordable price of $4,990, with greater accuracy and speed than any comparable desktop 3D printer on the
market today. The new CubePro C is capable of printing down to 25-microns layers at deposition speeds of up to 175
millimeters per second using durable PLA and ABS print materials with PVA support material.
LayerWise
a leading provider of advanced direct metal 3D printing and manufacturing services. LayerWise delivers quick-turn, 3D-
printed metal parts, manufactured on its own proprietary line of direct metal 3D printers, for aerospace, high-precision
equipment and medical and dental customers.
Apr-14 Medical Modeling
“The combination of our rapidly growing healthcare business with Medical Modeling’s expanding range of products and
services creates the largest 3D printing based personalized surgery and patient specific medical device service capabilities
available today,” said Avi Reichental, 3DS President and CEO. “By leveraging our collective expertise, technologies and
channels under the capable leadership of Andy Christensen, we plan to deliver an expanding range of direct metal and
plastic medical devices designed to address this rapidly expanding opportunity.”
Feb-14 Digital PlaySpace
the DPS platform combines home design, gaming, and community sharing to deliver a vivid 3D create-and-make experience
for children and their parents. Compelling content creation, capture and customization features make it quick, easy and fun
to personalize and 3D print incredible creations at home on a Cube® 3D printer, or have them cloud printed using 3DS’
fulfillment service, available on its consumer destination site Cubify™.
Jan-14 Gentle Giant Studios
3DS plans to immediately leverage Gentle Giant Studios technology and vast library of digital content into its consumer
platform and extend its existing brand relationships to further the reach of 3D scanning, modeling and printing for
entertainment, toys, collectibles, action figures in conjunction with numerous blockbuster films and evergreen licensed
properties.
Dec-13 Xerox R&D 35.2$
This agreement expands the decade and a half long collaboration between the companies, that already produced 3DS’ best
selling ProJet® series 3D printers. "We are pleased to expand our relationship with an innovative partner of the caliber of
Xerox and expect that acquiring some of the Xerox Wilsonville engineering team, together with their state-of the-art
development labs and selected licensed IP, to catapult our 3D printers’ development and manufacturing capabilities
forward,” said Avi Reichental, 3D Systems’ President and CEO. “This bold step is consistent with our belief that we must act
Aug-13 American Precision Prototyping
expert providers of rapid prototyping and advanced manufacturing, product development and engineering services, further
extending its service bureau operations in the United States.
Jan-14 Laser Reproductions
3D Systems is furthering its own 3D printing service, Quickparts, with the acquisition ofLaser Reproductions, a 3D printing
product development and engineering service based out of Columbus, Ohio.
Aug-14 Simbionix 120
The acquisition of Simbionix extends our first mover advantage in the fast growing field of 3D printing enabled personalized
medicine,” said Avi Reichental, President and CEO, 3DS. “Simbionix brings powerful technology, products, channels and
domain expertise that complement our healthcare offerings and enhance our seamless digital thread for patient-specific
healthcare. From the training room to the operating room, we are developing the digital thread for personalized medicine.”
Jan-14 Robtec
Creates strategic Latin American sales and service platform to drive accelerated adoption of 3DS’ entire design to
manufacturing solutions. Provides 3DS with significant in-region additive manufacturing service bureau capabilities,
knowhow and deep customer relations. Expands 3DS’ global Quickparts® service offerings reach and ability to deliver the
latest advanced manufacturing solutions and capabilities
Aug-13 TeamPlatform
TeamPlatform’s powerful collaboration tools connect and expand our growing 3D content-to-print portfolio, multiplexing
global productivity and real-time collaboration for our customers,” said Avi Reichental, President and CEO of 3D Systems,
“We intend to immediately integrate it into our Geomagic Solutions and Cubify platforms for the benefit of our professionals
and consumers globally.”
Aug-13 CRDM Ltd
a leading UK provider of rapid prototyping and rapid tooling services based in Bucks, England. The company intends to
immediately integrate CRDM into its global Quickparts Solutionscustom parts and manufacturing services.
Dec-13 Villiage Plastics
Through its state-of-the-art manufacturing facility in Norton, Ohio, Village Plastics delivers the highest quality, precision 3D
printing filaments. 3DS plans to immediately integrate Village Plastics materials and manufacturing technologies to
accelerate its development of advanced filament-based materials for its growing Cube ® and CubeX™ 3D printers.
Additionally, the company plans to support all of Village Plastics’ existing customers by providing full access to its complete
portfolio of design-to-manufacturing products and services.
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Dec-13 Figulo
The company plans to immediately integrate Figulo's 3D printed ceramics into its rapidly growing Cubify ® ecosystem and its
professional cloud printing service, Quickparts®, and to leverage Figulo's considerable ceramics materials and process
knowledge to fast track the commercialization of its own family of end-user ceramic 3D printers for home décor labels,
pottery shops, artists and hobbyists.
Feb-13 Geomagic 55
The combination of Geomagic’s powerful sculpting, modeling, scanning and inspecting software tools with 3D Systems’
portfolio strengthens its 3D authoring platform and positions the company for accelerated growth in the expanding advanced
manufacturing, healthcare and consumer opportunities. The transaction adds complementary products and technology and
increases the company’s reseller coverage globally.
Jan-13 COWEB
COWEB’s online tools create licensed collectibles as well as a wide range of original custom figurines that can be
personalized and 3D printed in full color, using uploaded photos. When integrated into 3D Systems’ powerful Cubify hosting
platform, these capabilities enable creative collaborations like the one previewed earlier in the week at CES between CBS’s
Star Trek franchise and 3D Systems, which invites Star Trek fans globally to personalize their favorite Original Series
character, 3D print it in the cloud in full color and have it mailed right to their homes.
Jul-13 Phenix Systems 15.1
“Phenix Systems is a strategic and differentiated addition to our extensive 3D content-to-print portfolio and we are thrilled to
deliver these powerful solutions to our customers,” said Avi Reichental, President and CEO, 3D Systems. “Our proven track
record in advanced manufacturing, combined with Phenix Systems extensive metals technology and expertise represents a
true game-changer that empowers our customers to manufacture the future.”
May-13 Rapid Product Development Group, Inc RPDG is a global provider of additive and traditional quick-turn manufacturing services.
Sep-13 Sugar Lab
The Sugar Lab adopted 3D Systems’ Color Jet Printing (CJP) technology to print on a sugar bed using different flavored edible
binders that meet all food safety requirements. 3D Systems plans to immediately integrate The Sugar Lab 3D printing
technique into its professional and consumer content-to-print platforms with a variety of production-quality applications as
well as the ability to 3D print indulgences at home.
Apr-12 Paramount Industries
3D Systems plans to integrate Paramount’s state-of-the-art manufacturing facilities and advanced tooling and assembly
operations with its growing on-demand direct manufacturing services.
Apr-12 My Robot Nation
The acquisition of MRN underscores 3D Systems' Cubify commitment to democratize 3D content-to-print access for kids and
adults alike, unleashing creativity and allowing individuals to express themselves easily in 3D. My Robot Nation brings to
Cubify proven video game principles to provide a simple, fun and amazingly flexible creative experience. Within minutes,
anyone can quickly and easily create their own, unique collectible from billions of possible combinations then make it real
with 3D printing.
Jul-12 Viztu Technologies The company expects to integrate Viztu into Cubify.com, adding intuitive and fun scan-to-print and create-to-print apps
May-12 Bespoke Innovations, Inc
Bespoke’s scan-to-print technologies will be integrated into 3D Systems’ growing suite of healthcare solutions. Right now
Bespoke only uses 3D printing for outer moldings, but 3D Systems is putting some R & D into developing prosthetics that are
entirely printed.
May-12 FreshFiber BV
3D Systems plans to integrate FreshFiber into its growing consumer business and leverage the FreshFiber brand and
leadership position to expand its reach into individualized and personalized electronics accessories.
Oct-12 The Innovative Modelmakers
a leading full service provider of on-demand custom parts services, located in Eindhoven, The Netherlands. The company
plans to integrate the operations of TIM into itson-demand parts service as part of 3D Systems Benelux, and immediately
offer its full range of rapid prototyping, model making and manufacturing solutions for the benefit of design-to-
manufacturing professionals and consumers alike.
Apr-11 Print3D Corporation
The company plans to commercialize Print3D as a complementary custom parts service to its Quickparts® and 3Dproparts™
services and to leverage this technology to create new user tools and utilities for its entire menus of services.
Apr-11 SYCODE
Overall, great move by 3D Systems. SYCODE, to my knowledge, develops more independent software for the CAD industry
than any other company. They’ve also done a lot in the conversion between any format you can think of. No doubt, 3D
Systems wants to leverage this.
Feb-11 Quickparts 23.1
Quickparts changed the way product development and manufacturing professionals source custom parts. We plan to
leverage our proprietary e-commerce and high-touch customer care capabilities for the benefit of the entire 3D Systems’
product portfolio. Our mission has always been to make it easy for our customers to buy custom parts, we believe that as part
of 3D Systems we can deliver greater benefits to our customers.”
90
Jan-12 National RP Support
"As a 3D Systems factory authorized customer support service provider, it makes sense for us to team up and jointly deliver a
more comprehensive range of services and capabilities to our customers,"
Jul-11 Alibre
3D Systems plans to expand the breadth and reach of the Alibre design productivity tools and to leverage its combined global
channels to deliver complete 3D design-to-manufacturing products, tools and services.
Mar-11 Accelerated Technologies, Inc
. ("ATI"), a Texas based provider of custom parts services, as part of the company's continued expansion of its 3Dproparts(TM)
services. 3D Systems plans to integrate ATI into its growing custom parts services network under its Quickparts(R) and
3Dproparts(TM) brands.
May-11 Freedom of Creation
Over the past years the 3D printing industry has been picking up speed, moving the technology towards mainstream
adoption. To keep our competitive edge and to strengthen our pioneering position we are excited about partnering up with
one of the biggest players in the 3D printing industry, 3D Systems. This strategic move helps to realize Freedom Of Creation’s
bold plans with 3D printing for both the near and distant future.
May-11 Huntsman Corporation/Advanced Materials Division41
This acquisition complements 3D Systems’ print materials technology and intellectual property portfolio and adds the
Digitalis® print engine to its printer family. 3D Systems plans to integrate these product lines into its growing rapid
manufacturing and healthcare solutions portfolio. The company expects this acquisition to be immediately accretive to its
net income and contribute favorably to its target operating model.
Oct-11 Kemo Modelmakerj
a leading provider of on-demand custom parts services headquartered in Budel, The Netherlands. The company plans to
continue all of its Kemo operations as 3D Systems Benelux and immediately offer its expanded range of 3D content-to-print
solutions for the benefit of design-to-manufacturing professionals and consumers alike.
Sep-11 Formero Pty, Ltd
The company plans to continue all Formero operations as 3D Systems Asia-Pacific and immediately offer its expanded range
of 3D content-to-print solutions for the benefit of design-to-manufacturing professionals and consumers alike.
Apr-10 Design Prototyping Technologies
“We are pleased to add another world class service provider with proprietary online capabilities to our rapidly growing
3Dproparts™ business,” said Abe Reichental, President and CEO of 3D Systems. “Under Mike and Dan’s experienced
leadership we intend to expand our online offerings significantly and further increase our menu of services for the benefit of
our growing customer base.”
Feb-10 Moeller Design
Moeller Design has established itself as a leader in high quality high accuracy QuickCast™ patterns supporting the growing
need of foundries for reliable Rapid Manufacturing solutions. QuickCast™ patterns produced via stereolithography (SLA®)
can be available in as little as two to four days, enabling its customers to produce quality, complex metal castings in one to
four weeks. Dave Moeller, owner of Moeller Design and an industry pioneer, joined 3D Systems as General Manager of its
3Dproparts™ Premium Services Division, and will continue to be based on the west coast.
Jul-10 CEP
We are pleased to add two fine French prototypers to our rapidly growing 3Dproparts™ operations,” said Abe Reichental,
president and chief executive officer of 3D Systems. “We intend to continue with our geographical expansion within Europe
and increase our menu of services for the benefit of our growing global customer base.”
Jul-11 PROTOMETAL
We are pleased to add two fine French prototypers to our rapidly growing 3Dproparts™ operations,” said Abe Reichental,
president and chief executive officer of 3D Systems. “We intend to continue with our geographical expansion within Europe
and increase our menu of services for the benefit of our growing global customer base.”
Oct-10 Provel, S.r.l.
“We are very pleased to add an Italian prototyper with Provel’s renowned reputation to our rapidly growing 3Dproparts™
operations,” said Abe Reichental, president and chief executive officer of 3D Systems. “With Provel, under the capable
leadership of Giorgio Buson, and CEP as our European anchors, we intend to continue our European expansion for the benefit
of our growing customer base.”
Sep-10 Express Pattern
Express Pattern is a leading prototyper that serves its defense, transportation, recreation and healthcare customers by
delivering a comprehensive menu of the most advanced rapid casting, tooling and parts solutions. Express Pattern co-
founders Dave Flynn and Tom Mueller bring a combination of unparalleled knowledge and experience in rapid prototyping
and manufacturing solutions that started with their active participation in the first beta test of stereolithography equipment
in 1987 and continued through decades of innovation leadership and customer service excellence. They have developed
Jan-09 Acu-Cast Technologies
"We expect that the synergies generated by combining our latest generation of Pro systems and materials with Acu-Cast's
extensive experience in additive and traditional manufacturing, coupled with its part building know-how and state-of-the-
art equipment and facilities, will provide our customers with the ultimate one-stop shopping experience for all their design,
prototyping and manufacturing needs."
Jan-09 Desktop Factory, Inc
Desktop Factory, Inc., an Idealab company that developed a sub-$5,000 3-D Printer. The Desktop Factory 3-D Printer, which is
currently in an advanced development stage, produces robust plastic parts at a build speed comparable to existing 3-D
printing technologies. 3D Systems plans to continue to develop Desktop Factory's technology within its previously
announced annual research and development expenditure range and integrate this breakthrough technology into its
expanding family of desktop and professional 3-D Printers.
Jan-09 AdvaTech Manufatcturing
"We are pleased to add a reputable certified aerospace and defense manufacturer of AdvaTech's caliber to our expanding
3Dproparts™ service," said Abe Reichental, President and CEO of 3D Systems. "Under Jim Butler's capable leadership, we
intend to expand our Selective Laser Sintering manufacturing capacity and capabilities for the benefit of our aerospace and
defense customers."
91
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