3D4M aims to provide well-rounded perspective of the industry. In another recent post, I detailed the relationship between Homebrew Computer Club and the Hackerspace. This is at the grass-roots of the industry growth. The pioneers of this industry, the originals like Charles Hull and Scott Crump have created the technology that hobbyists are now taking hold of.
This writing will begin to detail 3D Systems and give personality to the business structure.
So why is 3D Systems the company in the spotlight?
The industry is changing, and 3D Systems is not standing still. The company is making moves. Its stock is making moves. Its product lines are making moves.
3D Systems came about in 1986 after Scott Crump invented stereolithography while at his former job, UVP, Inc. The comapny is an acquisitions based company, has made 11 listed in 2013 and another 7 in 2012. Recently, the company has positioning itself by partnering with strategic companies and organizations. New products are being introduced, and big decisions are being primed and cured on the platform. As with any company, products and focuses take new form with technological advances. There are many developing rapidly in this space. What does not change as quickly is culture and management. I believe these two components — culture and management — drive a company more than anything else.
We will look at four areas:
Partnerships and horizontal growth
Acquisitions and vertical growth
Global outreach and distributive growth
Management and interpersonal growth
Partnerships are alliances where a company builds mutually beneficial opportunities between itself and its partner. In an earlier post, the strategic alliance between 3D Systems and Deloitte Consulting is such a mutually beneficial partnership. This is horizontal because it joins outside of the 3DP industry. 3D Systems is working with others, leveraging its specialties and the specialties of others in coordination.
3D Systems is a very acquisition heavy company, raking in 37 subsidiaries since 2009. We’ve experienced 11 deals done in 2013 and 7 in 2012 alone. Acquisitions ideally bolster the value chain and enhance current product lines of the company. Because of this extended control tactic, we call this acquisition and vertical growth.
In the IDA cited post, 33 companies were listed, with the vast majority located domestically in the US. But, it will not remain that America is the only company with the knowledge base secured. Germany has individual companies entering the 3DP sphere and China has its own initiative, similar to America Makes (formerly NAMII) that aims to spur 3DP investment. 3D Systems concurrently is enhancing its global outreach and distribution as we will see.
3D Systems management really is about to enter its first sustained test going into 2014. We will lastly look at the team that ultimately should have the dynamism to recognize where the industry is malleable, the understanding to see where the company itself can grow or pivot, and that capability utilize competition rather than avoid it. Especially within this management component, we will really achieve a well-rounded and largely non-monetary analysis of 3D Systems. This gives personality to the entity.
Partnerships and Horizontal Growth — Shake Hands, Reach Out
Today, where the industry is and where the competitors are, heavy importance lies in marketing tactic through partnerships. The company has publicly teamed up with domestic entities such as Deloitte consulting, America Makes (formerly NAMII), Staples, and Office Depot. Abroad, 3D Systems has done equally well to partner with Canon Marketing Japan with Japanese channels in mind, Sindoh Co for South Korea distribution, and Midwich to broaden into the UK. We will see below, but partnerships are a great way for public recognition on a global marketing scale and diversification of sales revenues too.
Acquisitions and Vertical Growth — Buy Up, Size Up
If we look at it, 3D Systems is growing more upward than out. Since 2009, 3D Systems has acquired about 37 companies, notably Z Corp, VIDAR Corporation, Village Plastics, and Xerox’s Solid Ink Engineering and Development Teams.
3D Systems is aggressive in acquisitions, especially in 2012 and 2013 in terms of deal sizes. Z Corp and VIDAR provided $55.6 million in revenue for the company in 2012.
As an aside, goodwill, which is an intangible asset recognized on a balance sheet when it is acquired rather than internally developed, has been growing on the balance sheet of 3D Systems. It means that we are looking at the additional amount the company has paid over the fair value, or competitive market value, for all of the stuff the acquired company owns. Goodwill is difficult to understand from an accounting entry point of view and is often thought of as a plug number, but it has real value. With that, it is subject to write-downs in financials. This is bad for the company and investors looking into the company. A goodwill write down translates to a large one-time expense, hurting profitability, ratios, and perception of management know-how. When a company like 3D Systems acquires 37 companies in a 3-4 year span, the chance that you overpaid for one of these companies grows and grows.
Global Outreach and Distributive Growth — The Global Fingerprint of 3D Printing
Partnerships are a key tool to opening avenues to enter into new markets and new countries. In recent years, revenue bases have come from an increasing percentage from the United States. This may soon change, if developing economies, especially in the Asia Pacific have a say. As was touched on above under “shake hands, reach out” I expect the focus of the revenue base to shift slightly. These figures are consistent with competitor Stratasys, who derives just over 50% of sales from the US and 15% of sales from the Asia Pacific, on average, over 2011 and 2012. Diversification is important, but we can expect revenues to remain predominantly in the coming years.
Management and Interpersonal Growth — Getting Jiggy With Management
Management, the connotations aren’t always positive. We can feel a sense fragmentation or hierarchy from this three syllable word. But, at the core of a long-term vision, it is management that has willfully put itself in the risky position of calculating — internally and externally — the future.
For 3D Systems, management will really have its first prolonged test of character over 2014. Here, the team comprised of Abe Reichental, Damon Gregoire, Chuck Hull, and Cathy Lewis join forces to repel doubt and spur evolution. These four make up the essential core of the management team as Chief Exec Officer (CEO), Chief Finance Officer (CFO), Chief Technology Officer (CTO), and Chief Marketing Officer (CMO). This is a superhero task — giving liftoff to this company — and a challenge to motion as the 3D Systems league aims to catalyze inertia.
On the whole, 3D Systems has a dynamic team.
Before becoming 3D Systems CEO, Abe began his tenure at Sealed Air Corporation (SEE) in 1981 and rose through the ranks until 2003. Over this time, Sealed Air Corp was doing very well until the dawn of the dot com bubble. This tells us about his experience as it relates to Sealed Air and as it relates to the leadership positions during this time of economic abundance. Damon was over at a company called Infor Global Solutions, Inc before putting on the CFO suit at 3D Systems. This is a global human resource management company that has customers in aerospace & defense, automotive, industrial manufacturing, and equipment & machinery. These similar relationship paths are applicable to the breadth that 3DP has in industries on a global sphere as well.
Of course we have Charles “Chuck” Hull, who founded 3D Systems and has been with the company since day zero. Chuck serves as CTO and has assumed roles as interim CEO and Chief Operating Officer (COO) in the past. I imagine him to be the philosophical driver behind the decisions and the strategy. He steps in wherever needed to keep momentum positive. Prior to 3D Systems, Charles worked at UVP, Inc, located in Southern California. UVP is a smaller company founded in 1932 that manufactures ultraviolet products. The ties that lead to his creation of stereolithography are clear as he was surrounded by this at UVP. Just recently, UVP was acquired by a German company Analytika Jena AG into the Life Sciences Unit, though they do not seem to have any 3DP strategy in mind.
Cathy has been with the team since late 2009 and is in charge of all things that have to do with marketing direction and strategy. Whoa. Before 3D Systems, she was over at a company called Siemens Information Systems as the General Manager and Principal of the service bureau and microcomputers sales firm. For 3D Systems, the service bureau has been shaped as a strategic point of interest as is detailed below.
Wrapping It Up
We’ve looked at a few key elements so far, including profiles partnerships, acquisitions, global reach, and management profiles. Phew.
What this picture has provided is a fairly robust discussion of who management is and what they’re doing right now. Their competitor, Stratasys, is focusing on an education initiative via Makerbot here in the US, so 3D Systems pivoted and is attempting the same in the UK. Stratasys partnered with the China-located Aurora Group for product retail and distribution, and 3D Systems has offered the same in Japan and South Korea. CFO Gregoire is committed to pleasing investors, aka those that own some of the nearly 103 million shares out, by increasing profit margins and diversifying its product line in the now.
In short, the company is aggressively exploring its options through acquisitions. The management team has been working with each other for a few years in majority, but they clearly are still looking for a rhythm. Because of this, again, 2014 will really mark the beginning of a prolonged test to see how well their growth strategy tracks.