During 3D Systems' (NYSE: DDD ) 2014 first-quarter-earnings call, it came to light how the 3-D printing giant views competitive threats from Stratasys (NASDAQ: SSYS ) and Hewlett-Packard (NYSE: HPQ ) . Although mindful of the competition, 3D Systems believes its business is more vertically integrated, and therefore gives it a first-mover advantage over the competition.
Oh, the irony!
In an effort to broaden its horizons, Stratasys recently made a greater push into the 3-D printing service bureau space when it purchased Solid Concepts and Harvest Technologies, two leading independent 3-D printing service providers in the U.S. Together, with its existing Redeye 3-D printing service bureau, Stratasys will consolidate its servicing operations into a streamlined solution, offering a wider range of 3-D printing services, including small batch direct manufacturing with metal alloys.
For Stratasys, the greater push into the servicing space makes a lot of sense because it diversifies its technology portfolio, broadens its manufacturing expertise, builds out its sales channel, and potentially expands its customer base. The irony with this move is that Stratasys only sells 3-D printers based on two primary technologies, and in order to become a fully streamlined 3-D printing service bureau, it likely has to adopt 3-D printing technologies from 3D Systems, which offers seven different technologies under its umbrella.
According 3D Systems CEO Avi Reichental, the service centers Stratasys purchased were "by and large" already using its stereolithography, selective laser sintering, and direct metal 3-D printers. In other words, the potential exists for 3D Systems to win future purchase orders from Stratasys as it streamlines and grows its service operations.
As far as Hewlett-Packard is concerned, Reichental acknowledged that it takes HP very seriously because it has "unlimited resources, capabilities, and technologies." As terrifying as this sounds to 3D Systems investors, Reichental doesn't underestimate the high level of complexity required to become a meaningful and relevant 3-D printing player in the design and manufacturing world. Realistically, it'll likely take years until HP can reasonably be considered a formidable competitor.
In Reichental's view, a multi-faceted approach involving different 3-D printing technologies is the only way to make a big impact in the space. Emphasizing a diverse 3-D printing portfolio makes sense from a business perspective because different 3-D printing applications are best suited for different technologies. The technology needed to produce a titanium medical implant device is dramatically different than technology that produces plastic automotive dashboard prototypes. The company with the most diverse 3-D printing portfolio can cater to the most 3-D printing applications.
Still, investors should continue to monitor Hewlett-Packard's entry into the space, only because HP has deeper pockets than what the worldwide 3-D printing industry generated in annual sales last year.
A first-mover advantage?
3D Systems believes it has a first-mover advantage over the competition because no other 3-D printing company offers as expansive of a 3-D printing portfolio. In order to subscribe to this statement, deeper vertical integration will have to become an increasingly predominant theme throughout the 3-D printing industry so that competitors would have no choice but to build or acquire a broader portfolio. If the industry does in fact move in this direction, it would put 3D Systems and its already established portfolio of seven 3-D printing technologies in a rather opportune position while the industry mobilized.
The jury may still be out on how this will all shake out, but Stratasys' recent emphasis on services and diversification certainly puts some weight behind this line of thinking. Going forward, investors should watch how 3D Systems deepens its level of integration and continues to differentiate itself from the competition.
One must-own stock in 2014
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year, his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252%, and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.