3 Major Announcements From 3D Systems Corporation and Stratasys, Ltd.'s Disruptive Competitor

This privately held company may not be well known to investors, but it’s causing a headache for 3D Systems and Stratasys.

Jul 11, 2014 at 9:42AM

Privately held Mcor Technologies may not be well known to investors, but that hasn't stopped the Ireland-based 3-D printing company from applying pressure on 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) in the early prototyping and conceptual modeling segment of their respective businesses. Unlike 3D Systems and Stratasys, which lock its users into buying expensive proprietary material cartridges, Mcor offers professional full-color and monochrome 3-D printers that use ordinary copy paper as its primary material. The end result is that Mcor's 3-D printers cost anywhere between five and 30 times cheaper to operate than competing 3D Systems and Stratasys systems. Over the life the printer, using Mcor's products could equate to hundreds of thousands of dollars in cost savings for high-volume product developers.

By not locking its customers into buying expensive materials, Mcor essentially breaks the traditional razor-and-blade business model that 3D Systems and Stratasys have established in the professional and consumer 3-D printing segment. Should Mcor prove successful and grow its market share considerably, it could force Stratasys and 3D Systems to face pricing pressures on the sale of its materials, which have grown to become an extremely important aspect of their respective businesses. In the first quarter, 3D Systems material sales represented 27% of its revenue, and although Stratasys doesn't break out material sales, it reported that material sales increased by 36% year over year in the same period.

In the following video, 3-D printing specialist Steve Heller asks Mcor Technologies CEO Conor MacCormack to highlight the company's latest developments since they last spoke. Going forward, 3D Systems and Stratasys investors should watch developments from Mcor and other 3-D printing companies that pose risks to 3D Systems' and Stratasys' underlying businesses.

A full transcript follows the video.

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Steve Heller: Very good. I wanted to move on now. You have a new product -- or a few new products. I'd like to talk about them. We can demo them here. Let's just go through it.

Conor MacCormack: We've been very busy. There are a few big announcements; the first one is that we just secured a major funding round from WHEB partners in London -- a total round of up to $12 million, WHEB being a major component in that.

Heller: Now you have plenty of cash to go pursue your market opportunity further.

MacCormack: Absolutely. It's been a very interesting journey up to now, but now it's the next step. Mcor is changing now into a bigger company, and this investment has enabled us to not only develop the current IRIS machine, but look at other things.

Heller: In your pipeline, yes.

MacCormack: Other potential products, but also other machines in time; R&D. That's the first announcement.

The second is that we've announced a new product called Mcor FLEX which is -- if you think of paper more like a scaffold -- if paper is like a scaffold and it's around 70% porous, if you take that 70% porous, mostly air, structure and you dip another material or spray another material onto that. When that material cures it actually takes on the properties of that cured material. You can demonstrate flexible materials with this new Mcor FLEX, so that's another announcement that we had at this show.

Heller: Basically, it's still a conceptual model, but you can still have some function to the model, to understand how it will operate in the real world.

MacCormack: Yes. You can simulate a lot more real-world. Obviously, it's not going to behave exactly like a spring, but you can put an assembly together and show parts moving over and back, and it all connected in one assembly. You can demonstrate more assembled objects by using something flexible.

The next thing we're very, very excited about was our new color enhancements. You can see the differences between these two models.

Effectively, we're the first 3-D printing company to adopt ICC, the International Color Consortium, standard. It's almost like a WYSIWYG, for what you're seeing on your screen and what you get on your 3-D color part.

This has run through a Mcor ICC color map, and this model hasn't gone through it. You can see the difference in the skin tones.

Heller: The new technology guarantees that the color is going to be what it's going to look like when it's manufactured.

MacCormack: Yes. A very interesting thing here is, you might know that you can look at an object on a computer screen, and depending on what computer screen you use you're going to see a different color. The color on the different monitors is going to look a little bit differently.

What we had to do is that we went to a CIE standard, which is a 3-D color space, and we find out what that color should really be. Forget about what the monitor shows you. Find out what that real color is in RGB, and then we run an ICC map over it, we send it to the printer, and we get as close as we can to the real color.

So, it's actually monitor-independent, printer-independent, and actually will give you what the real color is. That's a very big development. No other company is able to do that, because ink and paper...

Heller: Right, you have true color potential, true full color.

MacCormack: You could try and do that, but you wouldn't get close to the color on the other color technologies, so they don't do it.

Then the final big piece of news that we have at the show is that we've come up with a one-button fix -- a bit of the Holy Grail in just bringing in your data. As people know, sometimes you can bring in data and you're just not able to print it; there's a problem with geometries. There have been methods out there for doing Boolean operations and combining multiple parts to get you what you want.

That is OK -- that can be challenging, but people have solved that. But the bigger problem that people have a harder time solving is when you have color. When you have color in those objects and you do a Boolean operation, you can actually lose the color map. You can lose the color information afterwards, and your model can get all messed up in the color.

What we've done is a one-button fix, so if people will bring in the part, they'll hit Generate Layer, and they won't even know that there was a problem.

Heller: You're maintaining continuity, then, throughout the whole process.

MacCormack: We just said slice, and that will slice it. In a way, they won't even know that they had an issue.

Heller: There's magic happening behind the scenes.

MacCormack: Yes. In a way, sometimes you like to give feedback back to the customer and let them know there's a problem, but if we can fix it why bother? Just make it go through. That's what we've done. It's a one-button fix, and it opens up the capability for us to do this in color, which nobody else has been able to do before. That's very big news in the whole file fixing.

Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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