Last week, Stratasys, Ltd. (NASDAQ:SSYS) officially closed a deal to purchase GrabCAD, a cloud-based design and engineering collaboration platform and community of more than 1.5 million engineers worldwide. Specific terms of the deal weren't disclosed beyond it being an all-cash transaction, but Stratasys expects that it'll impact fourth-quarter earnings between $0.03 and $0.05 per share, or about $1.5 million to $2.5 million, based on 49.4 million shares outstanding as of the second quarter. Although this deal pales in comparison to previous acquisitions made by Stratasys, investors may want to take notice, because it may offer long-term upside potential for revenue if open collaboration becomes more widely embraced across the design and manufacturing industries.
The value of GrabCAD
For $59 or $89 per user, per month, GrabCAD's cloud-based, community-driven, software-agnostic design platform allows engineers and designers to collaborate worldwide on their own terms. The value proposition of such a platform became apparent when General Electric Company (NYSE:GE) hosted a worldwide open design contest through GrabCAD and invited engineers from all over the world to reimagine for 3D printing a jet engine loading bracket, which secures a jet engine to the wing of a commercial jetliner. The goal of the eight-week contest was to reduce the weight of the conventionally manufactured bracket by as much as possible, while still maintaining enough strength for it to withstand loads up to 9,500 pounds.
One of the greatest advantages that 3D printing offers over conventional manufacturing processes is how it produces objects "additively," or layer by layer, which eliminates the need for tooling during the manufacturing process. This fundamentally differs from "subtractive" manufacturing, which starts with a solid block of material that's then shaved, milled, pressed, drilled, or otherwise formed into an object's final shape. The lack of tooling required for 3D printing manufacturing invites design freedoms that would otherwise be cost-prohibitive or near impossible to produce conventionally.
General Electric was curious how the worldwide engineering community would take advantage of the added design freedoms that 3D printing offers, and the results of its contest didn't disappoint. Out of nearly 700 submissions from 56 countries, the winning engineer hailed from a small city in Indonesia and reduced the conventional jet engine bracket's weight by a staggering 84%, yet managed to maintain the necessary strength requirements.
The moral of the story is that there's tremendous potential in using the worldwide engineering community to help solve engineering challenges and drive innovation in short periods of time. For companies like General Electric, open collaboration could be used as another tool to learn about design from new perspectives, and even as a forum to attract and recruit off-the-radar talent.
What Stratasys sees
When Stratasys announced its plan to acquire GrabCAD, it highlighted how GrabCAD will deepen its understanding of designing software for engineers and product designers, expand its product portfolio by offering a solution for its 3D printing customers to collaborate more effectively, and strengthen the presence of its online engineering community.
In my opinion, Stratasys also purchased GrabCAD because it reduces friction in the marketplace by giving designers and engineers the ability to bring products to market faster and more affordably. Being a 3D printing manufacturer, Stratasys already understands the value of reducing friction for product designers and engineers, because 3D printing provides designers and engineers with a cost-effective tool that can rapidly iterate designs and help accelerate product development times. Not only does GrabCAD enhance this proposition for Stratasys, but it also offers the company upside potential for revenue, assuming the design and engineering community more widely embraces such open-collaboration platforms -- which I believe could be likely, considering how General Electric has demonstrated its innovative potential to the world.
Steve Heller owns shares of Apple. The Motley Fool recommends Apple and Stratasys. The Motley Fool owns shares of Apple, General Electric Company, 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.