Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of 3D Systems (NYSE:DDD) were trading more than 7% higher today after the company announced that it will acquire 3D software maker Cimatron (UNKNOWN:CIMT.DL) for $8.97 per share in cash, or approximately $97 million.
So what: Cimatron's 3D software products help small to midsize manufacturers produce molds, tools, and dies for a variety of end-use manufacturing applications. 3D Systems expects the acquisition will bolster its technology and product offerings, and broaden its overall sales reach worldwide. It seems likely that 3D Systems' design and manufacturing portfolio, which remains the bread and butter of the 3D printing specialist's business, was a deciding factor in making the deal. Last quarter, 3D Systems' design and manufacturing revenue represented more than 92% of the company's total revenue, as unit sales increased by 57% year over year.
Now what: Given 3D Systems' move higher today, investors appear to be applauding the potential synergies in integrating Cimatron's suite of 3D software with 3D Systems' diverse portfolio of design and manufacturing 3D printers. However, one area investors might want to monitor going forward is the rate of cash that 3D Systems has been burning recently. Between the second and third quarters, 3D Systems depleted nearly $193 million of cash on its balance sheet, or about 33% of its total holding -- the majority of which came from acquisitions. With an additional $97 million now earmarked for the Cimatron deal, 3D Systems has spent roughly $289 million of the $317 million it raised from a secondary offering conducted in May; that, by my calculation, leaves about $280 million in cash on its balance sheet.
Ultimately, if 3D Systems wants to maintain its brisk pace of acquisitions and leave itself with a decent cash buffer, the company could raise additional cash in the form of another secondary offering or perhaps take on debt.