Over the last two quarters, Stratasys' (SSYS -1.11%) MakerBot unit has proven to be a major thorn in the company's earnings. During this time, the consumer 3D printing unit's revenue growth rate has declined sharply on both a sequential and an annual basis -- to the point that it had forced management to reassess the value of the acquisition not once, but twice.
Unfortunately, these reassessments resulted in Stratasys taking two significant goodwill impairment charges against earnings during its most recent fourth and upcoming first quarters, indicating that the company grossly overpaid for MakerBot, which didn't live up to its growth potential.
The fourth-quarter write-down cost investors $102 million against earnings, and the second charge is expected to cost between $150 and $200 million when the company reports its final first-quarter earnings on May 11. Taking a midpoint of $175 million for the second impairment, Stratasys will have written off approximately two-thirds of the total $403 million it paid for MakerBot in mid-2013.
Although the situation may appear like Stratasys has lost hope for MakerBot, the company recently appointed Jonathan Jaglom as the unit's new CEO, and Jaglom brings 10 years of experience between his various roles at Stratasys and Objet.
Stratasys may be thinking that Jaglom's well-rounded experience will help improve the operating performance of MakerBot, but investors will have to wait and see if a change in leadership will drive meaningful improvements.
In the following video, 3D printing specialist Steve Heller interviews Jonathan Jaglom about how his experience could benefit MakerBot, and where he sees the unit in five years.
A full transcript follows the video.
This $19 trillion industry could destroy the Internet
One bleeding-edge technology is about to put the World Wide Web to bed. And if you act quickly, you could be among the savvy investors who enjoy the profits from this stunning change. Experts are calling it the single largest business opportunity in the history of capitalism... The Economist is calling it "transformative"... but you'll probably just call it "how I made my millions." Don't be too late to the party -- click here for one stock to own when the Web goes dark.
Steve Heller: Hey Fools, Steve Heller here. I'm joined today with Jonathan Jaglom, CEO of MakerBot. MakerBot needs no introduction. They're the leader in the consumer 3D printing space, owned by Stratasys. Thank you so much for being here today, Jonathan. I really appreciate your time.
I want to jump right in, here. I know you've got a lot of experience with MakerBot, Stratasys, Objet. You've worked the gamut, here -- roles and hats you've worn throughout the different companies, and they've all come together. How does this prepare you for being CEO of MakerBot?
Jonathan Jaglom: I've been around for 10 years, so I've seen this industry grow from small to big, and really seen how the technology developed and how the needs of our professional users [have] evolved over time.
I think what I can tap into in that experience is bring that know-how into the MakerBot community.
We're seeing a lot of attraction from the professional platform to the desktop environment. It makes a lot of sense, because the MakerBot printers can be used for initial concept modeling and initial drawings, initial ideas that you may have. Then you roll it out to the higher-end printers, which is where Stratasys would kick in.
There's a very nice transition going on between Stratasys and MakerBot, and it all really makes sense. I'm very happy to be leading that, as its CEO.
Heller: You've worked in a lot of different roles. You've worked in sales, customer experience, so you have all the hats, the knowledge base and the experience to run the show, here.
Let's get in here, in terms of philosophies and vision. What's your philosophy on strategy, leadership, innovation, and working with customers, and how it all comes together?
Jaglom: Back to your previous comment; I think it's a very interesting point that I'd like to develop. Really, I have a lot of experience in other departments. As you mentioned, sales, marketing, customer support, applications, sales operations, and my last role as General Manager of Asia [at Stratasys].
I'm tapping into that know-how, and I think it makes sense to implement a lot of that know-how into the MakerBot team. MakerBot grew very, very fast in a very short period of time [in recent years], so creating that structure within MakerBot in some areas will make a lot of sense.
Heller: What is your future vision for MakerBot? Five years from now, where would you like to see this company? What would you like to see it doing?
Jaglom: I think the company will continue to improve on its [3D printing] platforms, and also on its ecosystem. We have to continually provide more tools in that toolbox, to facilitate the individual and make that individual be more empowered and be more creative as a consequence of that.
I definitely see movement in the technology, in the software and the hardware, and also in the verticals that we're addressing -- in the education market where we still have a long ways to go, in the professional user space where we can tap into there as well, and also the consumers at home, which definitely we're seeing traction in as well.
