Before getting clipped in round two of the NCAA men's basketball tourney by the Oregon Ducks, the Winthrop Eagles rounded out a great season with a surprise victory over the Notre Dame Fightin' Irish. Bad news for Notre Dame fans, but good news for my fledgling series, Upset City!

In case you missed the first installment, this is how we play: I look to the hometown of the scrappy victor and seek a business-world analog -- a company that has the potential to outperform in 2007 but has nevertheless received a low rating from our Motley Fool CAPS community. Not a member of CAPS, you say? It's time to get in the game.

These particular Eagles are endemic to Rock Hill, S.C. -- a pretty empty nest when it comes to publicly traded companies. Even with the assistance of some Palmetto Fools, I could only identify one CAPS-rated company headquartered there. Business has been a bit slow in the area since the decline of the textile industry, but I wouldn't say Rock Hill's economy is going the way of the dodo, either. It seems that the greater York County region is managing to lure some Charlotte, N.C., companies over state lines with tax breaks and other business incentives. Our upset contender, 3D Systems (NASDAQ:TDSC), actually migrated even further -- it came all the way from far-flung Valencia, Calif., to roost in Rock Hill.

Rule Breaker or Faker Breaker?
3D Systems seems to have the field markings of a Rule Breaker-universe dweller. The company was an early pioneer in the field of rapid prototyping in the 1980s, and it has outlived many, many failed competitors. Rapid prototyping is a very nifty technology area. Imagine being able to take a digitally rendered object, divvy it into paper-thin horizontal slices, and print out the object one layer at a time. This isn't idle future-gazing -- it's the present capability of 3-D printers. You don't believe me? Check out this video from privately held competitor Z Corporation. Did anyone else expect Brundlefly to crawl out when the printer cover was lifted?

3D Systems has plenty of hype behind it, even if the company doesn't sport as snazzy a video on its website. What has that hype done for long-term investors? Not a heck of a lot. This past year was particularly unpleasant, with the revelation of accounting shenanigans and the ouster of the firm's CFO.

One would think these machines would fly off the shelves, were they not heavier than an ostrich. There are myriad applications in manufacturing, medicine, and education, not to mention World of Warcraftfandom. The business opportunity doesn't end with system placements, either. As with true Rule Breakers pick Intuitive Surgical (NASDAQ:ISRG), there is a recurring revenue model here, in which customers continually need to reorder printing materials. Despite all of this potential, 3D Systems managed to generate positive earnings in only four of the past 10 years. No wonder it sports a mere two stars in our CAPS rating system.

Final score
I just don't see 2007 as the breakout year for 3D Systems. It will be busy getting its house in order after the accounting mishap, not to mention the disruptions caused by a move to a new enterprise resource planning system. The company has stayed aloft this long in part because of the successful defense of its patent portfolio, but it can't glide on that resource forever.

3D Systems needs a killer app. Its recently announced V-Flash desktop modeler does show some promise in that regard. It's a potentially disruptive innovation -- simpler, cheaper, smaller -- and, if the product rollout is properly executed, it may eventually help to edge out the competition from firms like Z Corporation and Stratasys (NASDAQ:SSYS). However, 2007 is not going to see much in the way of V-flash sales.

I was willing to consider breaking out of V formation with an outperform call here, but in this case, that would just be a drag. Today, I defer to the wisdom of the flock. 

Stay tuned for the next installment of Upset City!

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Fool contributor Toby Shute knows a cloaca from a crop, thanks to his bird-lovin' college roommate. He owns shares in Intuitive Surgical, which is a Rule Breakers recommendation. The Fool has a precocial disclosure policy.