Financial History and Status
3D Systems remains the RP system industry's revenue leader, but has slipped in terms of units shipped. It lost the distinction of being the company with the largest installed-base of machinery several years ago to Stratasys. Indeed, more than 70% of the company's 2011 revenue was derived from sales of materials and services.

Through acquisitions and organic growth, 3D posted a 44% year over year revenue increase for 2011, establishing a new record of $230.4 million. Net income also increased by 83% to $41 million. Revenue for 2010 showed a 42% increase over 2009, which was also a new record, as well as a profit of $9.4 million.

While sales for 2009 dropped nearly 19% compared to 2008, and about 28% from the level achieved in 2007, showing a profit for both 2009 and 2010 was a very favorable development, especially considering the brutal economic environment. 3D Systems had a loss for three consecutive years after a profitable year in 2005, with its largest coming in 2006. 3D attributed that loss to difficulties in making its new internal enterprise resource software operational, the cost of relocating its headquarters to South Carolina, a decrease in service revenue from discontinuing support to some of its legacy systems, and to increased R&D expenses. The company also experienced substantial losses in years preceding 2005. Those financial problems stemmed from a variety of sources, including increased competition, a less-profitable product mix, and costs associated with acquisitions and litigation.

3D Systems has certainly turned a corner from those days. it's predicting sales of $330 to $360 million for 2012, and reports a 63% increase in revenue for the first quarter of 2012 while maintaining its profit level.

Early Acquisitions and False Steps
The company has worked steadily over the years to develop the market, protect its position with a portfolio of hundreds of patents, and to improve its machinery, software and materials. This has resulted in improvements in accuracy, surface finish and material properties that have been instrumental in expanding the rapid prototyping market as a whole.

3D has also acquired a number of technologies and competitor companies over the years. It purchased Keltool^® technology from 3M several years ago to address high volume injection mold-making applications. In rapid succession in 2001, it acquired OptoForm SARL (France), RPC Ltd. (Switzerland) (Rapid Prototyping Chemicals, a photopolymer producer) and DTM Corp. OptoForm's technology was aimed at additive manufacturing applications and RPC was acquired to help the company replace its long-term relationship with resin supplier Vantico (see the sidebar, below) which ended in 2002. While these acquisitions gave the company the widest technical capabilities and market stance of any system vendor, it was not easy to integrate and prune them into well-coordinated assets.

Changes in materials and technology have considerably lessened the need for some of 3D's past acquisitions. Keltool^® has become dormant as improvements to the selective laser sintering process were made and competitors introduced numerous fast injection mold tooling solutions. Improvements in composite-based photopolymers now permit higher performance parts to be made with stereolithography which has resulted in the shelving of OptoForm technology.

Product Line
The company's product line now includes a family of systems based on several fundamentally different technologies. Stereolithography is sold as a solution for applications requiring higher accuracy and resolution. These products use lasers to solidify successive layers of a liquid photopolymer resin. Selective laser sintering produces parts in final materials from powders. 3D Systems also provides jetted photopolymer-based systems which are positioned as lower-cost, somewhat lower-accuracy, 3D printers for the office environment.

This family of machines uses wide area inkjet heads which deposit entire layers of build and support materials. Each layer is fully cured by a flood lamp after deposition and supports are removed by melting. The product line, originally introduced under the InVision™ name was at the outset positioned to challenge the PolyJet™ family of 3D printers from Objet Ltd. (Israel) which use very similar technology. It is now sold under the ProJet™ trade name, which is also used for some other technologies, as well.

With the acquisition of DTM, 3D acquired selective laser sintering (SLS) technology that can produce parts in final polymer materials and metals. DTM commercialized research done at the University of Texas, selling its first system in 1992. The SLS system uses a laser to partially melt successive layers of powder.

In early 2008 3D Systems began selling equipment in the US based on a similar technology, selective laser melting, from Renishaw plc (UK) (formerly MTT Technologies Group). These machines are quite complementary to the company's SLS systems, offering a wide range of metal materials and full density parts.

 

In January, 2007 the company announced a new photopolymer-based technology with many of the same capabilities as stereolithography. With a selling price of US$9,900, there was the potential at that time for this machine to produce a tectonic shift in the industry. Dubbed the V-Flash™ Desktop Modeler, it was 3D's intent to make limited shipments in the first quarter of 2008, but technical problems resulted in delaying commercial shipments until May, 2009. By then, prospects were being offered other choices at much lower prices.

The V-Flash™ machine itself is in the process of being replaced in the coming months by 3D's ProJet™ 1000 & 1500 models which are based on an updated version of the technology. The machines are more expensive to purchase, but the cost of materials is about half that of the original version. They have been positioned against low-cost entries from Stratasys and Objet Ltd.

Shifting Technologies
While the company says acceptance of the V-Flash™ has been in line with its expectations, publicity at the low-cost end of the spectrum has been dominated by the very large unit sales of several start-up companies providing open-source systems based on thermoplastic extrusion technology. When Stratasys' basic patent ran out in 2009, copies of its FDM technology immediately appeared as kits selling for a few hundred dollars, with completely assembled units selling for as low as US$699. While not very sophisticated or accurate, several thousand machines have been sold in about three years. It's the sort of situation that draws attention to and feeds upon itself.

Addressing the Consumer Market
In October of 2010, 3D Systems announced the surprising news that it had acquired Bits From Bytes (UK), one of the more successful of these start-up companies producing open-source equipment. There was much positive in the move for both companies. BFB has been given access to 3D's technical and research prowess which enables it to find its way around many patent and technical issues, as well as means to accelerate the pace of its development. It provided 3D Systems with a window on the very low end of its market, and easier entry to cost-sensitive fields such as education. In addition, the product line is both a good starting point for the company to migrate users to its more expensive technologies and to harass its closest competitor for market dominance, Stratasys.

3D followed up that acquisition in August, 2011 with the purchase of BotMill, an even smaller US company producing RepRap derivatives. The company's VP of Global Marketing, Cathy Lewis, has stated that the purchase widens their offerings for those customers looking for machines at the lowest cost.

In January 2012, 3D announced a third major initiative in the low-cost consumer area, the Cube™ 3D printer - presented as a key component in a new web-based consumer community the company has dubbed Cubify™. The Cube™ is an assembled 3D printer which will be offered during the first half of 2012 at a price almost as low as BotMill's least expensive kits, US$1,299. While it still won't be the lowest-cost assembled machine on the market, it is the least expensive alternative available from an established company.

It remains to be seen how 3D Systems will integrate these efforts, or whether the entities will maintain their individual identities.

Focus on Major Industry Applications
3D also sells purpose-built machines for specific manufacturing applications. For example, in 2006 the company introduced the InVision™ Dental Pro™ integrated digital dentistry system. In 2007, it announced a hearing-aid manufacturing system based on its V-Flash™ technology. Selling application-specific systems has become a major strategy in the company's ongoing development and can be expected to expand beyond the present focus on medicine and dentistry.

Expanding Service Bureau Business
The company is also making efforts to greatly expand the service side of its business. It established a joint venture named MQast in 2009, an on-line provider of metal parts. MQast is said to utilize new technology which hasn't yet been made public. In addition, starting in the 4th quarter of 2009, 3D Systems began purchasing a number of medium-sized service bureaus, including well-known names such as Acu-Cast, Moeller and AdvaTech Manufacturing. It purchased six additional US and European service bureaus in 2010, and in February, 2011 aquired one of the largest, Quickparts, following that up in March by purchasing another sizable bureau, Accelerated Technologies, Inc. Additional sizable acquisitions have been made in 2012. It is melding these into a business unit under the 3Dproparts™ name.

While the acquisitions have made a sizable contribution to the company's revenue, 3D has said that one of the main reasons for buying the service bureaus is to more quickly roll out the newest technologies to customers. The company hopes that by creating demand for the improved parts such systems produce that it will create wider demand for the equipment itself.

Completing the Circle... A bit of evolutionary history: Many years ago Ciba Speciality Chemicals was instrumental in getting the industry going by helping to finance 3D Systems. It probably seemed like a good way to increase the demand for photopolymers. Ciba subsequently acquired the AlliedSignal photopolymer line and also Avecia's Stereocol line of photopolymers, including materials that produce color models. The combined Ciba products were eventually spun out as Vantico, an independent entity. Vantico sold its products exclusively through 3D Systems. After their acquisition by Huntsman, however, that company sold the products directly to customers except in Japan where 3D continued to be involved. In November 2011, 3D Systems bought the product line from Huntsman, thus completing some sort of enormous circle of ownership. While it's an interesting story, asking why it happened may be more instructive and offer some insight into the future of the industry.

Additional Acquisition Activity
The company ended Q3 2011 with no debt and $72.6 million in cash. After spending about $23 million on Quickparts and additional funds on Accelerated earlier in the year, it announced a stock offering in May of 2 million shares priced at $44 each to replenish its war-chest.

It has also used its bankroll to purchase several additional small to medium sized software, design and maintenance support companies. Notable among these are its acquisition of Alibre, Inc., a maker of CAD design software, and Freedom of Creation, a pioneer in product design using additive methods.

In November 3D made another major purchase, Huntsman's photopolymer product line, including its Digitalis™ 3D printing technology, for $41 million. It topped that in a big way later in the month by announcing plans to acquire Z Corporation, a major competitor with another small company thrown in, for $137 million. This is an important development in the field and substantially alters the industry's landscape.

The company borrowed the money for this purchase by issuing $152 million in convertible debentures which leaves it with plenty of cash for additional acquisitions.

Outlook
As time goes on, more industries will become aware of, and eventually adopt, additive manufacturing for applications in which it offers unique advantages. The range of possibilities is extraordinarily wide. While most of its competitors are also focused on this growth opportunity, 3D has an advantage in having ready-access to the widest range of technologies, and having put in place a framework for vertical integration.

However, after gobbling up roughly twenty-five companies in about two years, 3D may experience problems with digestion. It's never easy to meld company cultures, documentation, manufacturing and marketing functions. Accomplishing a smooth integration is likely to be challenging.

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