Could tech giant Hewlett-Packard's plans to dominate the 3D printing industry include acquiring or teaming up with the current industry leader Stratasys? One Wall Street analyst thinks so. Let's look at what we know, and whether the analyst's speculation makes any sense.
Hewlett-Packard's 3D printing plans
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Artist's rendering of the Multi Jet Fusion 3D printer. Image source: HP.
Last fall, HP unveiled its Multi Jet Fusion 3D printing technology and announced that it planned to bring to market in 2016 an enterprise-focused 3D printer based on this tech. Given the printer will reportedly be 10 times faster than those powered by the leading 3D printing technologies, some investors in 3D Systems and Stratasys cringed at the news. After all, even though HP has become infamous for its execution missteps in recent years, it does sport top chops in 2D printing, and has deep pockets.
More recently, we've learned that Stephen Nigro, senior vice president of HP's imaging and printing businesses, will head the 3D printing unit that HP's creating, once its official split into two companies occurs on Nov. 1. The 3D printing unit will be part of HP Inc., the PC and printing business, which will be led by Dion Weisler. Current HP CEO Meg Whitman will head Hewlett-Packard Enterprise, the server and services business.
Beyond this, however, we'd heard nothing notable from HP about its 3D printing plans until its recent analyst meeting.
HP's looking at partnering and/or acquiring to build its 3D printing businessHere's what Nigro said at themeeting:
Following the meeting, Jefferies analyst Jason North released a note saying that he thinks an acquisition would make the most sense, as an existing player's sales channel would enable HP to speed up its time to market. North wrote:
North further said he believes Stratasys' reseller network, combined with its diverse technologies, would make it the best fit.
Does speculation of an HP buyout of Stratasys have any merit?Consider me a general skeptic about the acquisition buzz in the 3D printing space. However, North's speculation about HP being interested in acquiring -- or at least partnering with -- Stratasys seems grounded in some solid logic. I'm not saying it's going to happen, just that it seems a realistic possibility.
North mentioned Stratasys' reseller network. This factor alone would make Stratasys considerably more desirable than 3D Systems, which doesn't have as extensive a network. Stratasys owes much of its international channel strength to its 2012 merger with Israel-based Objet.
Stratasys possesses some tech that would be particularly desirable to HP, in my view. I've previously writtenabout factors that should help mitigate HP's competitive threat to Stratasys, and some are applicable here:Stratasys' PolyJet tech appears less similar to HP's tech than does 3D Systems' multijet modeling, and Stratasys' Objet Connex500 printers sport better resolution thanHP's printer reportedly will.
Additionally, HP and Stratasys have a history. It seems to fly under the radar that HP teamed with Stratasys when it first dipped its toes in the 3D printing waters in 2010. Stratasys manufactured HP-branded 3D printers, which HP sold in the international market.They discontinued their partnership in mid-2012.My guess is that they parted ways largely because Stratasys' merger with Objet brought an international sales channel into its fold.
Furthermore, Stratasys' Israel headquarters should be beneficial to HP from a tax standpoint. Stratasys deemed Israel the site of its official headquarters after the merger with Objet because that country has a lower corporate income tax rate than the United States does. Most large U.S. companies have boatloads of cash overseas to avoid paying U.S. taxes. Deploying such cash on foreign investments, rather than bringing it back home, can keep the U.S. tax-avoidance strategy going.
Lastly, the huge plunges in the stock prices of all the 3D printing companies make buyouts in this space more likely now than they were when valuations were sky-high.
Printing a wrap...Stratasys' extensive reseller network and portfolio of diverse technologies are key reasons that it would make an attractive partner or acquisition for a company like HP that's aiming to gain a fast foothold in the 3D printing market on its way to dominating it. Whether Stratasys has any interest in partnering with, or being bought out by, HP, however, is probably another matter altogether.
I'd caution investors against investing in Stratasys based solely on hopes that it will be acquired, as a buyout seems far from a sure thing.
The article Could Hewlett-Packard's 3D Printing Plans Really Involve Acquiring Stratasys? originally appeared on Fool.com.
Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends 3D Systems 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.
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