Is Now the Perfect Time for HP to Acquire a Major 3D Printing Company?

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kyogjj
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Is Now the Perfect Time for HP to Acquire a Major 3D Printing Company?

Postby kyogjj » Thu Aug 27, 2015 8:41 am

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We all know it’s coming: HP will enter the 3D printing space in a big way near the end of next year. While this is sure to have repercussions which ripple throughout the 3D printing industry, just what those repercussions will be is really anyone’s guess. HP has the cash on hand and executive team to really make a statement within the space. However, with a couple of years to prepare for this move, the current giants within the industry, like 3D Systems and Stratasys, likely have their own plan of attack, in order to hold onto the majority of their market shares. Although HP’s Multi Jet Fusion technology is said to be an entire order of magnitude faster than the current industrial-scale 3D printers on the market, there’s little doubt that these other companies will have similarly advanced machines available within the next 12-18 months as well.

While there is obviously more to lose for the mainstays of the industry like 3D Systems and Stratasys upon HP’s entrance, HP also is not immune to the risks involved in entering a new industry. They’ve given their future competition a two-year heads-up on their plans. What if their entrance is a flop, as newer, more advanced technologies could possibly supersede their own?
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With the market caps and share prices of some of HP’s future competition down, in some cases over 80% from their highs, one has to question if perhaps a company with a $50 billion market cap may be considering acquiring one or more of these future competitors.

“What’s amazing to me is, Hewlett-Packard still has a $50 billion market cap,” Sean Udall, CIO of Quantum Trading Strategies, told Benzinga. “Why aren’t they out buying something? Why aren’t they buying one or two 3D printing stocks? Why aren’t they consolidating a couple of their old businesses?”

Udall brings up a very good point. With 3D Systems trading at a market cap of just under $1.4 billion, and Stratasys just under $1.5 billion, both companies, which will be formidable competitors to HP’s 3D printing business, could be scooped up fairly cheaply. If HP were to offer even a 75% premium over current valuations, an acquisition of either or even both companies would barely move the needle in terms of valuation for HP. If they acquired either hp2company, HP would then be the indisputable leader within the 3D printing space practically overnight.
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“They [Stratasys and 3D Systems] are developing 3D printing solutions, which will probably end up being pretty good,” Udall stated. “But why not consolidate the industry? 3D Systems was a $100 stock. It’s $12 today! They could pay a 70 percent premium, pay $2 billion and acquire the company. Stratasys was a $130 stock at $27 today — same thing! They could pay a 70 percent premium and buy it for about $2.5 billion.”
With Hewlett-Packard expected to split into two individual entities, Hewlett Packard Enterprise and HP Inc., come October, then would be the perfect time for a possible acquisition. While neither Stratasys nor 3D Systems may be 100% of what HP is looking for in terms of their future within the 3D printing space, with both companies spread over numerous verticals, there is no doubt that either company would provide a tremendous amount of intellectual hp3property as well as management insight related to the industry.

Stratasys is likely more in-tune to HP’s planned strategy within the industry, as they concentrate primarily on their large-scale industrial machines. While their consumer-targeted MakerBot division may not be the direction that HP wishes to traverse immediately, there is little doubt that eventually the company would like to enter the consumer space as well.

3D Systems, on the other hand, is probably a bit too unfocused for HP, as they have spread themselves (perhaps a bit thin) over numerous verticals. While they too concentrate on the industrial space, they also have their hands in software, 3D scanning (more so than Stratasys), medical modeling, consumer 3D prints, and consumer machines.
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