This is big news in the financial sectors and even bigger news for those that compete against these two companies. But what does this mean for the industry, and more importantly, to you?
I had the good fortune to meet with Scott Crump, Stratasys chairman and CEO, and several members of the Stratasys management team just one day after the announcement. I’ll use those conversations to interpret what this means.
First the facts:
- Merger, not an acquisition
- Blend boards, management, staff and reseller channels
- Ownership: 55% Stratasys stockholders, 45% Objet stockholders
- To be named Stratasys Ltd.
- To maintain two headquarters: Eden Prairie, MN and Rehovot, Israel
- Top management:
- Scott Crump, Stratasys chairman and CEO, to become chairman
- David Reis, Objet CEO and president, to become CEO
A key note in the announcement is that this is a “growth” merger, which means that it is not an action with a primary goal of reducing operational costs to pump up the bottom line. While the companies forecast $7 to $8 million savings annually, they are quick to note that growth and expansion are priorities.
That last bit is important to current and prospective customers. If executed as stated, you should benefit from more resources (field support, applications engineering and R&D) instead of suffering with fewer than you have today.
Consolidation
Combining this news with the transactions of 3D Systems over the past two years has many shouting “industry consolidation” and fretting over fewer options.
I don’t share these views. Instead, I see these moves as actions to strengthen the organizations and broaden their respective product lines.
If you segment the 3D printing market, you will see that there really isn’t an overwhelming amount of merger & acquisition (M&A) activity. The bulk of 3D Systems’ acquisitions were in services (bureaus) and software with a smattering of materials, file sharing /community tools and design firms. Within the consumer-class for hardware, it has purchased just two (of about two dozen) companies.
That leaves the business-class hardware segment. 3D Systems has just one acquisition here, Z Corporation. Meanwhile Stratasys has one acquisition (Solidscape) and one merger (with Objet). Yes, these are some of the biggest names in the industry, but there are plenty of other competitors out there.
So, it isn’t a consolidation play. It is a strengthening move and an important one.
According to Geoffrey Moore, author of Crossing the Chasm and Inside the Tornado, the industry leaders at a time when the early majority are adopting a technology will be most likely to remain the leaders for years to come. If Moore is correct, the M&A activity casts 3D Systems and Stratasys Ltd. as long-term leaders to be. This leaves one more leadership spot open with the most likely candidate being EOS GmbH.
Differentiation
I believe, for many reasons, that the merger will be good for all. The primary element in my logic is that the companies’ products are complementary, not competitive.
When the merger finalizes, Stratasys will have a more complete product line. It will offer Fused Deposition Modeling (FDM), Solidscape and PolyJet machines. This means it can offer you high-resolution wax patterns, tough thermoplastic parts and high-resolution photopolymer patterns and parts.
As unit sales leaders, Stratasys and Objet have been deemed competitors. But they aren’t. What Stratasys does well, Objet does not. What Objet does well, Stratasys does not. The differentiation between their products is so great that few educated buyers would have them pitted against each other when a sale comes down to the wire.
The only time that I believe it is sensible to have these companies in the final selection process is when there is only enough budget to buy one machine as a do-it-all tool. When the applications demand everything from smooth-finish patterns to end-use parts, and all requirements are equally weighted, these companies should be competitors.
I think that there will be one advantageous fallout from the merger: clarity. It gets confusing when Objet is pitching ABS-like materials against Stratasys’ ABS (and other thermoplastic) materials. Can you truly use an ABS-like part as a substitute for a molded ABS part? How durable…In what conditions…for how long…is it stable? As one company, Stratasys will have to provide us these answers so that we can make an educated choice between FDM and PolyJet. This education should also give us a better understanding of other companies’ ABS-like and polycarbonate-like phototpolymers.
Size & Strength
From a size and financial aspect, the merger will put Stratasys Ltd. on equal level with 3D Systems. Below are the numbers for 2011.
| Revenue | Net Income | Employees | |
| Stratasys | $156M | $20.6M | 530 |
| Objet | $121M | $14.7M | 430 |
| Total | $277M | $35.5M | 960 |
| 3D Systems | $230M | $35.4M | 714 |
So, in the competition for your money, the battle will come down to:
- Product offerings
- Product reliability
- Product support
The other factor will be the industry’s vote of confidence in business strategy. Will a concerted effort in consumer-class printers blended with a portfolio of business-class machines, software and services be the winner? Or will a portfolio of business-class machines with a service arm come out on top.
It will be fun to sit on the sidelines and watch the future unfold. But until then, all that I can say is that I like the merger, and I think it is good for Stratasys and Objet as well as the industry and you.