On Friday, Staples (NASDAQ:SPLS) announced that it intends to launch a service providing 3D printing capabilities at stores in the Netherlands and Belgium beginning in Q113. While private companies such as Shapeways already provide the ability for designers to create and market 3D printed products, it doesn't have a store in every major city where customers can pick up the products.
Staples is already a leading provider of printed items so this was only a natural extension for the company. Honestly, it already seems odd that 3D printing demand has started to explode, yet the majority of household technology companies aren't involved.
As an example, Hewlett-Packard Company (NYSE:HPQ) is a printing behemoth, yet it is nowhere to be found in this sector of printing. Considering that 3D printing mainly focuses on rapid prototyping and producing industrial parts, the technology companies have ignored the sector. Whether parts for airplanes, autos or dental, the demand didn't exist in the professional or home consumer world where Hewlett-Packard and other technology firms operate, but that could quickly change.
The company announced plans to open stores in Europe utilizing the Mcor Technologies printer that uses regular paper to create 3D objects. On initial thought, this should send a warning signal to 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS). Both companies are seen as leaders in the field, yet Staples plans to become a pre-eminent service bureau with a printer from a private company.
On second thought, the move isn't much more than a flare warning the sector and industry as a whole that the model is shifting towards a retail distribution or service bureau model. Stores such as Office Depot (NASDAQ:ODP), Staples, and Shapeways will likely become the major printer customers instead of consumers directly. Not to dissimilar to how the original copy and print shops sprung up in the 80s.
Staples also gave the community a huge heads up by announcing a plan that isn't likely to move beyond a few starter stores until mid-summer if not later. Will it even hit the US in 2013?
The company operates over 2,300 stores in 26 countries throughout North and South America, Europe, Asia and Australia. It has over $25B in sales and claims to rank second worldwide in ecommerce sales.
Clearly Staples offers the size and global footprint to push the concept into the forefront of users. Not only does the company offer the potential of bringing 3D printing to the masses, but it also provides the potential for a dominant customer that could dictate the leader in the sector. Imagine the company ordering 2,300 printers. As an example, 3D Systems only sells printers in the hundreds now.
As a private company, Mcor obtaining such a high-scale customer likely surprises most investors seeing 3D Systems and the Stratasys/Objet combination as the market leaders. The difference is that Mcor prints with paper that fits perfectly into the copy and print options currently provided by Staples.
Mcor claims that the IRIS printer provides for the highest color capability in the industry and the lowest operating costs of any commercial-class 3D printer. Clearly both will be advantages when dealing with users more familiar with standard Staples offerings.
The company lists art projects, architectural models, medical models, and 3D maps as items customers need in the more affordable manner. It would appear that these paper-based objects would have limited use other than some rapid prototyping and basic designs. Most industrial customers will need objects made out of metals, plastics, or resins. 3D Systems can already make actual medical products, instead of only a basic model.
Still the cost savings could be something that attracts users to the concept, thereby providing Mcor a major foot in the door.
Stratasys Obtains Merger Approval
On a side note, Stratasys announced the long awaited approval on the proposed merger with Israel based Objet from the Committee on Foreign Investment in the United States (CFIUS).
The government evidently requested some process modifications that Stratasys agreed to accept based on limited business impact. The company now expects to close the deal on December 6th.
Moving into the 3D printing sector won't provide much of a boost to a company such as Staples that already has $25B in sales. With sales expected to drop 1% in 2013, a few more innovative moves such as this might help the company return to growth.
Unless it can quickly rollout this service before competitors are able to move, it isn't likely to provide any catalyst for the stock to trade above 8x forward earnings. With the company making such an early announcement, my guess is that Office Depot and other office supply companies will be busy studying the concept now.
The Staples news further justifies the 3D printing concept as a future force in the global economy. Unfortunately for the public companies, Staples bypassed their options for a private company focused on paper creations.
While the current public companies enjoy lofty valuations, the biggest risk to stockholders remains that a major tech firm jumps into the market with hoards of cash. It would undoubtedly cause the stocks to crater whether justified or not.
The Staples news should be considered the initial warning. Both 3D Systems and Stratasys better be on guard for when Hewlett-Packard or another major technology firm enters the sector. Not to mention, the phone should be ringing off the hook at Office Depot to form a partnership that surpasses what Staples will offer. The consumer sector is much more likely to develop via these retailers than consumers buying a 3D printer for the home.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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