Hewlett-Packard's (NYSE:HPQ) stock price has shown extraordinary performance over the past twelve months - the stock is up 76%, and it looks like the trend in price will continue. The company was in crises due to lower sales and increasing debt. However, Meg Whitman looks to have tackled the issue with expertise. Since she took over, the company has been able to decrease its debt, increase its cash flows and explore new market segments for future revenue growth. 3D printing is one of these new opportunities that Hewlett-Packard is currently looking at. It is a rapidly growing segment and the company will benefit substantially if it can convert some of its printing portfolio into 3D printing customers.
3D Printing: The Way to Move Forward?
The 3D printing technology has taken the industry by storm. The foremost customers include companies from aerospace, energy, biomedical and automotive industries. As a result of increased demand from industries, the demand of 3D printers is projected to increase globally by 20% annually through 2017.
The 3D printing industry has a handful of players with a turnover of about $3 billion in year 2013. The biggest players in the industry are 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) - these companies have the largest market shares, and some of the strongest sales networks. Hewlett-Packard can benefit from its strong position in the printing segment and solid ties with customers. The company has a long history of expertise in 2D printers with commercial and consumer applications. Hewlett-Packard wants to implement the same expertise in the 3D printing industry with improved product accuracy and quality.
In 3D printing industry, the main concerns are the speed and affordability of the technology - these printers take many hours to manufacture a small object. On the other hand, cost is another factor for the 3D printers, making them unaffordable to a wide range of potential customers. Hewlett-Packard is focusing mainly on these two challenges.
In 2010, Hewlett-Packard signed a contract with Stratasys to sell HP branded 3D printers manufactured by Stratasys, but that contract was dissolved by both parties due to thin margin in August 2012. The printer was called DesginJet (Model Number-CQ655A) with a price tag of $170,00. This 3D printer took up to 10 hours to print an object the size of a bottle. Hewlett-Packard wanted to reduce the time and cost of the printer.
Advantage for Hewlett-Packard
The 3D printing companies like 3D Systems and Stratasys have worked very hard to establish sales networks. However, their sales networks are still substantially smaller than Hewlett-Packard's network. The company has one of the best global sales networks - if it is able to develop good 3D printers and replicate even half of the success it achieved in 2D printers; Hewlett-Packard will become a strong player in the 3D printing segment. Therefore, HP, with the help of its technology patents and huge distribution channels all around the world, is planning to make an entry into this market by mid-2014.
Another advantage for Hewlett-Packard in 3D printing industry is that none of the 2D printer players have decided to enter in the 3D printer market yet. Hewlett-Packard, with the biggest market share in printing and imaging of around 53% for the past 4 years, have a competitive edge over others. The company can extend its inkjet technology into 3D printing via photo polymers or deposition of RGB melted plastics via inkjet print head technology.
There are also rumors in the market about Hewlett-Packard acquiring a smaller player in the 3D printing industry. It will not be a bad idea - in fact, the company will get an established player with the technology and it might not have to wait to develop its own 3D printers. As a result, entry in the market can be faster and smoother.
The demise of the PCs market and slow growth in the printing segment have prompted the company to investigate new avenues for growth. The 3D printing segment is a massively attractive segment due to the hyper-growth opportunity present in the market. I believe it is a very good decision to explore this market and with its distributions network, the company will have a substantial advantage launching its products to both industrial as well as domestic customers. I expect the company to continue its recent growth, and I believe Hewlett-Packard will be a solid investment in the long-term.
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.