This Tech Giant Could Soon Dominate The 3-D Printing Space

| About: HP Inc. (HPQ)


The 3D printing industry is a disruptive industry experiencing huge growth that investors need to be aware of.

Two companies, 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SYSS), largely dominate the industry today.

Hewlett-Packard Company (NYSE:HP) is entering the 3D printing space this year and could quickly gain a strong foothold.

For the past few years, the rising tide of the 3D printing industry was more or less cornered by two companies: 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS). (I've talked about how these two companies are turning heads in a previous article here.

Later this year however, we're likely to see another player coming into to the fold: Hewlett-Packard Company (NYSE:HPQ).

Before I get into that, let's take a look at the current state of the market first...

According to IT research firm Gartner, end-user spending on 3D printers totaled around $412 million in 2013, a 43% increase over the $288 million spent in 2012. Of that, enterprise spending was pegged at more than $325 million, while the consumer market was close to $87 million.

Gartner projects that 3D printing spending will grow by 62% to reach $669 million in 2014, with enterprise spending comprising $536 million and $133 million for consumer spending.

They further estimate the number of 3D printers delivered to increase from 56,507 in 2013 to over 98,065 in 2014. By 2015, that figure is expected to double to close to 200,000 units.

In a separate report, research firm Canalys estimates that the overall market (which includes the 3D printing machines and the total cost of supplies and services) was $2.5 billion in 2013. That number is expected to grow to $3.8 billion this year, and hit as high as $16.2 billion by 2018.

With those kind of numbers, this is a high-growth market that investors need to be looking at.

As mentioned earlier, there are two main competitors in the space today.

DDD is roughly a $6 billion company and has been around since 1986.

Its products are primarily focused at the consumer level, and offer a variety of printers at different price points and sizes. Recently however, they've ventured into the medical field by acquiring Medical Modeling Inc., which uses 3D printing for surgical needs and medical devices.

Revenues for DDD grew 45% year-over-year from $354 million in 2012 to $513 million 2013. Analysts project revenues to increase to $702 million this year and as high as $1 billion in 2015.

SSYS is similarly sized and established in 1989.

SSYS focuses more on the enterprise level, with printing units geared towards manufacturers. But recent acquisitions into two additive companies, Solid Concepts Inc. and Harvest Technologies, will allow it to diversify and cater to end-consumers as well.

Much like DDD, revenues for SSYS grew substantially over the past couple years, from $359 million in 2012 to $487 million in 2013. Projections are for the company to grow $681 million this year and as much as $954 in 2015.

Both DDD and SSYS have spurred the growth of a game changing technology that revolutionizes how products are being made in this world.

They will continue to play integral roles in growing the 3D printing business, but there's another company entering the market that could very well dominate if they make the right moves.

A New Competitor in the 3D Printing Space

It was the kind of announcement that DDD and SSYS should've expected at some point, but never wished to hear: Hewlett-Packard Company is planning to enter the 3D printer market in 2014.

HP has long been a leader in the conventional 2-D printing space, so it was only natural, and a matter of time, before they made their move over to 3D.

HP CEO Meg Whitman announced last month that it will have its first product unveiling by the end of this fiscal year, which is at the end of October 2014.

So why now?

It's a bit of a role-reversal where smaller companies are usually the ones that come in later in the game but HP has timed it so that it can take advantage of the 3D patent cliff.

A number of patents related to selective sintering have either expired, or will be expiring over the coming year (selective sintering is an additive manufacturing technique used for the low volume production of prototype models and functional components).

A slew of stereolithography patents are in the same boat.

So where previous generations of printers cost tens of thousands of dollars, the latest hardware retail at a fraction of the cost and are more advanced.

Like it is with pharmaceutical patents, second-mover companies like HP stand to save millions in patenting expenses so that it can focus on R&D initiatives to make the existing technologies more competitive.

The bankroll in which HP has to advance their own products, along with their production capacity and economies of scale, could help to drive down costs across the sector.

Furthermore, in Whitman's announcement, she stated that her Company has solved the speed and quality issues found with current 3D printing technologies.

Despite all the buzz and hype, Whitman also says that current printing takes too long, and that the "surface of the substrate is not perfect."

Following Stratasys' lead, HP intends to foray into the enterprise market first, where demand and budgets are highest.

As for the consumer market, HP thinks they'll likely begin as a service provider, similar to paying for print jobs at Kinko's.

With a market value that research analyst Canalys predicts could be worth as much as $16.2 billion by 2018, there's a good chance that HP will take a nice chunk of that due to brand recognition (as well as the aforementioned production capability and economies of scale).

This is an added revenue stream that bodes well for HP in the medium to long term -- especially considering the "hot market" sentiment of 3D-printing.

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.