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JamesDawson
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Retired Treasurer / Director of Credit at Mcdonald Capital Investors Inc, Former Assistant Treasurer at McAfee Security UC Berkeley: Economics, Mathematics 16 years of successful experience in financial management and information systems.
  • How Selling 3D Printers Kills 3D Printer Companies 0 comments
    Oct 22, 2013 3:59 PM | about stocks: DDD, SSYS, IRBT, DZSI, ONVO

    If you haven't been impacted by the 3D printing wave, you will be. The major players 3D Systems[DDD], Stratasys [SSYS], Irobot [IRBT] have all seen tremendous valuation in the market. The share value of both Stratasys and 3D systems have doubled in the past 12 months, and the price to earnings ratio for 3D systems is hovering around 90. The two companies both have consumer marketed 3D printing solutions, and the solution each offers is roughly 3 times the cost of the most affordable solution. Yes, there are new companies popping up nearly each week. In fact a closer inspection reveals that the 3D printing industry is by design self-defeating.

    The push that brought 3D printing into the spotlight was a world wide effort, it occurred nearly a decade ago, to produce the world's first self-replicating robot. The RepRap project succeeded in creating a machine which could create nearly all of its own components. The project aimed to de-centralize manufacturing and demonstrate how distributed design will eventuate in obvious and apparent evolution of the objects designed and the machines themselves.

    Evolution has happened, to an amazing extent. There are companies like Organovo [ONVO] which aims to 3D print organs, and Systems and Materials Research Corporation which aims to produce food. Obviously most people are very interested in being able to replace their organs. I personally expect the 3D printing of food items to eventually be a consumer option as well, one day even being preferable to mass agriculture and centralized production and packaging in terms of taste, purity, and efficiency. 4D printing, the 4th dimension being time, is also being explored. It is most obviously involved in genetic engineering, but can also be done outside the realm of gene to protein mechanics.

    So to recap there was a worldwide collaboration to de-centralize manufacturing, and create self replicating robots. This essentially enables anyone that builds or purchases a 3D printer to become a competitor of the major players; they can replicating their machine at the cost of the materials (or create a modified machine). For example; These days kickstarter.com is never without a 3d-printer company with its hand out, claiming to bring the world the cheapest model. So the question isn't if the 3D printing bubble was designed to burst, but rather how long until it does.

    So while the 3D printing is a revolutionary technology, it is inherently self-destructive because once a person owns a 3D printer they are capable of replicating their machine and creating their own company that sells them. Just think about the effect this will have on the shipping industry; as people will be able to print whatever item they were going to order in the first place. The only winners of this technology are the ones providing the infrastructure and interfaces to the consumers. No matter what those that provide data connectivity will prosper, as the internet becomes the medium of commerce. This is apparent if one were watching companies that provide this infrastructure to companies, military's, and governments; like Zhone technologies [ZHNE] which have more than tripled in value this year already, and are looking forward to more growth and record profits.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: DDD, SSYS, IRBT, DZSI, ONVO
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