I would like to add to the debate on 3D Systems (Ticker:DDD) that has been taking place on this site. I am an individual investor with professional experience working in the 3D printing industry. I am not an accountant or a professional investor. I have owned Stratasys stock and 3D Systems stock in the past. I sold my stock recently after determining that I did not have the expertise to figure out whether or not the allegations against 3D Systems were true.
As a participant in the additive manufacturing industry I, like most of my peers and colleagues, have been carefully following the controversy surrounding 3D Systems generated by articles on this website. I want to see the industry flourish and I don't want to see wrongdoing by 3D Systems slow investment in advancing 3D printing technology. There are many promising startups, Formlabs, Shapeways, Makerbot, and others come to mind that don't need the industry tarred if 3D Systems is shown to be acting improperly. There are companies like Objet, Stratasys, and EOS that are aggressively investing in new technology to drive down costs and improve performance that need more capital to accelerate innovation.
What qualifies me to contribute to the debate on 3D Systems? I have been involved in the additive manufacturing industry for almost 10 years. Before that I spent many years working with leading edge plastic injection molding technologies. In the past I have worked for two of the top 5 players in this industry (in my mind those companies are 3D Systems, Stratasys (Ticker:SSYS), Z Corp, Objet, and EOS). I have also worked closely with most of the large resellers in the 3D printing industry. I have worked as a consultant to companies evaluating which additive manufacturing machines to purchase.
I agonized over whether or not to contribute some thoughts to this debate. I thought the Gray Wolf piece was supported by more research and was less sensational than Mr. House's article. I was disappointed that 3D Systems did not address the Gray Wolf piece directly and instead decided to attack Mr. House's weaker piece on their call. After seeing 3D Systems not address on their call what looked like legitimate issues raised by Gray Wolf and not provide additional information about their acquisitions I got closer to writing something. I finally decided to get involved in this debate when I saw this comment from Manxbuilder on one of the articles on this site and it reflected most of my views.
"Manxbuilder - As a very close observer to this 3D Systems debacle I applaud this article. DDD is a poorly run company who cares nothing about the quality of their products, relationships with their dealers and most importantly their relationship with their customers. They make poor quality products that puts them at odds with their customers and resellers. What's worse than this is their refusal to do the right thing for their customers after they have spent 10s of thousands of dollars on their technology. Before you go mouthing off please contact their customers and resellers and see for yourself how happy they are. Yes, this technology is really cool and it is the future of manufacturing, but the company behind this is not a good one to deal with. Even their own user groups have shunned them away. I myself am shorting this because their growth is false and their investments are all in the wrong areas."
I decided that I should write about 3D System's business practices so investors in 3D Systems will be more likely to go talk to participants in the industry to verify the story 3D Systems tells about their company. I don't have an informed opinion one way or another on the accounting at 3D Systems. I do believe I have an informed view on 3D Systems as a business. I want to contribute a few things on how 3D Systems treats its customers, partners, technologists, researchers, and competitors. I could talk for hours about how the 5 significant companies in the 3D printing industry differ on how they are perceived, what their products are capable of printing, and the use cases for the parts their machines produce. However, I believe that 3D Systems is really the outlier bad actor in our industry and that is why I feel it warrants my direct attention.
Based on my personal experience in the industry I believe the following points about 3D Systems business practices
1) They have run their company in an unsustainable manner by putting their interests before the interests of their partners and customers. They do not care about the financial success, reputation, and credibility of their resellers. They sell unreliable products and then do not adequately support their customers with adequate service and timely access to spare parts
2) They have under-invested in their technology and have invested in the wrong technologies. This has led them to give up ground competitively to competitors, primarily Objet and EOS.Their strategy of suing innovators like Formlabs is slowing innovation in the industry. 3D Systems has helped create a state of technology stasis in the industry over the last decade.
3) During their acquisitions of service bureaus they had bureaus buy printers and materials as a pre-condition to purchasing the bureau. They pursued a divisive strategy playing machine shop against machine shop at a time when the whole industry was in cyclically down period. They priced below cost against bureaus that would not sell to them.
4) They are losing top talent from their acquisitions including key Z Corp employees. Their mismanagement has destroyed some of the businesses they have acquired.
5) They are dramatically exaggerating the current capabilities of 3D printing technology and creating an unsustainable hype within the industry. They are claiming that adoption of direct digital manufacturing is much more widespread and near-term than reality would suggest. They are also over-exaggerating the ability of 3D printed parts to go into production end market products.
I will be expanding on each of these 5 points over the next few weeks with follow-up posts.
I want to make clear my high level views on the 3D printing industry and consumer 3D printing adoption. Even though I am negative on 3D Systems as a business, I am very enthusiastic about the future of additive manufacturing. I believe the industry will grow faster in the next 10 years than it has in the last 10 years. More adoption of 3D scanner and CAD tools combined with more awareness of 3D printing will drive more adoption by engineers and designers. I don't expect the industry grow to nearly as fast or be as big as Mr. Reichental claims with his recent bigger than the internet comment. I believe that consumer demand is a fun development but it is not going to drive much real growth in our industry because all the revenues and profits are and will remain in the professional and production segments. The consumer machines are not reliable, they cost to much to fix, they cost to much to operate since materials remain very expensive, and the content creation tools are not ready for the average consumer to successfully use. I am positive on the 3D printing industry, but based on my 5 points above I do not believe that 3D Systems will be a big beneficiary of the growth the industry is about to experience.
I am sure this article and my future articles will be attacked by many of the traders and investors that are trading 3D systems. I would encourage them to spend some time speaking with customers, resellers, current and former 3D Systems employees, and other participants in this industry before they attack me.