3D Systems: Will Apple Buy Into 3-D Printing?

| About: 3D Systems (DDD)
This article is now exclusive for PRO subscribers.

Personal 3-D printers are the next big technological revolution. They will drastically change our lives, second only to the effect of the personal computer. Throughout the course of this article, we will see why 3-D printing really is the next big technological leap; learn about 3D Systems Corp. (NYSE:DDD), one of the major players in the field; and discuss why Apple Inc. (NASDAQ:AAPL) should buy into this burgeoning industry.

What is 3-D Printing?

Here are two videos that illustrate different types of 3-D printing:

There are already a number of different marketplaces set up to connect designers with consumers. Designs for eyewear, shoes, jewelry, light fixtures, and sculptures are already being sold. Apple even sells 3-D printed iPhone covers. Also, a number of apps that assist in the creation and personalization of the products are already available.

The 3-D printing industry has grown almost 9% a year over the last ten years and is expected to reach "$3.1 billion worldwide by 2016 and $5.2 billion by 2020."

For further reading on the state of the industry, check out Terry Wohlers' Blog.

The Future

I can't say how these processes will evolve or which of these technologies will gain preeminence. However, here is my prediction for the next five to ten years:

  1. The price of the printers will drop precipitously, as has been the case with all emerging technology.
  2. 3-D printers will become ubiquitous in our personal lives.
  3. People will acquire the files and equipment online and replicate at home (this is just a continuation of the trend towards online commerce and away from "brick and mortar" stores).
  4. This open-source design and customization of products will flourish in ways that we can't even imagine now.

For further reading about the future implications of 3-D printing, check out my previous article.

A Takeover Target

One of the most important players in the 3-D printing industry, and a company that Apple should buy, is 3D Systems Corp.

According to Yahoo's Business Summary:

3D Systems Corporation, through its subsidiaries, engages in the design, development, manufacture, marketing, and servicing of 3D printers and related products, print materials, and services. The company's principle print engines comprise stereolithography, selective laser sintering, multi-jet modeling, film transfer imaging, selective laser melting, and plastic jet printers. Its 3D printers convert data input from computer-aided design software or 3D scanning and sculpting devices to produce physical objects from engineered plastic, metal, and composite print materials…

3D Systems has a market capitalization of $1.5 billion. For the first quarter of 2012, on a non-GAAP year over year basis, revenues increased 63%, gross profit grew 67%, and earnings per share rose 47%.

They expect full year 2012 revenue to be in the range of $330-360 million and non-GAAP EPS to be from $1.00 to $1.25 (see April 2012 Investor Presentation).

3D Systems' balance sheet has taken a slight hit recently due to acquisitions, but these acquisitions will help them increase profitability and maintain dominance in the future.

In regards to the recent secondary stock offering, it was fully covered and I believe it represents the normal actions of a growing company with its eyes on the future. It also increases the float, which makes it a more attractive investment for larger institutions, and provides 3D Systems with money for further research and development, acquisitions, etc. I took the opportunity to purchase shares and have no problem adding to my position on further general market weakness.

The stock trades at a P/E of 44.93. Although the P/E is high and the stock price has doubled this year, I think the forward P/E of 23.14 represents value for a company with a bright future.

Names You Should Know

Two of 3D System's subsidiaries that Apple should be most interested in are Cubify and Z Corporation (both featured in the above videos).

Cubify's Cube can be purchased for $1,299, uses Fusion Deposition Modeling and is designed primarily for personal/home use. They already have an online marketplace that allows artists to sell their designs to consumers who can replicate them (designs) at home.

Z Corp.'s printers make use of Selective Laser Sintering. Unfortunately, these printers cost anywhere from $30,000 to $60,000. Also, as you can see from the above video, it is a bit messy and can take some work to get the object ready for use. However, I believe that over time, this technology will become cheaper and more streamlined.

Why Apple Should Buy into 3-D Printing

Apple Inc., the largest company in the world by market capitalization, has seemed to have the magic touch over the last few years. This is attributed to the tenacity and passion of Steve Jobs; his search for beauty and simple functionality has drastically changed our lives.

People are wondering if Apple, led by CEO Tim Cook, has what it takes to continue the company as Jobs intended. Sure, they can lie back for the next couple of years and ride the momentum of Steve Jobs and the culture that he created; they can keep releasing projects that he worked with before his passing and still make a pile of money. However, if they want to stay true to who Steve Jobs was and the power of his memory, they should enter the world of 3-D printing.

Three Reasons Why 3-D Printing is a Perfect Fit for Apple

Reason #1

Jobs loved disruptive technologies and with the iPod, iPhone, and iPad, he changed the music, movie, telecommunications, and computer industries. 3-D printing may not be there yet, but this is the next, big disruptive technology.

Reason #2

Apple has a ton of cash on their balance sheet. They could purchase 3D Systems (market capitalization of $1.5 billion) with their spare pocket change. Then, spend the time and money introducing them to Apple's corporate culture, redesigning the software and hardware to fit Apple's goals and style.

Reason #3

3-D printing and its future also fit right in with Apple's business model:

  • Apple did not invent the personal computer, mp3 player, or smart phone; however it revolutionizes products by making them sleek and intuitive. The same can be true for 3-D printers and the software used in designing or customizing the products.
  • Apple has been the agent of change, causing the recent wave of advances in personal creativity and productivity. Apple computers and iLife (iMovie, Garage Band, etc.) make it possible for the average person to create professional music, movies, etc. in a simple way. The iPhone has made everyone a photographer and director. 3-D printing should be the next generation in creativity for the Mac ecosystem.
  • Apple already creates platforms (iPhone and iPad) that use iTunes and the App Store to allow crowdsourcing (Apps, etc. created by the community) to continually add value to their products. They can do the same thing for 3-D printers. Yes, there are already a number of established marketplaces set up; however, Apple has the expertise and experience to bring this market to a larger audience.
  • They already have iTunes or the App Store to distribute the 3-D schematics (printer directions) used in 3-D printing and a functioning certification process for approving the content (Apps and now 3-D schematics) that they allow on their platforms.
  • When a radical, new technology like this comes around, consumers are bound to be a little uncertain. However, they are very comfortable with Apple as a brand. If they can see the printer in action at a local Apple Store and be reassured that a "genius" will help them with any problems, then they will feel more comfortable buying one.


Apple's the clear leader in the consumer technology sector, but one false step and Google Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), or even Microsoft Corp. (NASDAQ:MSFT) could be all over them. Don't believe me? Just look at Research in Motion Limited's (RIMM) carcass!

3-D printing is the perfect next step for Apple. It fits in with the company's ethos, ecosystem and established business model. They have made their name by anticipating people's needs and desires; Apple should get started before one of their competitors beats them to it.

My recommendation for investors is that you purchase shares of 3D Systems Corp.. Not only are they a sound investment in a growing field, but they are a great takeover target for Apple.

Disclosure: I am long DDD.