Forbes to HP: reinvent yourself with 3D printers!


Today I see yet another article in a financial publication that is suggesting that the beleaguered HP reinvent itself by expanding into 3D printing. This time it’s none other than Forbes, in a piece called, “How HP Could Reinvent 3D Printing…and Itself.” Being in this respected magazine will no doubt cause the idea to spread even further.

Writer Peter Faktor begins by reminding us that many behemoth companies have successfully reinvented themselves, companies such as IBM, Ford and Apple. So, why could HP not reinvent itself as a 3D printer company? Why not, indeed? It’s just one more dimension. What’s another axis after all?

HPQ DDD SSYS stock chart

Looks to me like HP could use some of the growth that 3D Systems and Stratasys are enjoying.

Faktor points out that HP current R&D budget is $3.2 billion. I thought about how much money that is, compared to the valuation of the two big publicly traded 3D printer companies–Stratasys (and Objet via merger) and 3D Systems. As of the market close today, Statasys (SSYS) has a market capitalization of $1.36 billion and 3D Systems (DDD) has a market cap of $2.09 billion. Either one, even with a premium that would have to be paid to take out the company, is well within their the amount they simply spend on R&D in one year. And I’d venture to say that they would get a hell out of a lot more bang for their buck buying one of these 3D printer companies than creating yet another 2D printer, a tablet that no one will pay attention to, or another commoditized laptop.

Companies routinely pay these sums of money for patents alone, just take a look at the mobile device industry. I checked into the number of patents back in March, and at that time Stratasys held almost 200 patents and patent pending inventions. 3D Systems had 360, with 110 by Objet. I’m sure they have more now, especially at the brisk rate at which 3D Systems buys up companies. Those are a lot of patents for the money.

Of course, HP could create their own 3D printers, but they would run through billions of dollars doing this, and still not be up to par with the features, quality and existing cutomer base of their entrenched competitors. And do you think that HP could do this without stepping on a patent or two, or twenty. No, the path of least resistance is for HP to buy one of the companies.

And that’s one of the reasons that makes me hold on, rather than trade, my shares of stock in 3D Systems and Stratasys. I’ve been fortunate to have ridden them up quite profitably, and even though the DDD and SSYS stock charts signaled a short term top had likely been made, I continued to hold, because trying to time going in and out of long term holdings often results in losing the stock. These companies have a future that the masses of investors don’t quite understand (just another fad, printing trinkets and Yodas), and this is an advantage to those who do understand. I will not sell either one (other than some in and out trading shares) for some time because not only are they on an already profitable, fast-paced growth trajectory, but in my opinion, one or both will no doubt be bought out someday.

I don’t doubt that HP could be a buyer of either of them, as it makes so much sense. But it could be any number of companies. Big companies are looking to acquire growth these days, as organic growth is difficult in this economy, and they will pay for it. But it’s my hope they won’t be acquired for a long time, as a pure-play investment can be so much more profitable than when a technology is swallowed up by a large company.

Damn, I got so carried away with investing in 3D printer companies that I barely even talked about the Forbes article. Go read it. It’s pretty good, and the author opines on all the reasons HP needs to get going on this.

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2 Responses to “Forbes to HP: reinvent yourself with 3D printers!”

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  1. Jay says:

    Took a college tour back in 2011 to The Ohio State university and got a first hand look at some of their stuff. Pretty amazing to think what these things will be able to do in the future.

    Do you think the major growth in most of these stocks has already past and it is a little bit late to get in?

    • mark says:

      The stocks are ahead of themselves in price to earnings. However, this is always the case on growth stocks–the earnings are always expensive to buy. But then the winners keep on going up, often erratically, but up over time. I can remember being talked out of stocks such at Whole Foods and Salesforce (way cheaper than now) because they were “too expensive” in the past.

      So the questions are, 1) where are we in the 3D printing industry growth? and 2) how solid are the two public companies, DDD and SSYS? Well, in my opinion, the industry has only just begun. And these two companies are the behemoths of the industry, and are profitable and growing. Personally, I think they’ll be bought out at some point, but that’s just a guess.

      So, too late to get in? Not if you have a long term horizon. Buy and then don’t freak out on big price moves along the way.

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