3D Systems remains the RP industry's revenue leader, but has slipped in terms of units shipped and is no longer the company with the largest installed-base of machinery. Indeed, nearly two thirds of the company's revenue is now derived from sales of materials and services. The company showed positive growth for 2007 after the previous year in which revenue contracted and a substantial loss was experienced. Revenue increased 16% to $157 million and its loss narrowed from $31 million in 2006 to $6.7 million in 2007. 3D attributed its large 2006 loss to difficulties in making its new internal enterprise resource software operational, the cost of relocating its headquarters to South Carolina, a decrease in service revenue from discontinuing support to some of its legacy systems, and to increased R&D expenses. The company also experienced substantial losses in years preceding 2005. Those financial problems stemmed from a variety of sources, including increased competition, a less-profitable product mix, and costs associated with acquisitions and litigation. The first six months of 2008 have not been kind to the company which reported a decrease in revenue of 6.7% compared to 2007, while losses for the period showed some improvement over the same period in 2007.

The company has worked steadily over the years to develop the market, protect its position with a portfolio of hundreds of patents, and to improve its machinery, software and materials. This has resulted in improvements in accuracy, surface finish and material properties that have been instrumental in expanding the rapid prototyping market as a whole.

3D has also acquired a number of technologies and competitor companies over the years. It purchased Keltool^® technology from 3M several years ago to address high volume injection mold-making applications. In rapid succession in 2001, it acquired OptoForm SARL (France), RPC Ltd. (Switzerland) (Rapid Prototyping Chemicals, a photopolymer producer) and DTM Corp. OptoForm's technology was aimed at additive manufacturing applications and RPC was acquired to help the company replace its long-term relationship with resin supplier Vantico (now acquired by Huntsman Advanced Materials) which ended in 2002. While these acquisitions gave the company the widest technical capabilities and market stance of any system vendor, it was not easy to integrate and prune them into well-coordinated assets.

Changes in materials and technology have considerably lessened the need for some of 3D's past acquisitions. Keltool^® has become dormant as improvements to the selective laser sintering process were made and competitors introduced numerous fast injection mold tooling solutions. Improvements in composite-based photopolymers now permit higher performance parts to be made with stereolithography which has resulted in the shelving of OptoForm technology.

Product Line
The company's product line now includes a family of systems based on several fundamentally different technologies. Stereolithography is sold as a solution for applications requiring higher accuracy and resolution. These products use lasers to solidify successive layers of a liquid photopolymer resin. Selective laser sintering produces parts in final materials from powders. Under the InVision^TM trade name, 3D Systems also provides jetted photopolymer and laminated object manufacturing-based systems which are positioned as lower-cost, somewhat lower-accuracy, 3D printers for the office environment.

The photopolymer-based machines of the InVision^TM family use wide area inkjet heads which deposit entire layers of build and support materials. Each layer is fully cured by a flood lamp after deposition and supports are removed by melting. The product was originally positioned to challenge the PolyJet^TM family of 3D printers from Objet Geometries, Ltd. (Israel) which use very similar technology. However, the company cut the initial system price in half to $39,000 almost immediately after its introduction, to more aggressively compete with entries from Stratasys and Z Corp.

In April 2005, the company announced an agreement to sell a machine from Solido Ltd. (Israel) (formerly Solidimension ) under the InVision^TM LD brand name. Solido makes a low-cost, desk-top machine which fabricates parts by cutting and bonding layers of plastic film. It was priced at $23,000, just under the competition, and aimed squarely at increasing the company's share of the 3D printer segment. In January, 2006, Stratasys countered this move by reducing the price of its entry-level Dimension BST system to $18,900. 3D Systems then lowered the price of the InVision^TM LD to $14,900 just five weeks later.

With the acquisition of DTM, 3D acquired selective laser sintering (SLS) technology that can produce parts in final polymer materials and metals. DTM commercialized research done at the University of Texas, selling its first system in 1992. The SLS system uses a laser to partially melt successive layers of powder.

3D Systems acquired the company in August, 2001 for about $45 million. The US Dept. of Justice sued to block the merger on anti-competitive grounds. 3D agreed to settle by licensing intellectual property to an existing foreign RP competitor to enable such a company to enter the US market. Sony's subsidiary D-MEC, a stereolithography system manufacturer, was the final choice agreed upon. The settlement was intended to assure that there were at least three competitors in the US market. Unfortunately for both companies, over the last few years buyers migrated at an ever-increasing pace to low-cost 3D printers instead of more-capable stereolithography systems, with the result that Sony dropped out of the US market in May, 2006.

In early 2008 3D Systems announced plans to sell equipment in the US based on a similar technology, selective laser melting, from MCP Tooling Technologies. These machines are fairly complementary to the company's SLS systems, offering a wide range of metal materials and full density parts.

 

Outlook
The company faces a challenge to regain its dominance and momentum in the industry it started. It has been clear for some time that dramatic, initiative-seizing product introductions have been needed to win that position back. In January, 2007 the company made one such move by announcing a new photopolymer-based technology with many of the same capabilities as stereolithography. With a selling price of US$9,900 - much lower than anything of similar capability presently on the market, there is the potential for this machine to produce a tectonic shift in the industry. Dubbed the V-Flash^TM Desktop Modeler, it was 3D's intent to make limited shipments in the first quarter of 2008, but technical problems have resulted in delays.

3D has also begun selling purpose-built machines for specific manufacturing applications. For example, in 2006 the company introduced the InVision^TM Dental Pro^TM integrated digital dentistry system. In 2007, it announced a hearing-aid manufacturing system based on its new V-Flash^TM technology. More and more industries will become aware of and eventually adopt additive manufacturing for applications in which it offers unique advantages. The range of possibilities is extraordinarily wide. While most of its competitors are also focused on this growth opportunity, 3D has an advantage in having ready-access to the widest range of technologies.

Stratasys

Stratasys sold the first fused deposition modeling (FDM) system in 1991. The company went public in 1995. It had $112 million in revenue in 2007, an 8% increase over 2006. This was considerably slower growth than the 26% the company achieved in 2006 and in previous years, in which it nearly tripled its revenue in the period from 2000 to 2006. Stratasys produced $11.2 million in profit in 2006 and $14.3 million in 2007. The company reported an increase in revenue of 12% for the first six months of 2008 compared to 2007, but unit shipments were essentially flat for the period.

The company sold 2,169 machines in 2007 compared with the 1,796 it sold the year before, and while a 21% increase it's considerably lower than the 38% of the previous year. The company claims to have shipped 44% of all systems worldwide for 2007. It is the unit sales leader of the industry by a wide margin and it has the largest installed base with over 10,000 machines shipped.

Stratasys' machines are mostly small, office-friendly and quiet. The company also provides larger equipment, more suitable to a laboratory or factory environment, aimed at producing sizable objects. The systems extrude a narrow bead of plastic much like a hot glue gun. They are capable of making small, strong parts quickly, using an increasingly wide range of materials (ABS, polycarbonate, polyphenylsulfone, polyester and several others). Finishes and accuracy have been greatly improved over the years.

In 2002 the company shook up the industry by introducing a 3D printer at $30,000, about half the price of the nearest competitor. This introduction led to a 70% increase in unit sales for 2002 while only slightly increasing revenue. Stratasys subsequently reduced the price of this machine further to $24,900 at the beginning of 2004, while simultaneously introducing a machine at about $35,000 which could automatically remove support materials like the company's more expensive equipment.

The company continues to push prices downward aggressively in response to competition. In January, 2006 it announced an entry-level system at $18,900 and a price of $24,900 for a machine with automatic support removal. While some equipment has been available for years in Asia for as little as $10,000, this marked the first time the $20,000 barrier had been broken in the US market, and was quickly followed by aggressive pricing moves from 3D Systems. See above. Stratasys' low-end systems are handled by a subsidiary under the Dimension name and sold through approximately 200 third party distributors.

At the end of 2003 Stratasys began marketing Objet Geometries (Israel) Eden^TM jetted-photopolymer systems in the US market. Although sales of the line grew quickly and reached $16 million in 2006, Stratasys discontinued the alliance at the start of 2007 because margins were insufficient.

In addition to the Objet alliance, in January, 2006 the company announced a marketing agreement with Arcam AB (Sweden) to sell its Electron Beam Melting (EBM)-based equipment in the US. While this enabled Stratasys for the first time to address markets for metal parts, the company abruptly withdrew from the agreement in January, 2008. Stratasys has said that the growth of its proprietary FDM technology relative to the still-low revenue generated by EBM means that it must concentrate its efforts in that arena.

Offering Arcam's product line gave Stratasys the long-term ability to offer solutions for a much wider range of additive fabrication applications. Thus it's likely that this move signifies a change in strategic direction for the company.

Through a combination of technical development and shrewd business moves, Stratasys has succeeded with a technology that many saw as very limited when first introduced. Users have apparently seen it differently. They like the simplicity and reliability, quiet operation and office-friendliness of the machines which can now produce working parts in numerous durable thermoplastics. They especially like the price. The company says that as many as one third of its machines are finding their way into academic settings such as high schools and colleges. These developments bode well for future growth and increasing sales of materials.

It will be interesting to see if materials sales can remain as profitable in the future, however. Stratasys charges a very high premium on a per pound basis. The materials are not as proprietary as those used with other technologies, and have begun to attract knock-off manufacturers.

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