The 3 Biggest Challenges Facing Stratasys, Ltd.

Ssys Human Model

Image source: Stratasys.

Although the 3D printing industry offers attractive growth potential, Stratasys’ (NASDAQ:SSYS) performance has failed to impress investors over the last six quarters. Since the start of 2015, Stratasys has been hit with a notable slowdown in customer spending, and the stock reacted in kind:

SSYS Chart

SSYS data by YCharts.

When a stock loses a significant amount of its value, it often indicates that the company faces serious underlying challenges. Stratasys is no different. The company currently faces three major challenges that could undermine its turnaround efforts.

Falling printer sales

Due to the slowdown in customer spending, Stratasys has seen six straight quarters where its printer sales have fallen on a unit and revenue basis. Management’s prevailing theory is that customers have too much 3D printer capacity on hand and are opting to utilize their existing printers instead of purchasing new ones.

Ssys Annual Change

Data source: Stratasys. Graph by author.

Although the fall in 3D printer sales has had less of an impact on Stratasys’ overall revenue over the last two quarters, slowing printer sales threaten the long-term potential of its razor-and-blades model. After all, printer sales fuel the repeated sale of materials, which are consumed over a printer’s lifetime and typically carry a higher margin. With falling printer sales, the potential of this future revenue stream likely weakens.

Increased competition

Between the recent entrance of Carbon and the upcoming entrance of HP, Stratasys faces more competition than ever. Carbon’s M1 printer is anywhere from 25 to 100 times faster than technologies before it, while HP’s upcoming Multi Jet Fusion printers claims to be 10 times faster than leading extrusion and selective laser sintering-based printers. Overall, these new entrants threaten Stratasys’ competitive positioning, which could make it more difficult for the company to stand out.

While it’s too early to say conclusively, Stratasys’ management claims that it hasn’t been subjected to competitive pressures. However, the risk is if the market validates HP and Carbon with strong sales and Stratasys is slow to respond, it could come at the expense of the company’s market share.

Execution

In recent years, Stratasys’ execution has been a far cry from stellar. The company failed to realize the growth potential of previously made acquisitions, including its MakerBot unit, which suffered from ongoing performance and quality issues. Ultimately, these mishaps forced the company to write off a significant value of assets tied to acquisitions. Since the start of 2015, Stratasys goodwill and intangible assets have fallen over 68%:

SSYS Goodwill and Intangibles (Quarterly) Chart

SSYS Goodwill and Intangibles (Quarterly) data by YCharts.

Last month, Ilan Levin assumed the role of CEO and hopes to improve the company’s execution, efficiency, profitability, and overall strategy. Levin has been with the company in an executive role from 2000 to 2012. However, Levin’s leadership style, approach, and ability to stage turnarounds, are largely unknown to the market. The risk is that Stratasys chose a leader that’s too similar to his predecessor, David Reis, whose actions as CEO led to execution issues it faces today.

The bigger picture

Before investing in a stock, it’s important to understand the risks and challenges a business faces as it works to realize its full potential. For Stratasys, a large part of its future success hinges on management’s ability to navigate the challenges it currently faces. In other words, without solid execution on management’s part, the company’s other challenges may become more pronounced.

Steve Heller has no position in any stocks mentioned. The Motley Fool recommends Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Mayku Challenges Desktop 3D Printing for Maker Attention

If you’ve been paying attention to additive manufacturing (AM) news lately, you may get the feeling that desktop (AKA home) 3D printers haven’t quite turned out to be the gold mine some companies were expecting. First 3D Systems ditched the Cube, then MakerBot made the decision to outsource production of its 3D printers. Has the market for desktop AM systems reached the saturation point, or is the maker mania dying down?

A new company named Mayku is betting the makers are still out there. Rather than pinning its hopes on 3D printing, the company has instead turned to an old, reliable technology made over for (theoretically) easy home use: vacuum forming. In place of objects made in the complex arena of digital design, Mayku’s FormBox creates molds using existing objects, offering a new take on the home factory idea.

The FormBox offers makers an alternative to 3D printing. Courtesy of Mayku.

The FormBox offers makers an alternative to 3D printing. Courtesy of Mayku.

If nothing else, the FormBox certainly looks easy to operate. Users either find or create a shape or pattern and place it on the forming plate. Next, toss a fresh sheet of plastic in the system and wait for it to heat up. The shape of the object placed on the plate is then copied simply by pressing the plastic sheet down over your object, with vacuum power provided by actual vacuum cleaners.

Along with the basics for making molds, the FormBox also comes with casting material to ensure users are able to begin making stuff out-of-the-box. The nature of molds means that any material that won’t melt the plastic can be used to produce objects, opening the door for custom designs made in chocolate, concrete, plaster, etc. and then formed. For extremely simple designs, it’s also possible to use the system to directly produce objects by forming the shape in plastic.

Perhaps taking its cue from the aforementioned MakerBot, Mayku intends to offer design ideas in the form of a digital online library. Even if the site only acts as inspiration, nearly any attempt at creating an online community to help support your product is a good idea.

Below you’ll find the Kickstarter video for the FormBox, which, somewhat cheekily, includes an example of using a 3D printer to build objects that can then be used to create molds.
Source: Mayku, Kickstarter

Counterfeits, massive data sets among 3D printing challenges CIOs will face

Three-dimensional printing presents an opportunity for CIOs to get behind an emerging technology that experts believe could have a transformative effect on how work gets done. Along with the opportunity come 3D printing challenges that are both unique to the technology and typical of the broader digital business trend.

Implementing 3D printing, an additive manufacturing process to transform digital models into three-dimensional objects, will pose new security and data management challenges. Moreover, for 3D printing to be successful in the enterprise, CIOs will have to ensure their IT departments can keep pace with the business by adopting — if they haven’t already — Agile and continuous delivery practices.

3D security challenge: Counterfeits

Businesses that choose to outsource 3D printing to service bureaus will be shuttling files beyond the enterprise’s firewall. One of the 3D printing challenges CIOs will encounter is ensuring the intellectual property contained within those files remains secure.

Sophia Vargas, analyst at Forrester ResearchSophia Vargas

While protecting sensitive IP is nothing new for CIOs, 3D printing presents a new wrinkle, according to Sophia Vargas, an analyst at Forrester Research.

“If your shop has a product in digital form, [chances are] you’re extending access to an end consumer and not just to people within your partner or employer spectrum,” Vargas said. Because 3D printing technology is also a consumer technology, customers may expect an option to print parts from, say, Staples on their home 3D printers. CIOs will have to ensure security follows files from the enterprise to a B2B partner to a consumer’s network.

If files are hacked, counterfeiting can result in lost revenue. And if the counterfeited product breaks down in some way, it could result in reputational and even legal damage for the business. “We’re not seeing it yet, but it could happen where someone 3D prints a counterfeit good that then has a catastrophic failure,” said Pete Basiliere, a Gartner analyst.

Pete Basiliere, analyst at GartnerPete Basiliere

Protecting the enterprise from 3D printing counterfeiters will likely require the combined efforts of IT, engineering and legal counsel, as they consider ways to either mark products produced internally or to concoct a blend of materials — a proprietary mix of metals, for example — unique to the organization, according to Basiliere.

3D data challenge: Massive data sets

If businesses decide to set up an internal 3D printing shop, one of the biggest 3D printing challenges CIOs will face is a data bottleneck, according to Vinod Baya, director of PricewaterhouseCoopers’ Center for Technology and Innovation.

When 3D printers construct an object, they do so by adding one layer of material on top of the next. Many printers are equipped with sensors that can track temperature, moisture, pressure and any other characteristic the business deems worth measuring for every layer of material used.

Vinod Baya, director of PricewaterhouseCoopers' Center for Technology and InnovationVinod Baya

“All of that data is available to do things like diagnostics — Is the product going to meet specifications? — which, ultimately, means you’d have to do less quality testing,” Baya said. Much of the data generated is structured data (although some printers can take photos during construction to compare to the original model), but the volume of data produced is immense and has to be dealt with immediately if it’s going to be useful to the business.

“All of the big data techniques CIOs are learning from social or marketing or other spheres of influence are equally applicable here because the volumes of data need to be processed in real time, and the architecture needs to support that,” he said.

If they’re going to take on 3D printing, CIOs may want to consider the data lake as a data management strategy. Not only will 3D printing data need to be combined with data from other systems and so cannot be siloed, it may help to answer questions the business hasn’t yet considered, which means it will need to be collected and stored. The data lake, which acts as a landing ground for raw data, enables businesses to keep the massive volume of data from 3D printers for analysis.

“Past practices were all about, ‘If you don’t need this data for the production system right away, we’ll throw it out,'” Baya said. “But it’s getting cheaper and cheaper to store the data. Obviously, you need to invest in the right kind of architecture to be able to do that.”

3D culture challenge: Continuous delivery

Shapeways Inc., a 3D printing service bureau and marketplace headquartered in New York, is an Agile and Lean software development shop that lives and breathes continuous delivery.

Matt Boyle, vice president of engineering at ShapewaysMatt Boyle

“The biggest lesson learned? Always ship code,” said Matt Boyle, vice president of engineering, which doubles as the company’s IT department. Delivering code in a steady stream — one of the tenets of continuous delivery — enables the team to roll out and test new features, a better strategy then tossing code in a file where it could wither and die, he said.

“A corollary to that? When you release something, make sure you know what needle you’re trying to move and make sure you can measure whether or not you’re moving it,” Boyle added.

Boyle said his team pushes new code to the Shapeways site 20 times a day, on average. That kind of continuous delivery can’t happen without product development, a team he described as “the yin to our yang when it comes to how we develop software and bring features to life.” Along with manufacturing, the three teams are intermixed within the same physical space, which Boyle said encourages collaboration.

Experts agreed practices such as continuous delivery, Agile and DevOps, the tying of a company’s development and operations teams closer together, are necessary not just for 3D printing projects, but for IT’s role in digital business in general. Digital processes such as 3D printing compress the work cycle, giving the business an added velocity.

“CIOs will have to keep pace,” PricewaterhouseCoopers’ Baya said. “Their systems will have to change with the velocity of the business.” Otherwise, CIOs risk the business moving on without them.

Caterpillar Inc. Uses 3D Printing to Save Time, Money and Manufacturing Challenges

cat2We often hear about how 3D printing is not only the wave of the future, but that the technology is positioned to take the lead in the manufacturing sector. Evidence of this idea especially exists when a long-time manufacturing company adopts more 3D printing technologies to carry out its traditional work.

This is exactly the story behind Caterpillar, Inc. You may not follow the manufacturing sector closely, but you hardly need to in order to be familiar with this company. It is the world’s leading manufacturer of mining and construction equipment, industrial gas turbines and diesel-electric locomotives, and natural gas and diesel engines.

cat3

Another way to describe this company is that it is rare to pass a large construction site and not see the company’s name emblazoned on one or more pieces of construction equipment. Dating back to the early twentieth century, and headquartered in Peoria, Illinois, the company now embraces the twenty-first century as a turn to 3D printing has recently helped a manufacturing process that was not going well.

cat1

At the Caterpillar transmission assembly plant in Dyersburg, Tennessee, a faulty assembly line procedure had people believing thousands of dollars would be lost as the problem was fixed. But thankfully, Caterpillar’s 3D printing team was called in and was able to 3D print a “temporary plastic tool and got it to the facility overnight, saving the line from going down. ” The fact that the tool could be made out of plastic, using 3D printing, and not metal made the process go quicker and kept the transmission assembly line from being shut down.

Jim LaHood is on Caterpillar’s 3D printing team, and he has this to say about the technology:

“The possibilities are endless in the factories. Things that are previously done out of metal that don’t need to be – like little tools and gauges – can be made from plastic now.”

LaHood also describes how money and time is saved, as 3D printing also offers a more sustainable alternative to traditional manufacturing. One example of this is “low selling parts” that have always been a big inventory, shipping, and tooling cost. What once took a year to make now can be made overnight using 3D printing.

Caterpillar also acknowledges the convenience and cost-effectiveness of on-site 3D printing capabilities, and the company is currently working on a way manufacturing sites can print parts when they need one to keep production going — exactly like what happened in Tennessee on the transmission assembly line.

Discuss this story in the Caterpillar 3D Printing forum thread on 3DPB.com