3D Systems to Acquire Portions of Xerox R&D

Additive manufacturing (AM) has moved into the arena of big business. According to the Wohlers Report 2013, the industry saw a 28.6% increase in products and services in 2012, and total market value will exceed $6 billion by 2017. As the size of the market increases, one would expect to see larger deals enter the equation.

3D Systems (3DS) has moved to acquire portions of Xerox’s Wilsonville, Oregon product design, engineering and chemistry group and related assets for $32.5 million in cash. Both companies expect the deal to be finalized by the end of 2013, and it deepens the ties between the companies with Xerox already having produced 3D Systems’ line of ProJet printers.

I’m going to throw in a few more quotes than usual here to help give an overall picture of what this particular development might mean to AM. I think what was said is actually important in this case, rather than being the usual PR speak.

“We are pleased to expand our relationship with an innovative partner of the caliber of Xerox and expect that acquiring some of the Xerox Wilsonville engineering team, together with their state-of the-art development labs and selected licensed IP, will catapult our 3D printers’ development and manufacturing capabilities forward,” said Avi Reichental, 3D Systems’ president and CEO.  “This bold step is consistent with our belief that we must act quickly and decisively to extend and cement our marketplace leadership position by taking full advantage of the window of unprecedented opportunity in front of us.”

It’s that last line that I think is particularly important. While 3DS might be one of the biggest kids on the AM block at the moment, HP has made it known it will be entering the market next year. This seems like a move on the part of 3DS to ensure it stays ahead of the game.

“This deal takes advantage of Xerox’s world-class capabilities and expands our relationship with 3D Systems in the exciting and dynamic 3D printing industry,” said Kevin Warren, President of Xerox Strategic Growth Initiatives.  “It emphasizes how we are leveraging our expertise while we continue to evolve our business model and pursue strategic growth opportunities.”

That sounds like a lot of waffle at first, but keep in mind this deal doesn’t include any of Xerox’s AM R&D, which has generally been in the area of print head development. Where 3DS is positioning itself to stay at the front of the herd, it looks like Xerox is lining up to support its moves, and increase profits from what must be an already profitable relationship.

“The stronger our marketplace leadership, the more powerful our economic model becomes,” continued Reichental. “Simply put, a solidified position translates directly to higher revenue, higher profitability and greater earnings power over time and we are willing to sacrifice short term earnings to get there faster.”

While I don’t think anyone would accuse 3DS of stagnation, this sort of move does more than add a few new systems or AM-related properties to its portfolio. According to the press release, 3DS intends to increase its R&D by 75 to 100% as part of the acquisition. Increasing in-house innovation is less expensive in the long term than simply buying up whichever company happens to come up with an exciting new idea. It also gives off a strong, “Anything you can do, I can do better” vibe that must be directed, at least in part, at HP.

Below you’ll find a fairly extensive video featuring Avi Reichental lecturing about 3D printing.

Source: 3D Systems