November 7th was a significant day in a significant year for Stratasys.
The day, the opening one of the 2023 edition of Formnext, saw the culmination of six years' graft unveiled to the additive manufacturing community for the first time. The year, its 35th since Scott and Lisa Crump founded the business in 1989, saw the company try, without success, to expand into metal additive manufacturing. This is, of course, the launch of the F3300 FDM system and the failed merger attempt with Desktop Metal.
Both have been well documented on TCT Magazine channels in the last weeks and months, but not since early June has CEO Yoav Zeif spoken to trade media.
That changed during Formnext when a short interview was squeezed in between two pre-arranged meetings with customers and partners. Among the first words out of Zeif's mouth were: “I still believe in consolidation.”
Which is a bold position to take given the turbulence of the last six months. Having been at the centre of a saga that saw both 3D Systems and Nano Dimension try to acquire or merge with Stratasys in place of Desktop Metal, Zeif would be forgiven for having gone off the idea of any more M&A.
Not the case. Stratasys shareholders may have turned down the opportunity to acquire Desktop Metal, but the strategy remains the strategy.
“We have laser-sharp technology and a laser-sharp strategy,” Zeif said. “What makes us different is the fact that we have a strategy that the management team and board put in place in June 2020 and we just follow it.”
As outlined to shareholders in the summer, and again to TCT at Formnext, the first phase of the strategy was to 'stop the bleeding' across some of its key product lines, before executing several acquisition deals that could see it regain its moniker as the leading polymer 3D printing company in phase two. Takeovers of RPS, Origin, Xaar 3D and Covestro Additive Manufacturing saw Stratasys take strides in that direction, while Zeif and his leadership team also encouraged a focus on applications. That was phase three.
That is part of the reason why the likes of Toyota were brought in to assess the company's development of the F3300 FDM machine and provide some feedback. Stratasys asked the question, 'What is missing in FDM?' And Toyota and others responded: 'Throughput, cost per part, accuracy and materials.'
“This is the formula for success because you want to make sure that you address what they need and not what you think is cool technology,” Zeif explained. “The whole concept now is you don't develop for the sake of developing, you do it for the customer.”
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The customer is where the desire to integrate metal additive manufacturing hardware into the business comes from too. Many existing users of Stratasys' polymer 3D printing technology are said to be pushing for metal processes that run on the company's GrabCAD software platform and are underpinned by the same service support.
“It makes sense now that we have established ourselves in the polymer space, why not have, on the same GrabCAD platform, also metal?” Zeif said. “We do it step by step in a way that will ensure that we'll be in manufacturing; we will not invest in metal that will take us to prototyping because that's the strategy. We are laser-sharp on the long-term strategy. Meanwhile, it's ups and downs, the entire industry is depressed, but we have our north star. We keep going after it. We know where we're going. If you know where you're going and you put your money where your mouth is, at the end we'll be there.”
It is not the first time that Stratasys' intention to move into metal AM hardware has not come to pass. In 2018, Stratasys announced its Layered Powder Metallurgy technology, seemingly in response to many other additive manufacturing players being active in the powder-based metal 3D printing market. But after Zeif came into the company in late 2019, a decision was taken to 'park' the company's efforts in metal because there was not enough differentiation compared to what was already out there.
This led the company to eventually pursue a deal to merge with Desktop Metal, though over 75% of its shareholders would move to block the deal in September. It was the first major setback in Zeif's multi-faceted strategy and has Stratasys returning to the drawing board. In doing so, Stratasys commented that it would 'undertake a comprehensive and thorough review of all available strategic alternatives,' which is vague, perhaps purposefully.
Read more | Desktop Metal CEO Ric Fulop: "We'll remain an independent company. Desktop Metal is not for sale."
“Either M&A or standalone or something else,” was Zeif's response when asked what those alternatives might be, leaving the door open for pretty much anything. There is no indication that Stratasys intends to revert to Plan A and develop its own metal additive manufacturing technology, but a quick Google search will tell you that they have a good few patents relating to metal AM technologies, and Zeif does count the company's GrabCAD platform and service support as 'differentiating' elements - at least when compared to its polymer 3D printing competitors. On the other hand, the additive manufacturing industry is not immune to macroeconomic and market trends, and Zeif remains a staunch believer in consolidation, making it feasible that a merger with another outfit could be arranged.
Only time will tell.
“We don't do anything in a rush,” Zeif asserted. “Desktop Metal was not in a rush, we worked with them for almost a year and a half. Everything has to be strategic. We announced after [the] Desktop Metal [deal was terminated], which was disappointing, that we are starting a review of strategic alternatives and it's very simple. We understand that the shareholders did not support it, so we are opening options for different strategic alternatives. We will bring that alternative, together with third-party advisors, to the board and the board will consider it. There are many possible outcomes but that's where we are.
“You can also see that our board's decisions in the past were quite smart, especially with the latest offer that we received from another peer in this industry because it appears we were right in terms of the future.”
What the future looks like from here is anybody's guess. Zeif gave little away, other than to say that should Stratasys make a move to acquire another company, the target business would have to demonstrate synergies of scale or technology to provide value to customers, shareholders and employees.
As Stratasys continues to survey the market, it is confident it will be able to do just that. The word 'strategy' was repeated again and again as Zeif delicately articulated his way through a myriad of questions about what comes next for the company. It is the plan set out in 2020 that will continue to inform how the company operates. Phase one and two - stopping the bleeding and constructing a portfolio that could argue its way into the leadership position in polymer 3D printing - are complete, and phases three and four might be about to blend together in much the same way as phases two and three are doing.
“The only way to be successful is to move away from box moving,” Zeif summarised. “Have an application, develop it with the customer, bring the full solution and be there for them. It's very hard to have significant breakthroughs in so many applications if you're just a startup that developed a new machine. It's not enough. This is what held the industry [back] for so many years, this box moving. The nature of so many companies is box-moving because they don't have the resources to do more. But it will happen, consolidation.”
