Stratasys says it made deal to avoid falling behind in 3-D technology

Stratasys Ltd. said Thursday that its $403 million acquisition of desktop 3-D printer firm MakerBot was an offensive move to expand its market, and that it had to move fast on the deal to avoid falling behind in ­technology.

"The desktop category of 3-D printing is developing at light speed," said Shane Glenn, Stratasys vice president of investor relations in Eden Prairie, which, along with Rehovat, Israel, is one of the company's headquarters. "Timing is critical. If Stratasys wanted to be a player, it needed to make a significant investment today."

3-D printers are a hot technology that hold out the promise of revolutionizing the manufacture of some everyday objects, such as coffeepots, machine parts and, to the dismay of some, guns, by personal devices that print physical objects by layering deposits of sprayed material.

Bobby Burleson, a Canaccord Genuity analyst in New York who has a "buy" on Stratasys stock, wrote in a Wednesday report that the acquisition was partly a defensive move. MakerBot's low-end market strategy "posed a potential threat to Stratasys' entry-level system sales and its materials pricing," he said.

Stratasys said the popularity of desktop 3-D printers certainly hasn't been hurt by a storm of publicity about the technology in the news media, including controversial stories during the congressional gun-control debate about a Texas student who used a 3-D printer to make a gun.

"The gun issue was kind of interesting," Glenn said. "I think the industry will have to address sensitivities about manufacturing products that are copyrighted or products such as guns that raise a whole host of issues."

But the publicity about 3-D printing has been mostly helpful to Stratasys, Glenn said.

Wall Street had a mostly positive reaction to the acquisition, which was announced after the market closed on Wednesday. Stratasys stock closed Thursday at $85.60 a share, up $1 or 1.2 percent. About half of analysts rate Stratasys stock a "buy," a third rate the stock a "hold" and nearly 17 percent rank it as a "sell."

Burleson wrote that while the MakerBot acquisition will help Stratasys in the long run, it is it expected to be slightly dilutive to 2013 non-GAAP earnings per share, and won't be accretive until the end of 2014.

MakerBot, whose 3-D printers can be used to make machine parts or any of 36,000 other downloadable product designs, sells machines that cost $2,200 to $2,800 to consumers and small businesses. Stratasys calls this the "prosumer market," because the customers often use it for business purposes.

By contrast, Stratasys 3-D printers, used to create plastic prototypes for companies such as General Electric or Ford Motor Co., cost $10,000 to $600,000.

Among the risks faced by Stratasys is that the market may view it as less attractive because its 3-D printers make prototypes out of plastic, resin or wax rather than metal, which is perceived to have better wear characteristics, Burleson wrote.

"We want to be a leader," Glenn said. "There's a lot we can do with the technology we already have, but if there is an opportunity for printing parts made of metal, we'll look at it."