Could H-P (HPQ) Disrupt the 3D Printing Segment? (DDD) (SSYS) (XONE)

March 18, 2013 2:08 PM EDT
Up until the 2000s, Hewlett-Packard (NYSE: HPQ) largely built its empire on sales of digital printers for home use. Since about 2004, the company has had a strong presence in the PC market, becoming the world's top shipper over the last few years. But, with the PC market slipping and enterprise still slightly hesitant on spending too much on expansion, which direction will H-P go next?

What about the 3-D printing segment. Names like 3D Systems (NYSE: DDD), Stratasys (Nasdaq: SSYS), and ExOne (Nasdaq: XONE) have garnered a lot of press lately as their offerings have become more affordable for consumers and businesses are popping up left and right, allowing folks the ability to print out basically anything from a flower vase to smartphone cover.

H-P doesn't have a significant presence in 3-D printing right now. Though the question has been raised before, would H-P be better off growing that segment organically or purchasing a company?

Both Stratasys and 3D Systems recently came off of annual high share prices and both carry relatively high P/E ratios at 62 times and 148 times, respectively. H-P might be eying one of the companies, or possibly even a smaller privately-held firms which it would be able to grow into its own distinctive business. And there is no shortage of 3D printing companies, even LeapFrog has a piece of the game. At about $2.7 billion each, 3D Systems and Stratasys aren't exactly cheap, either.

The segment could provide a bit of hope for Hewlett-Packard as it transitions its business plan and company structure from PCs to other segments. Morgan Stanley was out with a positive note earlier today, highlighting the belief that H-P could rebound in 2014. The report doesn't go into too much detail, but notes how a few small tweaks would allow the company to grow earnings and cash flow without a big jump in profit. For more color, click here.

So, while there are a lot of players in the 3D printing segment, it would be interesting to see what, if any, moves H-P brings to the table. The technology isn't new, but execution has come far enough along to make the venture an interesting prospect for the one-time printing giant.

Shares of H-P and 3D Systems are up about 2.6 percent, while Stratasys and ExOne are lower Monday. Analyst firm Gabelli was out with positive comments on 3D Systems earlier.

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