Investing in the next tech revolution
Combine computing with manufacturing and you get 'making.' Add robotics and you have what could prove to be the next great merger of technologies.
Technologies are constantly merging. The cloud is the product of the combination of distributed computing and virtualization. The marriage of laptop computers and phones produced tablets.
Big technology mergers are on the horizon in this decade, and none may have a bigger impact than the merger of computing and manufacturing.
Chris Anderson, perhaps the best tech writer of my generation, recently quit the journalism scene to join the startup 3D Robotics. In an interview with The Atlantic, Anderson described the company -- a manufacturer of robots -- as "a natural outgrowth" of the "maker" movement he began covering five years ago at Wired magazine.
For investors, this movement may still be a mystery. But its essence is simple: Instead of producing virtual goods with computers, makers produce real goods.
"Making" is where personal computing itself was 40 years ago, a hobbyist niche looking to become a mass movement.
A manufacturing revolution?
Think of 3D printers as the computers of this new movement. Companies such as 3D Systems (DDD) and Stratasys (SSYS) are what Intel (INTC) and Texas Instruments (TXN) were to the digital revolution; their printers are at roughly the stage where the Intel 4004 chip was after its creation. The best printers made by these companies are capable of creating such practical products as dental implants from wax molds and aeronautics parts from metals.
Hewlett-Packard (HPQ) had a private labeling deal with Stratasys but ended it amid speculation it would get into this business on its own. General Electric (GE) recently bought two high-end 3D printing outfits, Morris Technologies and RQM, through its aviation unit, as reported by 3Ders, which you might call the Datamation magazine of this field.
Early investors have been rewarded for buying into 3D Systems and Stratasys. 3D Systems' 215% run-up over the past 12 months has come despite short-term worries, including an increasing amount of time management is forced to spend in court protecting its niche. Those issues will work themselves out.
The uptrend in Stratasys (176% over the past 12 months) seems more secure, as it appears to have a better handle on the differences between the prototyping and production areas of the business. But both companies should do well.
Put down your pen
The real excitement is on the low end, with start-ups like MakerBot, based in Brooklyn. The company focuses on the consumer market, producing hardware and software, encouraging the growth of the hobbyist market and doing demonstrations such as a 3D "photo booth" that can produce small sculptures of your head from a photograph. Its Replicator 2 can turn plastic filament into finely detailed parts for about $2,200.
Think of these as being like HP calculators back in the day. They're cool, and if you're a college student or an engineer you're going to be jazzed. Events like the Maker Faire have the vibe of the old West Coast Computer Faires from the 1970s, complete with long-haired geeks speaking a language their parents don't understand.
It's from this cohort that the big breakthrough will come. We're still awaiting the Apple II or the Radio Shack TRS-80 of the maker revolution. Something, and someone, in the next few years, is going to transform 3D printing from a niche market into a mass market, into something every business has to have in-house and every family will want to own. Vast new markets in software, materials and products will flow from that.
What Anderson's adventure is pointing to, however, is something even bigger. That is the merger of making with motors. 3D Robotics is in the build-your-own-drone business; these are smaller versions of the war machines that have transformed fighting against al-Qaeda from a defensive struggle to an offensive one.
But that's just the tip of the iceberg. Where it all leads is unknown, and that's the most exciting place for any business to be, at the bleeding edge. It's enough to make a great writer put down his pen.
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