It continues to be a long, hard road for Meg Whitman and Hewlett-Packard (HPQ) back to relevance, to say nothing of profitability. Let’s face it: They’re between the rock of a slumping PC market and a hard place of shrinking margins in their printing business. The good news is that the stock price continues to hold on to its gains over the past year, rising over 70% in that time frame, including almost 68% year-to-date.
But Whitman and Co. will continue to have to find opportunity in a growing markets that are also, you know, profitable.
A Growing Market
H-P’s latest market move has the potential to tick both boxes: The Register reports that at a conference in Beijing, Whitman announced HPQ is developing a 3-D printer it hopes to bring to market in 2014. And the upside could be huge –according to David Reis, CEO of 3-D printing manufacturer Stratsys (SSYS), the market today is worth around $3 billion in revenues, with an expectation that it will double in size by 2016.
All of which suggests Whitman’s efforts, if they are successful, can land HPQ a footprint in the market, and provide a boost to HPQ’s growth prospects.
3-D printing isn’t necessarily a new industry, but it’s still in its infancy in terms of growth potential. The technology is based on producing three-dimensional products through a series of layering of plastic or other materials according to directions provided by a computer program. Jewelry, tools, dental molds, even small guns are just some of the products being produced today through the technology. Indeed, while the product set may not be limitless, new ways to use the technology for personal, industrial and medical purposes offer the promise of huge growth.
The industry’s massive growth potential has some big players looking to fill in parts of its ecosystem on full notice. Microsoft (MSFT) announced in July that it will provide full support for 3-D printers in its next update (Windows 8.1) to its Windows operating system.
HPQ ‘s Competition
It’s the growth opportunity that’s driving Whitman to the table, but there she will find some entrenched competitors beyond SSYS, including 3D Systems (DDD), one of Louis Navellier’s picks in his Emerging Growth Portfolio. Navellier bought 3D in December 2012, and the $353 million in annual (12/30/12) revenue company is up over 60% on strong earnings and revenue growth. DDD is a formidable competitor despite its small size, and indeed, Jeff Reeves suggested that it might make sense for HPQ to simply buy them up with some of its huge pile of cash.
The bottom line for Hewlett Packard is it needs to find new channels of growth, and building a new platform on its existing printing business — still a legacy operation for HPQ — is one place where the opportunity to grow may actually pan out.
So go ahead and keep putting some of that $13 billion in cash war chest toward this 3-D printing effort. At the very least it’s a market with growth ahead.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he is long MSFT.