Buried in its Q3 financial report for 2023, 3D Systems (NYSE: DDD) highlighted the possibility of a major move that was missed by most of the general public and media: the potential sale of its software business, Oqton.
“During the quarter ended September 30, 2023, the Company concluded that it is more likely than not that it will sell or otherwise dispose of Oqton MOS, a business which the Company acquired in 2021. … As the present value of the estimated future cash flows expected to result from the use and eventual disposition of the asset group is less than the carrying value of the asset group, during the quarter ended September 30, 2023, the Company recognized $13,597 of impairment charges related to the acquired technology and trade names included in the Oqton MOS asset group.”
The Belgian firm was an exciting player in the software segment, having developed artificial intelligence (AI) for manufacturing execution systems (MES). Upon the purchase of the company in 2021, 3D Systems bundled it with its other software divisions, including Geomagic, and other acquisitions, like Additive Works. Altogether, the Oqton business now represents a comprehensive suite of tools.
The likelihood of selling the unit doesn’t appear to be a comment on Oqton itself, but rather 3D Systems’ necessity to streamline and dispose of assets. Financial challenges marked by a reduction in total revenue and net loss spurred this move. 3D Systems believes it can bolster its financial footing by concentrating on more profitable or central aspects of its business through capital generation or decreasing operational intricacies and expenses.
The firm also announced a reduction in employee numbers by roughly 6 percent, mainly in corporate and business support roles. Alongside job cuts, 3D Systems seeks to internalize the production of certain metal printer platforms to boost the production cycle from development by combining engineering and manufacturing.
Oqton monitoring quality in welding.
Estimating Oqton’s effectiveness as a software suite and business is tough from the outside, but it appeared to be an ideal package, at least on paper. The prospect of having a single tool provider for simulation, quality control, print preparation, and fleet management is attractive. The notion of integrating “AI” as a significant component of the suite also seems like it would spark customer interest and additional investment, considering the buzz around the technology.
It could be that the idea of AI isn’t all that it’s cracked up to be, lending credence to the philosophy of non-AI software firms like Dyndrite, or that Oqton wasn’t applying AI in the right places, like AI autocorrect startup 1000 Kelvin. Or Oqton may be a perfectly great software developer, but that 3D Systems just isn’t in a position to hang onto it in the current economic climate.
If this last scenario is the case, whoever does end up buying the business unit could pick up a valuable asset and turn themselves into an AM software leader and conquer what Additive Manufacturing Research suggests is currently a $1.2 billion market, according to its “Opportunities in Additive Manufacturing Software Markets 2023” report. Who would buy it is anyone’s guess, but because private equity (PE) took 3D Systems’ Quickparts service bureau, it wouldn’t be out of the question for a PE firm to acquire Oqton.
Given the fact that 3D Systems isn’t the only one being hampered by the current financial situation, one wonders if its long-time competitor, Stratasys (Nasdaq: SSYS), might end up selling its software division, GrabCAD. This would echo the pattern followed earlier, in which 3D Systems divested its service bureau division only for its competitor to do the same for large chunks of Stratasys Direct Manufacturing.
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