3D Systems announced a major “restructuring” initiative, but what could this mean?
When a company talks about “restructuring”, they’re really meaning “cutting costs” and doing so in a systematic and sometimes even ruthless manner.
3D Systems explained:
“The company also announced the next evolution of its restructuring initiative designed to improve operating efficiencies throughout the organization and drive long-term value creation. This additional phase of the restructuring initiative will target to deliver expected annualized savings of $45 – $55 million by the end of 2024, with the majority of the cost takeout to occur by the end of the first quarter of 2024. The initiative is primarily targeted at continuing to rationalize headcount and geographic locations in all functions across the company.”
That’s a huge amount of cash, and it seems to be mostly driven by “soft” revenue predictions for the near future. Evidently the bulk of the cost savings will come from staff layoffs, which we now must expect to see over the upcoming few months.
Were they not to do this, it’s likely their stock price will fall further, because a stock price reflects the amount of profit a company is expected to make. If the expected profit is less, then the stock price will go down and shareholders will be notably unhappy. To restore the required amount of profitability, they are cutting costs and planning on receiving the same amount of revenue.
In retrospect this move is perhaps not so surprising: the company’s stock price and valuation has plummeted over the past few months. In fact, the company as of this writing is worth 64% less than it was in the summer. That’s no doubt concerning to investors, and the company is taking action.
Also interesting is how this relates to their now expired offer to take over Stratasys. Their offer included an estimate of about US$100M in savings if the two giants combined. Curiously, that’s about double the amount of the new restructuring plan. One wonders if the work required to investigate the merger potential identified a pile of savings to be had. Now it seems they’re executing that plan on their own, or at least parts of it.
From a broader view, the weakness of 3D Systems sales might be a phenomenon being experienced by other 3D printer manufacturers. It’s entirely possible we may see other companies come up with their own restructuring plans in coming weeks as results are evaluated. It may be that 3D Systems got a head start via their work on the Stratasys proposal.
Via 3D Systems
