Buried in its Q3 monetary report for 2023, 3D Techniques (NYSE: DDD) highlighted the potential for a serious transfer that was missed by many of the basic public and media: the potential sale of its software program enterprise, Oqton. In its Kind 10-Q, filed on November 9, 2023, 3D Techniques famous:
“Through the quarter ended September 30, 2023, the Firm concluded that it’s extra doubtless than not that it’s going to promote or in any other case get rid of Oqton MOS, a enterprise which the Firm acquired in 2021. Oqton MOS represents a discrete asset group throughout the Industrial Options section, as its identifiable money flows are largely impartial of the money flows of different teams of property and liabilities throughout the Industrial Options section. Based mostly upon the Firm’s expectation that it’s going to promote or in any other case get rid of Oqton MOS, the long-term money circulate forecast for this asset group was revised. The revised long-term money circulate forecast indicated that the carrying quantities of Oqton MOS’s long-lived property, consisting primarily of product expertise and commerce identify intangible property initially recorded when Oqton MOS was acquired, might not be recoverable. Accordingly, the carrying worth of Oqton MOS’s long-lived property was examined for impairment based mostly upon an estimate of the related discounted future money flows. This honest worth measurement strategy required using Degree 3 honest worth measurement inputs, as outlined in Word 19. As the current worth of the estimated future money flows anticipated to end result from the use and eventual disposition of the asset group is lower than the carrying worth of the asset group, throughout the quarter ended September 30, 2023, the Firm acknowledged $13,597 of impairment prices associated to the acquired expertise and commerce names included within the Oqton MOS asset group.”
The Belgian agency was an thrilling participant within the software program section, having developed synthetic intelligence (AI) for manufacturing execution methods (MES). Upon the buy of the corporate in 2021, 3D Techniques bundled it with its different software program divisions, together with Geomagic, and different acquisitions, like Additive Works. Altogether, the Oqton enterprise now represents a complete suite of instruments.
Oqton’s software program reduces time workers spend on repetitive duties by automating nesting.
The choice to doubtless promote the unit, due to this fact, doesn’t appear to essentially replicate on Oqton itself, however 3D Techniques’ have to shed property and streamline its operations. The transfer comes amid a interval of economic challenges, as evidenced by a lower in complete income and a internet loss. By specializing in extra worthwhile or core areas of its enterprise, 3D Techniques appears to assume that it might strengthen its monetary place both by means of fast capital era or by lowering operational complexities and prices.
Moreover, the corporate introduced plans to scale back its headcount by about 6 p.c, primarily of workers in company and enterprise assist roles. Together with the job cuts, 3D Techniques stated it aimed to in-source the manufacturing of some steel printer platforms to enhance cycle time from improvement to manufacturing by co-locating engineering and manufacturing.
Oqton monitoring high quality in welding.
Whereas it’s troublesome to find out simply how efficient Oqton is as software program suite and enterprise from the skin, it appeared like a really perfect bundle at the least on paper. Who wouldn’t need a single supplier of instruments for simulation, high quality management, print preparation, and fleet administration? The very idea of “AI” as a key piece of the suite additionally appears as if it will drive buyer adoption and additional funding, given how a lot hype the expertise has acquired.
It may very well be that the concept of AI isn’t all that it’s cracked as much as be, lending credence to the philosophy of non-AI software program companies like Dyndrite, or that Oqton wasn’t making use of AI in the fitting locations, like AI autocorrect startup 1000 Kelvin. Or Oqton could also be a wonderfully nice software program developer, however that 3D Techniques simply isn’t ready to hold onto it within the present financial local weather.
If this final state of affairs is the case, whoever does find yourself shopping for the enterprise unit might choose up a helpful asset and switch themselves into an AM software program chief and conquer what Additive Manufacturing Analysis suggests is at the moment a $1.2 billion market, in accordance with its “Alternatives in Additive Manufacturing Software program Markets 2023” report. Who would purchase it’s anybody’s guess, however as a result of personal fairness (PE) took 3D Techniques’ Quickparts service bureau, it wouldn’t be out of the query for a PE agency to accumulate Oqton.
Given the truth that 3D Techniques isn’t the one one being hampered by the present monetary scenario, one wonders if its long-time competitor, Stratasys (Nasdaq: SSYS), may find yourself promoting its software program division, GrabCAD. This is able to echo the sample adopted earlier, through which 3D Techniques divested its service bureau division just for its competitor to do the identical for giant chunks of Stratasys Direct Manufacturing.
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