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HP's Plans for 3D Metal Printing Could be a Game Changer

HP (NYSE: HPQ) CEO Dion Weisler recently revealed that his company planned to launch next-gen 3D printers that could produce metal objects. Weisler didn't reveal much else about the technology or the prices, but declared that HP would reveal more information next year.

Weisler stated that he was signaling "the intent" HP had in entering the market so it could initiate discussions with potential customers that wanted to print 3D metal objects. That announcement, along with HP's gradual entrance into the industrial 3D printing market, caused shares of popular 3D printing plays 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS) to slide over the past six months.

Why is HP making 3D printers?

HP split with Hewlett-Packard Enterprise (NYSE: HPE) in late 2015. HP retained the PC and printer businesses, while HPE kept the enterprise hardware and software units. At the time, HP was considered a slower-growth play than HPE, since global PC shipments were weak and printers were heavily commoditized.

Yet HP defied expectations by redesigning its PCs and focusing on higher-growth categories like 2-in-1s and premium laptops. As a result, HP's shipments rose as industry-wide shipments declined. Gartner's latest numbers reveal that HP's shipments grew 4.4% annually during the third quarter, as all of its rivals -- including Lenovo, Dell, Asus, Apple, and Acer -- posted single-digit declines. That's why HP's Personal Systems (PC) revenue rose 12% annually to $8.4 billion last quarter.

HP's Sprocket mobile printer. Image source: HP.

As for printers, HP diversified away from traditional inkjet and laser printers with higher-growth niche products like mobile printers (for smartphones), industrial 3D printers, and multi-function printers that can simultaneously replace copiers and printers. HP also secured about 65 channel partners and scaled up by acquiring Samsung's (NASDAQOTH: SSNLF) printing business, which will boost the unit's margins and market share in the multi-function printer space.

HP's Printing revenue rose 6% to $4.7 billion last quarter as stronger sales of consumer printers offset a slight decline in commercial printer sales. But since commercial printers usually have higher margins than consumer ones, the unit's operating margin fell 310 basis points annually to 17.3%. Expanding further into 3D printing, especially with new features like metal printing, could help HP move well ahead of its rivals and boost its commercial printing revenues again and expand the unit's margins.