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Stratasys Ltd. (SSYS - Analyst Report), a 3D printing company, has entered into a merger agreement with a desktop 3D printing company MakerBot Industries LLC. As per the terms of the agreement, Makerbot will merge with a subsidiary of Stratasys in a stock-for-stock transaction.

The merger brings together two industry leaders and their 3D printing technology. The combined resources should result in improved products, which should help adoption.

Since desktop 3D printers are gradually gaining popularity, Stratasys should see demand increasing in the coming days. 

MakerBot came into existence in 2009 and played a significant role in the development of the 3D market. The company sold nearly 22,000 3D printers in 2009 and around 11,000 MakerBot Replicator 2 Desktop 3D printers in the last nine months. The share price of Stratasys surged 2.84% after trading hours.

MakerBot’s client base constitutes primarily of designers and engineers trained in CAD. The merger will provide MakerBot the world class infrastructure that it was looking for and would help it grow leveraging Stratasys’ infrastructure. We therefore, believe this is a natural progression for MakerBot.

Stratasys has taken the acquisition route to augment its 3D printing business. The companypreviously merged its operation with Objet Ltd. valuing the joint entity at $1.4 billion. The merged entity has further strengthened the company’s position in the growing 3D printing space. Prior to that, the company acquired Solidscape, Inc. for $38.0 million plus certain purchase price adjustments. New Hampshire-based Solidscape also helped Stratasys to strengthen its 3D printing capabilities.

The 3D printing business is particularly attractive for Stratasys because of rival Hewlett-Packard Company’s (HPQ - Analyst Report) decision to quit the market, as digital printing formed only a trivial part of its business portfolio. Again, the company is also witnessing an upward trend in direct digital marketing demand.

On the other hand, the company is apprehensive about its high-cost business model and stiff competition from big and small players like 3D Systems Corp. (DDD - Snapshot Report). Nonetheless, the acquisition of MakerBot is expected to improve the growth of its 3D systems business.

The company has a Zacks Rank #3 (Hold). Investors can also consider other companies in the technology space, such as Western Digital Corp. (WDC - Analyst Report), which has a Zacks Rank #2 (Buy).

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