UPDATE 2-3D Systems gross margin slips, shares slide

Tue Apr 29, 2014 1:19pm EDT

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(Adds details from conference call, analyst's comment; updates share movement)

April 29 (Reuters) - 3D printer maker 3D Systems Corp's quarterly gross margins fell for the first time in two years, raising concerns about its growth prospects in an industry, which is drawing the attention of bigger technology firms.

3D Systems shares fell as much as 11 percent, making the stock one of the top losers on the New York Stock Exchange on Tuesday morning.

The company said on Tuesday that its gross margin expansion was being delayed as it printers continued to be a major source of revenue.

3D Systems printers, priced at less than $1,000 to about $1 million, generate lower gross margins than its printing materials and services.

The company also said it now expects to get most of the revenue and profit it forecast for 2014 in the second half of the year when it launches new products and services.

The nascent 3D printer industry has generated widespread interest in the last couple of years. It has, however, also drawn criticism from some analysts for being overhyped and immature.

HP Co, which plans to tap into the market, said in March it would focus on selling to businesses, rather than on making cheaper consumer printers.

"We take companies like HP very seriously, we also don't underestimate the degree of complexity that they would have to position themselves as a relevant and meaningful player," Chief Executive Avi Reichental said.

3D Systems reported a better-than-expected 45 percent jump in first-quarter revenue, but gross margin fell 130 basis points to 51.1 percent.

The company's revenue increased to $147.8 million in the quarter ended March 31 from $102.1 million. Sales of 3D printers rose 60 percent to $50.7 million.

"... As we place more printers faster, we expect an overall gross profit margin expansion trend over the next few periods," Chief Financial Officer Damon Gregoire said on a conference call with analysts.

Gregoire said faster growth in printing material sales and higher revenue contributions from software and services would improve margins.

Net income attributable to 3D Systems fell to $4.9 million, or 5 cents per share, in the quarter from $5.9 million, or 6 cents per share, a year earlier.

Excluding items, the company earned 15 cents per share, in line with analysts' average expectation.

3D Systems, which named Black Eyed Peas rapper will.i.am chief creative officer in January, reaffirmed its full-year forecast of adjusted earnings of 73 cents-85 cents per share on revenue of $680 million-$720 million.

The company's shares, which have lost nearly half their value this year, were trading at $43.73 in afternoon trading on Tuesday. Shares of rival Stratasys Ltd's fell as much as 6 percent while those of ExOne Co fell 5 percent.

3D Systems stock traded at almost 19 times its earnings, while that of Stratasys traded at 25 times, according to Thomson Reuters StarMine. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty and Joyjeet Das)

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