Rumors of Facility Closures and Looming Layoffs Paint a Bleak Picture for 3D Systems

As a rule I generally don’t like to trade in rumors, but I’ve now heard from several anonymous sources, at least one of them quite reliable, from within 3D Systems that the last year of business disappointments has finally started to catch up to them. And this morning’s abrupt announcement of the resignation of the public face of 3D Systems, CEO Avi Reichental, doesn’t bode well for the future of the company. This year has seen 3D Systems dealing with a string of disappointments, including astounding drops in stock prices and a potentially devastating $11 million arbitration loss, leaving one of the largest 3D printing companies in the world struggling to hang on to their market share (not that their primary competitor Stratasys is faring much better).

Anonymous sources tell us that yesterday morning several 3D Systems executives and representatives from the human resources department advised several departments in the Andover, Massachusetts facility that they were being closed down as a cost-saving measure. They were told that the closure would happen by June 30, 2016–however, the general feeling is that more realistically the facility would be closed by the first of the year. Andover currently employs about 80 to 120 employees, including the Projet and Cubejet engineering team mostly made up of ZCorp holdovers), and the Geomagics software group. The facility also houses the Projet manufacturing team, customer service operations, several smaller software services, print services and the ceramics division.

The source said that while many at the Andover facility were at risk, some members of the team, managers and team leaders (“white collar workers”), would be offered transfers to other facilities. This offer would include a $20,000 relocation allowance and a 15% weekly salary incentive to stick around during the facility closure and stay with the company until transfer. For the management and team leaders who will not be offered transfers 3D Systems is offering a 20% gross salary incentive to stay on until the facility closing is complete.

While everyone was shocked and upset by the timing of this news, several employees told me that they were not especially surprised. Many employees believed that the arbitration ruling was a sign that the future of the company was probably going to be a bleak one. I have also heard unconfirmed rumors of a second facility being closed soon, and the speculation is that the target is the recently opened Culinary Labs facility in California. 3D Systems has struggled to make their food 3D printing division profitable since acquiring Sugar Labs back in 2013, with the release of the ChefJet Pro 3D printer being delayed multiple times.

So how and why did this happen to a company that just three years ago was riding a wave of stock market success, unprecedented media attention and popularity? People will be speculating on what went wrong for years to come, but speaking with several 3D Systems employees, both past and present, has painted a somewhat telling picture. The primary reason given is that this is allegedly the result of years of executive mismanagement. Accusations of exorbitant bonuses and salary increases at the top while everyone else had pay frozen and were given little opportunities for advancement were common, as was the dysfunctional nature of a company that had been stitched together from dozens of acquired companies. While the executive teams have taken significant pay cuts recently, many saw their salaries as still too high given the company’s performance, and the pay cuts accomplished very little, only seeming to delay the inevitable.

The Frankensteinian nature of 3D Systems has always been a worry to many in the industry. The company, seemingly desperate for innovation and a desire to meet impossible promises to investors and an eager public, tried to simply buy their way to success. Over the last few years the company has made more than a dozen high-profile purchases of startups, several of them completely untested with no plan for commercialization. As the spending spree started to add up and 3D Systems stock dipped lower and lower many investors had enough and filed a class action lawsuit, claiming that they were misled by company leadership about the their production capabilities and the long-term growth potential of 3D Systems.

Integrating acquired companies into an existing one is always difficult and often leads to growing pains as they settle into their new roles. But it seems like adding so many companies so quickly made it virtually impossible to pull together a unified corporate culture. Many of 3D Systems’ recent acquisitions included high-paid executive or management positions, making the already top-heavy company even more unbalanced. A commonly recurring complaint from employees has been that many managers tended to look out for themselves not the company as a whole. Combine all of that with accusations of the company allegedly cutting out resellers from large deals and contracts, accusations of alleged unethical sales tactics and what some have called deliberate obfuscation of their technologies’ actual capabilities, the unrest and discord has been building from all sides.

3D Systems’ former CEO Avi Reichental.

With more than sixteen top-level executives and board members, many with what seem to be overlapping or extraneous positions, the strain has been threatening to pull the company apart for years. And with each executive position complete with its own team of underlings, the uneven and often indecisive management team left many employees feeling lost or confused about the directions of their projects, causing further unrest. Many will place the blame squarely on now-former-CEO Avi Reichental, and that isn’t entirely unjustified. He has always been known as a bit of a micromanager, and his public persona will do little to stem accusations that he’s oversold what 3D Systems and their technology can do. But if he was the only executive making poor decisions for the company, why hasn’t anyone on the board stepped in before now?

It is doubtful that 3D Systems as a company will die or dissolve; companies that size rarely do. But to keep the company from coming apart at the seams, stem the high turnover rate and loss of top level talent who often quickly flee to better paying companies and maintain the integrity of their worldwide resale and distribution network, they are going to have to lose a lot of dead weight. Going forward it is clear that 3D Systems needs a massive restructuring at the executive level, and while this is simply speculation on my part I seriously doubt that Reichental will be the only top level executive to step down in the coming weeks.

I have sent several emails to 3D Systems yesterday afternoon and throughout the evening to confirm these rumors, and even held off on submitting this article for a day to give them time to respond. But unfortunately all of my attempts to contact them have so far gone unanswered. I’ll update this article as new information comes available. If you are a current or former employee of 3D Systems with more information please feel free to email me directly, or to the primary 3DPrint.com email: either way, your anonymity is guaranteed.  If you would like to discuss these rumors publicly along with Reichental’s resignation then check out the 3D Systems forum on 3DPB.com.