Desktop Metal to Lay Off 12% of Workforce & Consolidate Operations

Massachusetts-based additive manufacturing (AM) startup, Desktop Metal, announced on Monday, June 13, that the company will lay off 12% of its employees. This comes alongside a general consolidation of its operations following a string of acquisitions last year, the company stated in a press release.

Calling it a “strategic integration and cost optimization initiative,” Desktop Metals’ CEO and founder, Ric Fulop, explained, “While the acquisitions we completed in 2021 contributed to [significant] growth and to our total market opportunity as we focused initially on harvesting product and go-to-market synergies, they also increased our cost base and global facilities footprint. …[Today’s announcement] is the result of a comprehensive portfolio and business operations review conducted across all functions at Desktop Metal.”

The company said that it envisions the changes associated with the the plan, along with the layoffs, will save as much $100 million over the next two years. On the two largest of the five takeovers Desktop Metal made last year, ExOne ($575 million) and EnvisionTEC ($300 million), the company spent almost $900 million. When these acquisitions originally went through, the S&P 500 was approaching its all time-high, and the Federal Reserve was still months away from announcing it planned to make a total of seven interest rate hikes in 2022. Now, the company’s current market cap is significantly less than the total it paid for ExOne and EnvisionTEC.

Whether or not Desktop Metal still would have made every one of those acquisitions under current financial conditions, it’s safe to assume that, at the very least, it could’ve gotten a better price tag for all its purchases. On the other hand, a 12% reduction in workforce when you’ve taken in that many additional companies under your umbrella seems, if anything, minimal, and the company’s financial outlook could easily improve in the short term from the announcement. That of course also largely depends on how financial markets, in general, are doing.

Beyond that, it will be necessary to see what exactly its “strategic integration” entails. Desktop Metal’s biggest issues to tackle are all related to what the company presumably also sees as its greatest strength: the diversity of its portfolio. This certainly could become a real asset. Once more, however, it depends on factors largely outside of its immediate control—in this case, the strength of the overall AM industry.

Basically, if a sector within the industry in which Desktop Metal has a stake is doing well, then it will be an advantage to be positioned within that sector, and if it’s not, then it won’t be an advantage. Interestingly then, the diversity of the company’s portfolio is at the moment functioning more as a source of risk than as an insurance policy. By not choosing to just focus on one thing, the company is risking spreading itself far too thin.

At the same time, narrowing its focus could very well be part of Desktop Metal’s strategic shift. Moreover, there’s significant positive momentum in AM’s favor right now, including in multiple sectors in which Desktop has a foothold. To reiterate yet again, many variables are at play in determining the direction the company takes, so it’s difficult to interpret exactly how the moves Desktop Metal has just announced will turn out.

Images courtesy of Desktop Metal