Mba Microeconomy

SPIRENT COMMUNICATIONS PLC.
Spirent Communications PLC (Spirent) is a company that is currently headquartered in Essex in the United Kingdom. The company is listed in the London Stock Exchange under the trade name of SPT (London Stock Exchange Website 2012). The company is in the IT and telecommunications industry, it claims that it provides its customers with “the latest generation ofnetworking technologies” (Spirent Website 2012).
Investors that are looking to buy into the equity of Spirent will find that they will gain moderate returns to their investments. Investors that are looking for a three to five years investment will be interested in this company. Nevertheless, this is a good solid company that has reshaped itself a couple of times in order to adapt to the changingmarket.
Company & Current Market Overview:
From company records, it is stated that Spirent currently operates in the United States, Europe and Asia via its owned subsidiaries or through partnerships. The company continues to grow its presence in the Chinese and Asian Pacific markets, as this is one of their areas of concentration for their business development. (Statement of CEO 2012). What mustbe noted is that half of its turnover currently comes from the United States, 15% from Europe and 35% from the Asian market. Their growth in the Asian market will represent the future growth in the number of customers and also in the cash turnover for the company. Spirent states that there was a “16% increase in the Asian market” in 2011 compared to 2010. (Spirent Annual Report 2011).
Spirenthas the opportunity to continue to grow and to expand its product offerings because it has a favourable market opportunity in the telecommunication sector. The “telecommunications industry is one of the fastest-growing industries in the world characterized by significant technological changes. In most countries of the world mobile communications technologies have sought to replace fixed linetechnology.” (Lee, et al. P21).
However, in recent years we have seen EU and USA governments issue budget cuts that will undoubtedly affect their purchasing power. Sending shocking waves of caution to Spirent customers. This will bring about a slower growth in sales. One of the largest industry advocates, TIA, issued a press release in which they provide a forecast for 2012. The forecast showsthat the most growth in the industry will be in the wireless sector with an stunning 11.8% growth. In order to handle the demand Spirent will have to continue to make significant investments in their “...infrastructure, from upgrading networks from 3G to 4G to increasing the number of cell sites to improve coverage and capacity.” (CTIA Press Release, April 13, 2012).
The IT andTelecommunications industry has a large array of competitors. The geographic competition comes from the U.S., Europe and Asia. Spirents main competitors include: Agilent Technologies, Inc., JDS Uniphase Corporation and Anritsu Company. These three challengers are larger than Spirent, and have a more diverse portfolio of offerings. (Agilent, JDS, Anritsu website 2012). This means that these companies havemore money to spend on R&D. Also, as we have learned in economics, cash is king, and those companies have more of it than Spirent. The challenge that this represents for Spirent is in the strength of their partnerships with other IT manufacturers and innovators, so that they can maintain the cutting edge on the technologies that they can offer to its customers.
Despite their expected growth inthe Asian Pacific market, its growth is not likely to continue at the same rate as previous years. The financial annual report and the message from the CEO show that the company understand the challenges ahead, and does not expect two of its three segments to perform as well as they have in the past. Therefore, It is unlikely that the company will be able to match its epic revenues during their...