QUALCOMM and Cisco future prospects and risk evaluation

QUALCOMM future prospects can be understood from a SWOT analysis point of view given that it will provide a strategic view of the firm’s businesses and its operations. The analysis will offer a comprehensive view of the strengths that can be used to overcome weakness and the potential opportunities that will enable the firm to face any possible threats. The strengths of the firm arises from a strong market base and its focus on research and development enables the firm to continue being leader in the development and commercialization of the a CDMA (Code Division Multiple Access) which is a digital communications technology, OFDMA (Orthogonal Frequency Division Multiple Access) technologies and LTE (Long Term Evolution) that are used in wireless applications for cellular communication (QUALCOMM INCORPORATED, 2015). The firm also owns some substantial intellectual properties related to the above mentioned technologies and also develop other key technologies used in the development of tablets and handsets which largely play part in the demand for the end-user. The firm holds about 12,600 US patents some of which are pending application for the CMDA and other related technologies (QUALCOMM INCORPORATED, 2015). These products enable the firm to have an expanded customer base. It also enjoys format diversifications and which enables it to a large pool of customers. This goes hand in hand with a strong recognition of the brand and formats that are very innovative. In addition to a wide geographical coverage, the firm boasts of a firm client base in its loyalty program. The customer base installed is huge and the firm has entered into long-term contracts with them. Another source of strength is the strategic alliance the firm has been able to forge with foreign partners like Casino who offers exchanges for best practices (QUALCOMM INCORPORATED, 2015).  However, the firm is faced with various weaknesses that have to be considered by potential investors. A major weakness is it has weak presence in technologies that are non CDMA. The recall for the brand is also limited given that the firm does not engage in considerable global marketing meaning that faults in products may not be rectified.  

The opportunities that the firm can advantage of include a subscriber base that is growing constantly. In addition there is a rapid increase in the adoption of the 4G and 3G technologies informed the fact that customers are increasingly acquiring multimedia assets and graphics that are handheld. On the other hand, the firm is faced with various threats with the major ones relating to policies on SDO intellectual property (QUALCOMM INCORPORATED, 2015). Such threats also involve various latent litigations and in the market landscape adverse economic conditions globally that threaten growth.

The Cisco System brand can also be analysed in terms of future prospects and on the basis of SWOT analysis. The strengths of the firm emerge from the diversity in the products and services it offers to its large customer base. This is a highly respected brand name as a result of its quality products and services known for their reliability and effectiveness making the brand to a very trusted one. The firm also embraces research and development which translated to the aforementioned quality (Cisco systems, 2016). The key strength is thus satisfied customers who help to promote the brand image. The firm is also credited with its high regard for effective governance and adherence to its ethical code forming part of its internal strength. The employees of the organizations are highly regarded leading to their excellent satisfaction. Such a firm code of ethic promotes honesty integrity and transparency which are indicated in the firm social responsibility engagement. For instance, the partnership between the Cisco Networking Academy and DeafAid, an NGO in Kenya has been of great help to the young people with hearing impairment in acquiring job skills which valuable enough to improve their economic situations and thus their standing in that society (Cisco systems, 2016). Various strategies are in place for financing some qualified customers for building, maintaining and upgrading the networks, a competitive advantage in getting business more so for the infrastructure projects.  .The firm is, on other hand, faced with some weaknesses beginning with a management structure that is too complex due to issues such as oversized workforce.  The other weakness includes its declining markets share for storage networking. The firm also has weak presence in BPO markets and technologies as compared to the market leaders in the global economy (Cisco systems, 2016). However, various opportunities are available to the firm chief of the m being potential for expansion by forming strategic acquisitions and alliances. The current infrastructure for smart grid, mobile broadband and Wi-Fi Home Calling could also increase demand for Cisco products and services. Other potential areas for growth include data mining or intensive applications (Virginia’s Community Colleges, n.d). The firm is faced with various threats that may hinder its future prospects. The market is awash with Open Source Competitors masking the firm to encounter very competitive rivalry. Such competitors include Avaya, Brocade, and Juniper which is the closest competitor more so in securities market – firewalls, VPN (Virginia’s Community Colleges, n.d).  The firm will have to brace an industry that is fast paced and which could make it to lose market share very quickly.

The trend in financial performance for both Qualcomm and Cisco indicate Qualcomm as being in a better position to increase the wealth of the owners due to its operations. As a major player in provision of generational wireless technologies, the firm operations continue to show a better growth informed by increasing conversion of wireless devices and networks to 3G or 4G around the globe. The financial statements indicate that Qualcom had a ROE (return on equity) of 17. 95 percent with a ROA (return on assets) being of 10.90 percent for the year 2016 in the third quarter (QUALCOMM, 2016). Even though the previous year had seen the rate of returns declining, the firm was able bounce back and thus improving return on investments better than Cisco. Though the return on equity level is low as compared to historical data or results, the increasing financial leverage was able to some, to some extent, offset those effects. With this kind of performance and various patents, the firm can still continue to dominate the market for mobile network as new markets and even more users are changing to 3G and 4G (Morning star, 2016). This means that the firm can still continue to experience improved return on investment as seen in the dividend yield for January 2015 which stood at 4.22 percent , fairly good as compared to Cisco. Cisco on the other hand may not match Qualcomm in increasing the owners’ wealth.  This is because the firm faces a big threat in networking market dominance arising from the emerging rivals. Companies such as ZTE and Huawei have brought about stiff competition for products offered by Cisco creating a major threat to profits from its operations (Cisco systems, 2016). The firm had returns on equity stood at 16.89 percent and return on assets was 8.83 percent, lower than those of Qualcomm (Stock Analysis on net, 2016). Moreover, the firm’s Operating Profit Margin was also lower at 25.71 percent in comparison to that of Qualcomm at 27.57 percent.  Qualcomm‘s operating profit showed a considerable improvement. The 2015 fourth quarter revenue together with Earning per Share for this firm met the expected results, with a major increment in capital return, where a record $14 billion returns on capital was realized for to the benefit of stockholders (QUALCOMM, 2016).

The non-recurring items include the gain on sales of wireless spectrum on the income statements of the QUALCOMM Inc. They were in real sense a part of operating activities’ gain. The other item includes the issuance of debt on the financial statements of Cisco INC which is actually a loss.  These items may influence on the determination of the profitability of the firm and therefore should be considered. For Qualcomm INC, the earning persistence is obtained from the revenues associated with non-monetary exchanges, tax compensation, and gains from the investments such as marketable securities. For the Cisco financial statements, earning persistence is seen in the form of interest income and the provision of income arising from the tax benefits.  

References

QUALCOMM (2016). Quarterly results. Retrieved from: http://investor.qualcomm.com/results.cfm

Virginia’s Community Colleges (n.d).Cisco Systems Business Portfolio for BUS100. SWOT analysis. Retrieved from: https://sites.google.com/a/email.vccs.edu/cisco-systems-business-portfolio-for-bus100/swot-analysis

QUALCOMM INCORPORATED (2015). Form 10-K. For the Fiscal Year Ended. Retrieved from: http://investor.qualcomm.com/secfiling.cfm?filingID=1234452-15-271&CIK=804328

CISCO SYSTEMS, INC(2016). Form 10-K. For the Fiscal Year Ended.

 

Morning star. Retrieved from: http://www.morningstar.com/markets.html

Stock Analysis on net(2016). Profitability Analysis. Qualcomm Inc. Retrieved from: https://www.stock-analysis-on.net/NASDAQ/Company/Qualcomm-Inc/Ratios/Profitability