This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cisco's Boom and Bust: a History Lesson

SAN JOSE, Calif. ( TheStreet) -- We all remember when Cisco (CSCO - Get Report), which reports its fourth-quarter results Wednesday at the bell, was once the biggest hitter in Silicon Valley.

In March 2000, at the peak of the dot-com boom, Cisco's market cap reached a whopping $555.4 billion, which saw the networker surpass Microsoft (MSFT) to become the most valuable company in the world.

Service providers and Internet companies were snapping up Cisco's hardware, and there was chatter that the market cap would reach a mind-boggling trillion dollars, although the subsequent dot-com bust brought Cisco -- and everyone else -- back to earth with a bump.

By 2001, the company's market cap shrank to around $151 billion and Cisco, like a dazed prizefighter, set out to learn some new moves.

Fast forward a decade; Cisco is on the ropes again. From poor execution to consumer spending weakness to intense competition, the body blows have been coming thick and fast. After delivering three consecutive quarters of weak outlook, investors have pushed the company's stock down more than 31% this year.

Cisco's market cap, incidentally, is currently at $76.56 billion.

John Chambers, the CEO who guided Cisco through the dot-com collapse, has vowed to lead the firm out of its current morass, drawing comparisons with the dark days of 2001 and 2002. "We've had to make big changes before," he said, during the company's third-quarter conference call. "Each time we have made these changes, we've emerged even stronger."

There are, however, some big differences between 2001 and 2011, according to Brian Marshall, an analyst at Gleacher & Company.

"I think the two situations are not related," he told TheStreet. "The dot-com bust was an over-build from false demand and Cisco's issues now are structural in nature and not dependent upon market forces."

Whereas all of Silicon Valley felt the impact of the dot-com bust, Cisco largely has itself to blame for its current woes, according to the analyst. "Cisco is a victim of its own doing -- for example, focusing on non-core businesses like consumer, and migrating off the path which made the company a tech bellwether such as innovative switching and routing products."

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CSCO $27.49 0.00%
HPQ $12.27 0.00%
JNPR $23.40 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs