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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.

Cisco

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."

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