SAN FRANCISCO -- Paul Johnson recalls that in the early days after

Cisco

(CSCO) - Get Report

went public -- exactly 10 years ago this month -- detractors assumed the young company's days were numbered. "As soon as

IBM

(IBM) - Get Report

and

Digital Equipment

begin trying to go after the networking equipment business, Cisco will be finished," is how the argument unfolded, says Johnson, a New York-based analyst with brokerage

Robertson Stephens

. His response, regarding when IBM (which never became a networking player) and Digital Equipment (or DEC, which nearly went out of business trying) would begin to exert themselves: "They are."

This quaint yarn is germane because Johnson sees the same thing happening now in what he calls "next-generation networks." If he's right, the ramifications for the companies involved and the investors who own their stocks are enormous.

The 22 companies that make up Johnson's next-generation universe (listed below) are distinct from what he now identifies as the "enterprise networking" segment. This is a good tech-stock history lesson. If IBM and DEC were the heart of the mainframe era and

Dell

(DELL) - Get Report

and

Compaq

(CPQ)

have been the soul of the PC era, then Cisco,

3Com

(COMS)

,

Cabletron

(CS) - Get Report

and others are at the center of the waning enterprise networking era. They've derived the bulk of their revenues selling gear to big businesses or enterprises.

The new breed supplies so-called next-generation networks. These are brand-new systems to handle Internet traffic, including the voice, data and video transmissions that will be part of the future of communications.

The customers are "carriers," broadly defined as the service companies springing up to serve these new markets, like

Qwest

(Q)

,

Rhythms NetConnections

(RTHM)

and

MCI WorldCom

(WCOM)

, and they write great big checks, unlike enterprises, which simply write big ones.

In Johnson's worldview, the new companies are making exactly the same headway against Cisco as the San Jose, Calif.-based giant once made against its elders.

Some context: Johnson's entire group of newly public companies is worth $160 billion, and only

Emulex

(EMLX)

has been public for more than a year. Cisco alone is worth $450 billion. The group has annualized revenues of about $2.5 billion and is growing 30% from one quarter to the next. Cisco's annualized revenue is $16 billion, but its sequential growth is just 12%.

The conclusion is clear. Today's gorilla (note: Johnson is co-author of last year's

The Gorilla Game, An Investor's Guide to Picking Winners in High Technology

) still dwarfs the challengers. But their growth is faster, and Johnson maintains that they've gained a technological advantage over Cisco as well.

"Out of this group of companies will emerge another Cisco, another

Bay Networks

, another

Cascade Communications

, et cetera," says Johnson. The point is telling. Each company made buckets for investors, and every one of the acquired giants like Bay, Cascade and

Ascend Communications

stumbled plenty of times along the way.

Not surprisingly, Johnson shies away from picking winners and losers here. Most of the companies on the list are Robertson Stephens banking clients, and a specialized firm like Robertson, a unit of

FleetBoston Financial

TST Recommends

, earns its keep by focusing on the challengers more than the incumbents. (Cisco has an internal investment banking team that undoubtedly is the rival of Robertson's.) Johnson rates each of the 22 newbies a buy, effectively taking himself out of the stock-picking game.

This baked-in conflict doesn't detract from the thesis. From this group of wannabes will come the next winners. Johnson identifies as the chief challengers to Cisco public companies

Juniper

(JNPR) - Get Report

,

Redback Networks

(RBAK)

,

Extreme Networks

(EXTR) - Get Report

,

Foundry Networks

and

Alteon WebSystems

(ATON)

.

Avici Systems

and

Cosine

are two closely held firms he highlights as well.

Among the publicly held challengers to

Lucent

(LU)

,

Nortel

(NT)

,

Alcatel

(ALA)

and

Siemens

-- the incumbent makers of equipment for voice and video networks -- Johnson includes

Clarent

(CLRN)

,

MCK Communications

(MCKC)

and

Sycamore Networks

(SCMR)

. Private challengers include

Jetstream Communications

and

Taqua Systems

.

Of course, there can be only one next Cisco, which means that there'll be massive consolidation in this segment. Seeing as every company on the list trades for an astronomical valuation, Johnson notes that the only company other than Cisco that can buy them is one another. And so they shall.

Meanwhile Cisco -- like every great gorilla -- certainly aims to be the next Cisco as well. Johnson reports that Cisco acquisition

Cerent

intended to have 2000 revenue of between $150 million and $200 million. Now it looks as if Cerent, under Cisco, will ring up sales more like $800 million to $1 billion.

That's pretty compelling growth for a fuddy-duddy of a company and explains why Cisco is flying high, despite the competitors nipping at its heels.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.

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