I come to praise
, not bury it like the jackals tried to on Friday. When Cisco bought
a few months ago for billions of dollars, it seemed completely absurd. I know we initially sold some Cisco on this acquisition. We couldn't figure it out. How in the heck could Cisco explain away that dilution? Had they lost their minds?
Now it looks like we, the sellers, had lost our minds. Cerent competes in the world with
, Friday's monster-big IPO. It would have been valued like Sycamore, maybe even higher, most likely north of 10 billion, if it had been brought public. That means that had Cisco waited until Cerent was a public company to make a tender offer, it would probably have had to pay up, at least by a 30% premium. So, instead of moronically paying $7 billion for some little company, Cisco may have
$6 billion by striking when it did.
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We all know that Cisco is an amazingly well-run company. (Oh, as an aside, understand that I am a commentator here, not a reporter. I admit my bias, just like a
admits his bias. I am long Cisco and I like Cisco. I like it because it is well run and because it has made me a lot of money. If you think that is wrong, you have been brainwashed by those who think that it is wrong to talk your position. People talk their positions everyday. The difference between them and me is that I disclose!) Cisco dominates the plumbing infrastructure for the Net.
This acquisition shows me that Cisco even understands the wacky way we, on Wall Street, value Web infrastructure equipment plays. I am sure that someone in Cisco said, "You know we can't pay up because the stock market is absurdly valuing these things." And I bet that John Chambers said, "That's what
. That's what
. And now look, they have been passed by Yahoo and AOL. We can't have that happen here. We have to accept the stock market's valuation methods as a way of life."
Most American companies of the bricks-and-mortar variety play this naysayer game and they have been blasted alive for it. Cisco didn't. That's why it's a winner. That's why I hope short-selling scummers keep calling
with rumors of an imminent pre-announcement of bad earnings. So, I can buy more of this company at prices that are even better than I would get otherwise.
: We are going to be adding Sycamore shortly to the index of
Red Hots. It wouldn't be red hot without Sycamore's admission to the ranks.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo, Cisco, America Online, Redback, Broadcom, Exodus and Sycamore. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at