Mizzou, here is your CSCO whipping for the day. Jeff
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Cisco Passes $300 Bln in Market Value, Joining Microsoft, General Electric
By Scott Lanman
Cisco Passes $300 Bln in Market Value, Joining Microsoft, GE
San Jose, California, Nov. 23 (Bloomberg) -- Cisco Systems
Inc., the world's largest maker of Internet equipment, vaulted
past $300 billion in market value, becoming the third U.S.
company to do so after General Electric Co. and Microsoft Corp.
Cisco shares gained 1 to a record close of 88 1/2. That
gives San Jose, California-based Cisco a market value of $301
billion, based on 3.401 billion shares outstanding.
The company, which turns 15 years old on Dec. 10, is one of
the biggest beneficiaries of the Internet boom. In recent years,
it's used its dominance in corporate and educational networks to
gain a foothold in the much larger market for equipment sold to
phone companies. Cisco had sales of $3.88 billion in its most
recent quarter, up 49 percent from a year earlier.
``No one was able to foresee this,' said George Kelly, the
managing director at Morgan Stanley Dean Witter & Co. who brought
Cisco public in 1990. Cisco's ``markets are more dynamic and
robust than anyone could ever imagine.'
Few could have imagined the rewards, either. Cisco shares
have surged 700-fold since the company first sold stock to the
public in February 1990. An investor who bought 100 Cisco shares
at the IPO price of $18 would find the holdings worth $1.27
million today, accounting for eight stock splits.
Cisco's shares are the fifth-best performers on the Standard
& Poor's 500 Index since the company was added to the list on
Dec. 31, 1993.
Fastest to $300 Billion
Led by Chief Executive John Chambers since January 1995, San
Jose, California-based Cisco reached the $300 billion mark, as
well as $100 billion and $200 billion, in the shortest time of
any U.S. company.
Microsoft, at about $462 billion now, took about 23 years to
reach $300 billion in market value, while GE took about 106 years
since it was established. GE's market value stands at about $451
billion. The two have seesawed back and forth from the top spot
over the last week.
On Nov. 10, Cisco passed Intel Corp., the world's largest
computer-chip maker, to become the third-most valuable U.S.
company and No. 1 in California's Silicon Valley area, home to
many of the world's technology companies.
Of the 10 U.S. companies with the biggest market values,
Cisco is the youngest, excluding AT&T Corp. spinoff Lucent
Technologies Inc. Lucent first sold shares to the public in April
1996, and its spinoff from AT&T was completed in September of the
same year.
Lucent, North America's largest phone-equipment maker and
one of Cisco's biggest rivals, has more than 2 1/2 times Cisco's
revenue and a market value of $233 billion.
Of course, Lucent isn't making Cisco's life any easier.
Lucent is the biggest maker of equipment for telecommunications
companies, an area Cisco is counting on for growth. Lucent turned
up the heat earlier this year when it acquired Ascend
Communications Inc., a company whose data-networking gear
competes directly with Cisco's.
Humble Beginnings
Cisco was started by a husband-and-wife team who built a
piece of equipment called a router to connect two computer
networks at Stanford University in Palo Alto, California. The
couple, Leonard Bosack and Sandra Lerner, sold their 35 percent
stake in 1990 for about $170 million, according to Fortune
magazine. Today, 35 percent of the company would be worth $105
billion, more than Microsoft Chairman Bill Gates's wealth.
Cisco had just one venture-capital investment, $2.5 million
from Donald Valentine's Sequoia Capital in 1988.
Since Cisco went public, it's consistently met or topped
analysts' earnings forecasts, acquired more than 40 companies to
fill gaps in technology and find new niches, and entered and
dominated new markets.
It's also been lucky, said Morgan Stanley's Kelly.
``Cisco always had a focus on Internet connectivity
solutions, and no one ever thought the Internet would be what it
is today,' he said.
No. 1?
If Cisco stock continues to rise more than twice as fast as
Microsoft and GE's, as it has this year, Cisco could pass both
companies in 2001.
It's already vaulted past the likes of International
Business Machines Corp., the world's largest computer maker, and
Wal-Mart Stores Inc., which has almost 40 times as many employees
as Cisco's 23,500.
Cisco trades at 89 times expected earnings of $1.00 a share
in its fiscal year ending next July. Microsoft trades at 55 times
expected fiscal 2000 earnings.
Many analysts and investors say Cisco's valuation is
justified, given the company's dominance and its surging revenue.
``There's no other company on the face of the planet like
it,' said Paul Weinstein, an analyst at Credit Suisse First
Boston, who's covered Cisco since 1991. He rates the shares a
``strong buy.'
Though Weinstein downplayed the significance of the $300
billion mark, he said Cisco is ``the model for all other
companies that want to deliver consistent earnings to
investors.'
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