Upon leaving the army> after a half-century of service, General Douglas MacArthur remarked how "old soldiers never die, they just fade away."
That certainly would seem to be the fate of Cisco Systems (CSCO),
In a market which had previously favored many large-cap tech stocks like Amazon (AMZN),
It's hard to imagine today, but there was a time when Cisco was the world's hottest stock. Twelve years ago it would have been included in nearly every discussion about the U.S. economy and most certainly every mention of the U.S. stock market. It boasted a market capitalization of over $300 billion; today, it's just $100 billion.
In 1999, BusinessWeek called CEO John Chamber "the Internet's No. 1 salesman" in a cover story about Cisco's plan to "rule the internet." Another writer gushed that "a bet on Cisco is a bet on the pure unadulterated growth of the Internet," concluding that "no matter how you cut it, you've got to own Cisco." And many investors did.
Cisco's Shrinking Piece of the Pie
Source: Bloomberg, Rosewood Research
The internet did take off as Chambers predicted, with the number of worldwide users growing 444% over the past ten years. But Cisco, and its importance in the markets, did not -- despite net sales more than doubling over the same period.
Back in 2000, Cisco accounted for over 15% of the Nasdaq-100 index, tradeable today via shares of PowerShares Nasdaq 100 (QQQQ)
The point is that the internet did grow, as did Cisco's sales and earnings. But a company and its stock are two different things, and after more than a decade, the company's valuation and price action have stagnated.
When Cisco and other former leading companies like Motorola (MSI)
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC.