Cisco Eclipses Microsoft As 'Most Valuable Company'

Anonymous Coward writes: "'On an official basis on the Nasdaq, Cisco's stock closed up 1-9/16 at a record 79-3/8 while Microsoft eased 3/16 to 111-11/16. Based on those prices and on fully diluted stock totals from quarterly statements, Cisco ended the day with a stock market value of $579.2 billion, slightly ahead of Microsoft's $578.2 billion. On Thursday, Cisco briefly overtook Microsoft, earning the moniker of the most monied.' This is expected to continue. See NewsAlert's story for more details."

Stock evaluations are far from the only way to measure a company's worth, but they certainly are convenient. Cisco seems to have avoided much of the limelight (and searchlights) that Microsoft seems to lives beneath, though in a similar time period it's established a similar market dominance. Is it because Cisco doesn't live by "Embrace, Extend, Extinguish"?

Cisco won't be the last

There are other hardware companies waiting to eclipse Microsoft, as far as market cap is considered. If Microsoft keeps getting legal heat, their stock price will remain stagnant.

There are a number of other hardware companies that may eclipse Microsoft in the near future: Intel, NTT Docomo and Nokia. Granted, the value of the latter two is only about half of that of Microsoft.. but if the growth rate of the companies remains the same (for example, both Cisco and Nokia grew 1200% in the last 3 years, whereas Microsoft grew "only" less than 400%), the shift will happen.

Re:Is it because ...

Actually, the internet comes from Windows. Didn't you know that??? Duh. In fact, Windows 98 includes Internet version 5.

If you don't believe me, then go here [microsoft.com] and find out for yourself.

See, users with Windows 98, and I'm assuming 2000, don't need routers, phone lines, ethernet, modems, or any of that mess. Just get some of that power out of the wall, and watch it go.

more evidence that hardware is king

In the mid-90s, prognostication went along the lines that hardware makers, in a commodity business, were on the way out. It was important to "own the OS". However, with the success of open source (Linux/BSD/Darwin), enabled no doubt by the internet, the landscape has changed to hardware and service being the foci of promise. Can anyone say: IBM stinks? Right: I believe Microsoft stinks (in the long term...but that's why they are building PCs called X-box).

Re:Cisco... The Other Monopoly

Cisco is a monopoly as huge as Microsoft. Fewer people are aware, because it involves the 'invisible' part of computer usage that most of us take for granted. But because of their market share, Cisco can and does gleefully break interoperability. Their machines don't need to work with anyone else's machines. But if you aren't Cisco, your machines had damn well better work with Cisco's, or you won't have any customers.

This is an interesting comment that is true. &nbsp Although where I work has gone for the "cheaper" 3COM router solution, most everywhere has forked up the $$$ to buy Cisco products.

It is not obvious to me whether or not the monopoly is harmfull in this case. Cisco, I understand, actually makes good products. But is that any consolation when they can lock out competition, charge arbitrary prices, and in the future stop making good products because, like MS, they don't _need_ to make good products, just new ones. As of yet most of this hasn't come to pass, but it is a possibility as it is with any monopoly.

I think the issue alot of us (and Judge Jackson) had with Microsoft as a monopoly was not so much its marketshare (which it's had for some time on the desktop) but its business practices. &nbsp And this included forcing the "bundling" of their software on every PC sold (although for awhile, there wasn't much choice other than OS/2 or maybe Be or some of the smaller OSs), blah, blah, I think everyone by now knows the story.

If Cisco shows it has its marketshare based on a quality (albeit expensive) product and people buy it, then what can you say?

Standards and the Monopoly

Cisco is a monopoly as huge as Microsoft. Fewer people are aware, because it involves the 'invisible' part of computer usage that most of us take for granted. But because of their market share, Cisco can and does gleefully break interoperability. Their machines don't need to work with anyone else's machines. But if you aren't Cisco, your machines had damn well better work with Cisco's, or you won't have any customers.

It's not uncommon for monopolies to exist in infrastructure environments (take the phone company, the electric company, the water system, the cable company, the list goes on, at least in the US). This is because those organizations tend to deal in a highly standardized environment where it pays if everyone's working on the same sheet. I would honestly hate to have more than one or two companies managing the power grid in my city. The possibilities for some sort of mishap increase, as does the cost as each company has to maintain its own network.

With that said, Cisco happens to have a good grip on the hardware implementation of one of these infrastructures and what's keeping them there is a) an excellent product, b) good marketing and c) interrelated systems. However, Cisco would have a hard time locking people out of the router business with changes in their product. They're still dealing in standard protocols when communicating between machines. Cisco routers will work just fine with 3Com Total Control units and hubs because nothing special is happening with the data. When the machines work in parallel, yes you want them to be the same and intercommunicate, but Cisco doesn't need to do anything to lock people out because you generally don't want many different setups doing the same task anyway (look at the pain in the ass handling both K56 and x2 was). The fact that Cisco makes a superior product is primarily what keeps it in control. You can bet, though, that if their work started becoming shoddy, ISPs would jump ship to the next best alternative, and they can because of those common protocols.

Re:CSCO & MSFT

One really cool thing about Cisco is that their IOS isn't all copyrighted - Juniper and Redback both use large parts of Cisco's software on their equipment, and the interfaces work the same way.

IOS is quite copyrighted, and if Cisco thought Juniper or Redback used any IOS code they would sue in half a heartbeat.

IOS's "look and feel" isn't copyrighted. Which is good, since it is pretty much the TENEX LnF anyway. Juniper made their product have a similar LnF because the coustmer base allready has Cisco experiance, and maybe because many of the original Juniper folks were ex-Cisco folks. Redback did the same LnF because they figured the customers would expect it. Redback also added "virtual routers", which they are very proud of.

Thhe other thing about networking equipment, it has to obey the protocol. Cisco hasn't gone out and written it's own version of IP, frame relay,[...]

Cisco has gone and done their own Frame-Relay like Framing ("Cisco HDLC"), their own ethernet VLAN stuff. But I don't beleve it was done for "embrace and extend" reasons. Their VLAN stuff was out before 801.Q was a standard. Their HDLC is much lighter weight then Frame Relay.

But it's not all rosey. They have patented their "Hot Swap IP address" thing (I forget if it is two machines that share a ether MAC, or if they both have a MAC and the third MAC is passed between them). That's right patented.

Cisco hasn't shot itself in the foot yet, and I doubt they intend to. In contrast to Microsoft, Cisco has become the networking giant because their products actually work. Redback and Juniper have come into the game in niche positions, and Cisco has left them there, rather than trying to kill them off.

Cisco has left Juniper in the "super fast super dense router niche" because they can't dislodge them. I don't know if that is because they see selling an ISP-only router (few non-nationwide ISPs need an M40 let alone an M160), or if the BFR really is the best they could do.

Similar with Redback, they just didn't have a product that worked as well in that space last year, and I don't know how hard they are trying.

Now both of these things may be sound bisness moves. Being the biggest-baddest-router is a lot like being a SuperComputer, and you will note few SuperComputer componies make the really big bucks. There is much more money in selling PCs, or even "wussy little Unix things like the Sun E10K".

Is it because ...

>Is it because Cisco doesn't live by "Embrace, Extend, Extinguish"?

No, it's because pipes aren't glamorous and routers aren't sexy. Everyone who uses a computer has seen Windows; it's always right there in your face. As a result, MS is a household word. On the other hand, most people don't have a clue how data gets from A to B. Come on, some people still think electricity just comes out of the wall.

Cisco is worth lots because they're BIG. They have a set of TV ads on the go right now with a tagline something like 'almost all Internet traffic travels over a Cisco product at one point or another'. Anything Internet is a huge growth industry, and as their propaganda will tell you, they're "the worldwide leader in networking for the Internet".

They're low profile because the end user doesn't give a damn; the Internet just comes out of the wall and into their computer.

The networking monopoly

As I recently began working for a company that does a lot of networking diagnosis, implementing, whatnot, I have began to realize that Cisco has a huge monopoly and DOES use it to increase their sales. Only instead of breaking everyone elses protocols, they just make their protocols "plug and play" if you will. You plug them into a network, they automagically talk with the other routers to setup routes. I forget the name of the exact protocol it uses; however, it is properiety. By closing that protocol no one else can enter cisco arena. So, you have a network built with cisco routers, are you going configure the whole thing to use a open protocol that is not plug 'n' play just to get a cheaper 3com router? It's going to have be WAY cheaper.

Ian

We use Cisco's where I work

and I mean a TON of them (literally thousands) I can tell you a few things. * They make pretty good stuff * They have no qualms about yanking the carpet out from under you future support-wise (i.e. totally dropping an architecture thus necessitating a sooner than expected hardware upgrade) * They WAY overprice commodity stuff. For instance, when we did some wide-ranging "Y2K" upgrades reccomended by them, I took my $600.00usd Cisco 64MB DRAM DIMM and stuck it in my workstation - worked fine. I then did the opposite, fine as well. * They seem to be EOL (end-of-life) happy. Just when a model starts getting established in our network (as big as it is it takes a while) they will start the EOL process on the friggin thing. * They have EXCELLENT uptime. I can't ever think of one of these (despite literally being a computer/OS) hanging, and we have some of these (those in locations not requiring following their dizzying upgrade path) with uptimes measured in _years_. The ones with uptimes NOT measured in years are that way through no fault of Cisco's (well, I guess "technical" fault is better. When you had to upgrade the thing because they EOL'ed that model, that's sort of their fault, right?) Summary: good stuff, expensive stuff ($600.00 for a $100.00 DIMM sucks)

it's the customer

I must say this about cisco, they have "the customer is always right" tatooed on every free part of their collective bodies.
At work, we recently purchased a cisco 1605 router with built in csu/dsu. It was my job to setup and configure this router. The docs weren't as helpful as they could've been, so I put in a call to their tech support. After a lengthy conversation with some one there, I recived a fax with sample configurations, emails with specific technical docs attatched, and just tons of new information. When I finally hung up with the support tech, I checked my voice mail b/c someone had called while I was on the phone (almost an hour), only to find that it was another cisco tech. Apparently, while I was talking to the first tech, my ticket had been entered into the computer with a status of "pending". Seeing this still open ticket, the other tech wanted to make sure that I had recieved _all_ the information I needed to get their product up and running to my complete satisfaction!
This is phenomenal(sp?). Not only do their techs want to stay on the phone with me until I'm completely satisfied (and bearing my "stupid" questions), but they also have techs who "patrol" for open tickets (freshly opened mind you, I was still on the phone with the tech that opened it) who call me to make sure I get everything I can.
I'm no financial expert (taxes...? what are those?) but in my opinion, this company is worth _every_ damned penny of it's valuation.

go cisco, well earned.

from a (very) happy customer,
-Peter

Cisco's Control

I don't think people understand exactly how much control Cisco has over the Internet. Not only do they make routers, they also make dial-in equipment as well as the OS which runs all this equipment. What's so great about that, you might ask? Well, it's completely possible (and in fact, it's a reality) that an ISP can have 85% of their network infrastructure be Cisco products. It's something they've been able to do very quietly because a) they don't interact with the common consumer the way that MS does and b) they have a reputation for both making solid products and backing them up with solid service. They have certification programs that are very similar to Microsoft certification programs and they maintain a pretty constant flow of OS revisions for their routers. They're not without their problems, though, one of which is to have nasty bugs (when they do have bugs) that are hard to track down. Still, they are a solid company (worth almost $600 billion, I dunno about).

A couple of years ago, my dad, who's a stock market junkie in his retirement, asked me which stocks were the best to buy. He was thinking of stocks like Yahoo, Amazon, etc. and I steered him towards more product driven companies, especially those involved with the infrastructure of the Internet, those that are less visible in the news. It's paid off. Luckily, he manages my portfolio as well. Stocks of companies that provide primarily services (Yahoo, Netpliance, Redhat) are traditionally more volatile than their product counterparts. I think anyone who's made an investment in such companies has generally done pretty well and had a much better chance for growth. This is, of course, long-term advice, not short-term advice. Yes, if you were in on Redhat in the initial period, you made a lot of money, but I wouldn't want to be my kids' future on companies that produce very little tangible product.

And to those worried about Cisco's OS, don't worry, Linux isn't going to be challenged anytime soon. The OS is made for administering routers, not for running games and what-not. It's very specific to its task and not exactly something you play around with.

Cisco... The Other Monopoly

Cisco is a monopoly as huge as Microsoft. Fewer people are aware, because it involves the 'invisible' part of computer usage that most of us take for granted. But because of their market share, Cisco can and does gleefully break interoperability. Their machines don't need to work with anyone else's machines. But if you aren't Cisco, your machines had damn well better work with Cisco's, or you won't have any customers.

It is not obvious to me whether or not the monopoly is harmfull in this case. Cisco, I understand, actually makes good products. But is that any consolation when they can lock out competition, charge arbitrary prices, and in the future stop making good products because, like MS, they don't _need_ to make good products, just new ones. As of yet most of this hasn't come to pass, but it is a possibility as it is with any monopoly.

Perhaps, being networking where people are generally educated and care about performance, this will take care of itself, and no problem will emerge. But in the end PHB's still make the decisions, which worries me. I guess I just can't see a company get that huge with that much market share and not shudder a little.

CSCO & MSFT

One really cool thing about Cisco is that their IOS isn't all copyrighted - Juniper and Redback both use large parts of Cisco's software on their equipment, and the interfaces work the same way.

The other thing about networking equipment, it has to obey the protocol. Cisco hasn't gone out and written it's own version of IP, frame relay, or ATM that is going to fsck someone putting equipment from multiple vendors on the same network or force certain hardware. Juniper routers can be put into an ISP's network, as can Redback aggregates, and still talk to the cisco border and transfer routers. UUNet uses equipment from all three vendors in mass quantities.

Cisco hasn't shot itself in the foot yet, and I doubt they intend to. In contrast to Microsoft, Cisco has become the networking giant because their products actually work. Redback and Juniper have come into the game in niche positions, and Cisco has left them there, rather than trying to kill them off.

--mandi

Re:Cisco vs. MS

Actually Cisco makes good products their not great products. Ask anyone in the networking field and more then likely you will find that their are SUPERIOR products to that of Cisco.

Begs the question: Why is Cisco so valuable?

Number one: Cisco does put out a quality product, its just not spectacular so no points lost here like MS.

Number two: "No one lost their job buying Cisco product" mentality pervading the networking arena. Goto www.nwfusion.com or pick up a copy of Network World, an unbiased and very well done trade magazine, their was an article about these thoughts around two months ago. Very well done and will give some insight about this ideas.

Number three: Cisco has gobbled up every company in an area of weakness and made M&A work. Credit CEO John Chambers and his staff on this one. Cisco has got "the buyout" down to an artform, in fact, executives from other companies come and study it. This ability to quickly integrate companies into Cisco has lead to the EXTREMELY low turnover within companies Cisco has bought out. This number hovers around 2% vs a standard in the industry 30%. Leading to number four.

Number four: Great people make Cisco work. Cisco has been able to recruit, hire, buy, and keep its people allowing it to move quickly. With the use of a good corporate culture and outrageous stock options, Cisco can get the people it needs to keep moving.

Words of caution: Cisco makes good gear, they dont make great gear. Refer back to Number two about this idea. Also sticker prices for Cisco gear are generally higher then the industry but many net managers can weasal price breaks out of them. Cisco also has a serious lacking of product towards the network core (ie fiber optics). Of course, Cisco has been on a terror buying up companies to fill this void. Actually Cisco's competitor Lucent has many more products and expertise related to the area thanks to its roots at AT&T.

Food for thought: Cisco 12 billion in revenue last year, Lucent 34 billion
Cisco's market cap almost 540+ Billion
Lucent's 208+ Billion

While I dont believe Cisco will be headed down anytime soon, I do believe there growth will slow, ie dont see 700 Billion next year. However, as a value play Lucent does figure well. Lucent does compete with Cisco in some areas but Lucent has more expertise at the network core then Cisco. With the increasing use of fiber-optics towards the network edge, ie in hubs, routers, into your home maybe =), then Lucent becomes much more valuable.

Last comment: Cisco has become a giant within the networking arena, a benevolent giant. Cisco's reach is extending to nearly every aspect of the networking world, but we here nothing about them as a force. If people were TRULY interested in anti-trust lawsuits Cisco would be sitting in the crosshairs. Why? Because it could be argued that Cisco has more pull in the networking arena then Microsoft has in the software and OS arena. Also, if Microsoft were buying up companies at the rate of Cisco rather then tied down by prosecution, Microsoft would have already passed one trillion by now.

All random thoughts, pick and choose.

Re:cisco's own OS?

Cisco kit (routers, switches etc) runs an operating system called IOS (Internetworking Operating System) currently at version 12. Check it out here [cisco.com] if you're interested.