Cisco (CSCO) today 100 times bigger than 3Com (COMS) -- it wasn't in 1994

This morning 3Com (NASDAQ: COMS) announced that private equity firm, Bain Capital, would put it out of its misery and pay $2.2 billion in cash for the company. 3Com has lagged so far behind that it has been painful to watch. 3Com and Cisco Systems (NASDAQ: CSCO) indeed could provide at least two to three chapters in an investing teaching and history book. Here's the CliffsNotes version:

Summer of 1994 was a tough technology environment. Technology had a great run from 1990 through 1994, till summer that is. Valuations contracted and investor fatigue set in for about four to five months. I was traveling through Silicon Valley with a couple of British portfolio managers visiting companies. One day we had a breakfast meeting with then CEO Eric Benamou of 3Com and lunch with a senior VP at Cisco (whose name escapes me). Benamou was an intellectual, a refined man, but did not possess the street smarts necessary for a tech company CEO. He was arrogant and bluntly declared that Cisco's days were numbered and 3Com would acquire any tech company necessary to achieve total domination. OK, great, and we went on to Cisco for lunch.

The senior VP was a classy guy, never said a bad word about any competitor and just explained Cisco's game plan and execution philosophy. Here is the funny part: In July 1994, BOTH companies had a market capitalization of $9 billion.

3Com went on to make some stupid acquisitions like US Robotics, paying top dollar for a company in serious decline with evaporating margins. 3Com has never been the same since. Eric Benamou went on to pursue "other interests" and 3Com has languished at the bottom of the tech food chain.


Cisco went on to make over 120 acquisitions, most very strategic and successfully integrated. Cisco at its peak topped $450 billion in market capitalization. That number was frothy and unrealistic in 2000-2001. Today, Cisco's market value is a more earthly $202 billion, nearly 100 times the value of what Bain Capital is paying for 3Com.

Cisco is the clear winner in the networking world: game, set and match.

In real estate the expression is location, location, location. In evaluating stocks, the expression is management, management, management...

Comments

Popular posts from this blog

L2TPv3 Enables Layer 2 Services for IP Networks

TCP/IP 明確擁塞通知 (ECN)

Q-in-Q(Dot1Q Tunnel) Sample Configuration