WEBVTT - Cisco Systems Today 0:00:04.120 --> 0:00:07.160 Get in touch with technology with tech Stuff from how 0:00:07.200 --> 0:00:13.760 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:13.800 --> 0:00:16.520 I am your host, Jonathan Strickland. I'm an executive producer 0:00:16.520 --> 0:00:19.480 at how stuff Works and I love all things tech. 0:00:19.600 --> 0:00:22.720 And in my last episode, I covered the founding of 0:00:22.800 --> 0:00:27.360 Cisco Systems, a company associated primarily with routers and switches 0:00:27.440 --> 0:00:30.639 and other computer network hardware. Today, I'm going to look 0:00:30.680 --> 0:00:33.560 more at where the company went after the co founders 0:00:33.800 --> 0:00:36.559 left the company, and also talk a bit about some 0:00:36.640 --> 0:00:40.040 of the technologies that the company got involved in. Now, 0:00:40.080 --> 0:00:43.680 the early years of Cisco focused on just a few products, 0:00:43.880 --> 0:00:47.720 from network boards that could allow computers to interface with 0:00:47.960 --> 0:00:51.520 larger networks to the routers that could actually facilitate communication 0:00:51.640 --> 0:00:55.480 between networks. In the mid to late nineteen eighties, this 0:00:55.600 --> 0:00:59.240 was cutting edge technology. Computer networks were just beginning to 0:00:59.320 --> 0:01:03.680 expand beyond tech companies and universities and start to enter 0:01:03.800 --> 0:01:07.480 into other industries, and demand was growing around the world, 0:01:07.720 --> 0:01:11.880 not just in the United States. By when the co founders, 0:01:12.000 --> 0:01:16.080 Lynn Bozak and Sandy Lerner, then husband and wife, left Cisco, 0:01:16.600 --> 0:01:19.840 the company was generating an annual revenue of sixty nine 0:01:19.880 --> 0:01:23.720 million dollars and had two d fifty one employees and 0:01:23.840 --> 0:01:26.200 had obviously grown quite a bit since its launch as 0:01:26.240 --> 0:01:28.720 a business out of the founders living room, and obviously 0:01:29.000 --> 0:01:31.319 it was no longer operating out of their living room. 0:01:31.400 --> 0:01:33.800 They had an office in Menlo Park at the time. 0:01:34.400 --> 0:01:37.080 The company had also gone public with stocks trading on 0:01:37.120 --> 0:01:42.320 the Nasdaq Stock Exchange, and in ninetee Cisco Systems. Under 0:01:42.360 --> 0:01:45.840 the guidance of John Mortgage, the new president and CEO, 0:01:45.920 --> 0:01:50.040 who had been put in place by the UH investment 0:01:50.040 --> 0:01:54.040 firm Sequoia Capital. He had been there since nineteen he 0:01:54.080 --> 0:01:57.800 opened up their first international office in the UK. The 0:01:57.840 --> 0:02:02.280 company also had its first stock split in just one 0:02:02.400 --> 0:02:05.200 year after it got listed on the stock exchange. So 0:02:05.680 --> 0:02:08.200 here's a quick refresher. What the heck is a stock split? 0:02:08.240 --> 0:02:10.919 What does that mean? So a company issues a certain 0:02:11.000 --> 0:02:14.919 number of shares and this represents a percentage of ownership 0:02:15.000 --> 0:02:17.600 in the company. Right, If you buy shares in the company, 0:02:18.040 --> 0:02:22.000 you own a part of that company. The number of 0:02:22.000 --> 0:02:25.360 shares determines how much of that company you own. So 0:02:25.560 --> 0:02:27.799 if a company puts out a whole lot of shares 0:02:27.800 --> 0:02:30.800 and you buy only one, you have a very tiny 0:02:30.840 --> 0:02:34.080 percentage of ownership. In that company, the shares are worth 0:02:34.120 --> 0:02:37.000 a certain amount each. Right, that's what we see when 0:02:37.000 --> 0:02:40.560 we say the stock is twenty dollars. That tells you 0:02:40.600 --> 0:02:43.720 how much it a single share of stock in that 0:02:43.800 --> 0:02:47.200 company costs. UH. That amount is determined by lots of 0:02:47.240 --> 0:02:51.680 different factors, especially when you are first launching a company, 0:02:51.720 --> 0:02:53.960 Like how do you determine how much you're going to 0:02:54.080 --> 0:02:57.519 charge for a share of stock in your company if 0:02:57.520 --> 0:03:01.760 you have not yet launched an UH initial public offering? Well, 0:03:02.040 --> 0:03:04.720 get lots of different factors that figured that out, including 0:03:05.080 --> 0:03:09.200 underwriters who judge what the value of the company should be. 0:03:09.880 --> 0:03:13.560 For simplicity's sake, let's take a very easy example, one 0:03:13.600 --> 0:03:16.200 that would never really happen, but just to be able 0:03:16.200 --> 0:03:19.640 to talk about this. So, let's say I am launching 0:03:19.680 --> 0:03:23.200 a company, and I've determined that my company is worth 0:03:23.200 --> 0:03:26.680 about a thousand dollars, you know, princely some I decide 0:03:26.720 --> 0:03:30.040 I'm going to go public with this very prestigious company, 0:03:30.080 --> 0:03:33.600 and my underwriters decide that the one hundred shares I 0:03:33.680 --> 0:03:38.200 plan to create will cost ten dollars each. They agree 0:03:38.440 --> 0:03:42.640 my company is worth one thousand dollars. So UH, one 0:03:43.160 --> 0:03:46.720 of my company will cost you ten bucks. Right, because 0:03:46.760 --> 0:03:49.240 I have a hundred shares ten dollars of share. That 0:03:49.280 --> 0:03:52.560 means that you know, that's all you're gonna get is 0:03:53.040 --> 0:03:58.480 just those hundred shares um and that that's the whole 0:03:58.560 --> 0:04:01.560 value of the company. So I keep fifty one of 0:04:01.560 --> 0:04:03.920 those shares because I'm no dummy. I want to have 0:04:04.200 --> 0:04:07.640 controlling interest in my own company. And the other forty 0:04:07.720 --> 0:04:11.280 nine shares hit the market at ten dollars each. Then 0:04:11.320 --> 0:04:14.480 the market decides whether or not those shares are actually 0:04:14.480 --> 0:04:16.640 worth the ten dollars, and people either buy them or 0:04:16.680 --> 0:04:19.440 they don't. Now, let's flash forward a year. Let's say 0:04:19.480 --> 0:04:21.960 that the stock price has gone way up. Now it's 0:04:22.000 --> 0:04:24.559 a hundred dollars per shared. It started out ten dollars 0:04:24.600 --> 0:04:26.960 per share on the I p O. A year later, 0:04:27.320 --> 0:04:29.640 they're valued at a hundred dollars per share. There's still 0:04:29.640 --> 0:04:32.279 a hundred shares out there, but that means my one 0:04:32.320 --> 0:04:36.040 thousand dollar company is now worth ten thousand dollars. Right. 0:04:36.360 --> 0:04:38.839 I take that same number of shares that exist, that's 0:04:38.880 --> 0:04:42.000 one hundred times the price one hundred dollars. This gives 0:04:42.000 --> 0:04:45.599 me the market capitalization of the company. Now, it's awesome 0:04:46.000 --> 0:04:49.120 that my company has increased in value like this, But 0:04:49.160 --> 0:04:51.520 I would kind of like to see more trading happen 0:04:51.600 --> 0:04:53.920 in the market, more liquidity, right, I want to see 0:04:54.200 --> 0:04:58.080 people actually buying and selling these shares more frequently. And 0:04:58.120 --> 0:05:01.200 at a hundred dollars per share, all investors might feel 0:05:01.200 --> 0:05:04.279 pushed out. They feel like that's too expensive to buy 0:05:04.320 --> 0:05:08.360 any shares really worthwhile. So my board decides that we're 0:05:08.360 --> 0:05:10.159 going to do a stock split. We're gonna do a 0:05:10.200 --> 0:05:13.720 two for one stock split. That means for every outstanding 0:05:13.760 --> 0:05:17.440 share of stock, I will create another share and issue 0:05:17.480 --> 0:05:20.240 it to the people who are holding those shares. So 0:05:20.279 --> 0:05:23.120 if you are currently holding two shares in my company, 0:05:23.360 --> 0:05:27.080 you would now hold four shares in my company. However, 0:05:27.600 --> 0:05:31.680 I can't just magically double the value of my company, right. 0:05:32.160 --> 0:05:34.040 I can't sit there and say, well, I had a 0:05:34.120 --> 0:05:36.360 hundred shares at a hundred dollars, now I've got two 0:05:36.480 --> 0:05:39.920 hundred shares at a hundred dollars. That doesn't work that way. 0:05:39.960 --> 0:05:43.440 So all shareholders would see the number of shares double, 0:05:43.640 --> 0:05:46.880 but the value per share would be cut in half. 0:05:47.440 --> 0:05:50.360 So instead of having two shares worth a hundred dollars each, 0:05:50.760 --> 0:05:54.279 you would now have four shares worth fifty dollars each, 0:05:54.839 --> 0:05:58.080 but the lower cost per share might mean greater liquidity 0:05:58.200 --> 0:06:02.200 and trading. That might encourage smaller investors to get involved, 0:06:02.400 --> 0:06:05.120 and that can sometimes help a company grow even more. 0:06:05.520 --> 0:06:09.680 Companies like Cisco have had numerous stock splits, and I'll 0:06:09.720 --> 0:06:12.200 talk more about the result of that at the end 0:06:12.240 --> 0:06:14.520 of this episode. I just wanted to mention that it 0:06:14.560 --> 0:06:18.440 was impressive that a company would hold a split only 0:06:18.560 --> 0:06:22.160 a year after getting listed on the stock exchange. When 0:06:22.200 --> 0:06:26.359 Cisco Systems first went public, it had the market capitalization 0:06:26.440 --> 0:06:29.719 of two four million dollars. So, in other words, you 0:06:29.720 --> 0:06:33.200 took all the shares of Cisco that existed, you multiplied 0:06:33.240 --> 0:06:36.240 it by the price per share, you get up two 0:06:36.920 --> 0:06:40.000 four million dollars. That's how much the market cap is 0:06:40.160 --> 0:06:45.240 for Cisco when it launches in Just a year later, 0:06:45.520 --> 0:06:51.400 that market cap was already one billion dollars. In ninety two, 0:06:51.520 --> 0:06:54.960 Cisco was awarded its first patent, which was originally filed 0:06:55.000 --> 0:06:58.760 back in Because patent applications can take a while, the 0:06:58.839 --> 0:07:01.080 patent office takes a while to review a patent and 0:07:01.120 --> 0:07:05.320 then uh issue a patent. It was US Patent number 0:07:05.360 --> 0:07:09.359 five million, eighty eight thousand, thirty two That patent was 0:07:09.440 --> 0:07:13.760 for technology called the Interior Gateway Routing Protocol or i 0:07:13.920 --> 0:07:16.600 g RP. That was a set of rules that routers 0:07:16.640 --> 0:07:20.960 would follow for efficient communications within a computer network, peaking 0:07:20.960 --> 0:07:24.040 ahead for a moment. In the summer of ten, Cisco 0:07:24.080 --> 0:07:28.120 would celebrate getting its ten thousand US patent. But to 0:07:28.160 --> 0:07:32.200 be clear, Cisco also grew quite a bit through acquisitions. 0:07:32.640 --> 0:07:36.920 Uh Primarily, Cisco grew by acquiring other companies, so I 0:07:36.920 --> 0:07:40.080 imagine many of those patents were part of acquisitions and 0:07:40.160 --> 0:07:43.360 not just patents that were filed by Cisco R and D. 0:07:44.560 --> 0:07:47.640 Cisco also opened offices in Canada and Japan in n 0:07:48.680 --> 0:07:52.120 and hit revenues of three one million dollars and grew 0:07:52.160 --> 0:07:55.440 to eight hundred seventy five employees. Now, from this point forward, 0:07:55.600 --> 0:07:58.160 I'm only going to mention revenues and employee counts when 0:07:58.240 --> 0:08:01.280 it's particularly notable, since a lot of Cisco's history is 0:08:01.320 --> 0:08:05.080 all about it got bigger that year, and that gets 0:08:05.120 --> 0:08:06.800 really old, really fast, So I'm not going to do 0:08:06.840 --> 0:08:10.480 that for every single year. In ninety three, Cisco Systems 0:08:10.520 --> 0:08:15.440 made its first acquisition. It was a company called Crescendo Communications, 0:08:15.680 --> 0:08:20.240 and Crescendo was working on network switching technologies, particularly for 0:08:20.360 --> 0:08:25.320 local area networks. The acquisition cost nearly nine million dollars, 0:08:25.680 --> 0:08:28.040 and again, if I were to list every single company 0:08:28.080 --> 0:08:32.040 Cisco Systems purchased from that time up to present day, 0:08:32.320 --> 0:08:35.439 it would probably take about twenty minutes to do. Most 0:08:35.480 --> 0:08:39.199 of them were companies that focused on technologies relating to networks, 0:08:39.200 --> 0:08:43.440 so within Cisco's wheelhouse, they were largely companies that made 0:08:43.520 --> 0:08:48.920 routers or switches, or modems or firewalls. Others, however, were 0:08:48.920 --> 0:08:52.120 in related fields like computer security. There was even a 0:08:52.160 --> 0:08:55.240 couple of companies that were related to Internet television, back 0:08:55.240 --> 0:08:57.400 when everyone was convinced that was right around the corner, 0:08:57.440 --> 0:08:59.640 when in reality, it would take you know, a decade 0:08:59.679 --> 0:09:03.120 or two after that acquisition for any sort of Internet 0:09:03.160 --> 0:09:05.000 TV to kind of take off, and even then it 0:09:05.040 --> 0:09:08.480 was a totally different UH implementation than what people had 0:09:08.520 --> 0:09:12.480 imagined back in the nineties. Cisco would also acquire companies 0:09:12.520 --> 0:09:16.240 in the mobile space, also in surveillance, in voice over 0:09:16.280 --> 0:09:21.640 Internet protocol, in digital cable, and more even in consumer electronics. 0:09:22.040 --> 0:09:25.960 More recently, the company has invested heavily in cloud computing infrastructure. 0:09:26.080 --> 0:09:30.920 So in all, Cisco has spent around seventy billion dollars 0:09:30.960 --> 0:09:35.199 in acquisitions, and most of the products Cisco offers comes 0:09:35.200 --> 0:09:37.720 out of those acquisitions, So you could say a lot 0:09:37.760 --> 0:09:41.320 of Cisco's growth came from buying out other companies and 0:09:41.440 --> 0:09:46.080 adding to their own offerings. That way, John Mortgage and 0:09:46.200 --> 0:09:50.000 his successor, John Chambers both used acquisitions as a means 0:09:50.040 --> 0:09:53.240 for growth. According to a two thousand two Business Week article, 0:09:53.520 --> 0:09:59.000 acquisitions accounted for about fifty of all Cisco's businesses. Cisco's 0:09:59.240 --> 0:10:02.800 uh moves also meant that it maintained a dominant position 0:10:02.880 --> 0:10:07.079 in business to business enterprise, and it focused on network technology. 0:10:07.080 --> 0:10:09.480 It was the dominant player in that space. If you 0:10:09.600 --> 0:10:11.880 planned to build out a computer network, chances are you 0:10:11.920 --> 0:10:15.120 were relying at least in part on technology from Cisco. 0:10:15.520 --> 0:10:19.360 This included Internet service providers, so we started seeing more 0:10:19.360 --> 0:10:22.360 and more Internet service getting rolled out to the United 0:10:22.400 --> 0:10:28.120 States population. Those network infrastructure pieces had to come from somewhere. 0:10:28.520 --> 0:10:31.520 Cisco provided a lot of the routers and switches that 0:10:31.640 --> 0:10:35.000 would be used by Internet service providers in their various networks, 0:10:35.040 --> 0:10:40.400 so it was a lucrative source of revenue for the company. Now, 0:10:40.440 --> 0:10:44.600 to be clear, the acquisitions were likely necessary to some extent. 0:10:44.760 --> 0:10:48.120 Cisco had built much of its business early on on 0:10:48.240 --> 0:10:50.960 multi protocol routers. If you listen to my last episode, 0:10:51.120 --> 0:10:54.400 you know what I mean by that. Those are the 0:10:54.440 --> 0:10:57.559 routers that can communicate between different networks that are operating 0:10:57.600 --> 0:11:01.360 on incompatible communications protocols. But by the nineties a lot 0:11:01.360 --> 0:11:03.960 of that was changing. Most networks were starting to rely 0:11:04.160 --> 0:11:08.920 upon Internet Protocol as the standard in communications, so you 0:11:08.960 --> 0:11:12.160 weren't seeing as much proprietary approaches. Everyone was kind of 0:11:12.240 --> 0:11:15.640 leaning towards Internet Protocol because that was clearly going to 0:11:15.679 --> 0:11:19.280 become a dominant means of communication through computer systems, and 0:11:19.320 --> 0:11:23.000 that made multi protocol routers less important because really only 0:11:23.120 --> 0:11:26.760 legacy systems were dependent upon them. Newer systems were adopting 0:11:26.800 --> 0:11:30.200 Internet Protocol, so you didn't need something that was multi protocol. 0:11:30.240 --> 0:11:33.040 It's like you don't need a translator if everybody in 0:11:33.080 --> 0:11:37.200 the room speaks the same common language. So without diversifying, 0:11:37.240 --> 0:11:39.880 Cisco could have been in danger of becoming obsolete. So 0:11:39.920 --> 0:11:44.280 these acquisitions were actually not a bad thing, But there 0:11:44.360 --> 0:11:48.840 is this sort of view among certain people that a 0:11:48.880 --> 0:11:52.480 company growing by acquiring other companies is kind of sort 0:11:52.480 --> 0:11:56.400 of cheating. It's like the pay to win philosophy and games. Uh, 0:11:56.679 --> 0:11:59.319 according to some people. Sometimes I feel that way. I'm 0:11:59.320 --> 0:12:01.360 not gonna lie. Sometimes I look at a company that 0:12:01.520 --> 0:12:05.680 makes most of its growth through acquisitions and I think, really, 0:12:06.200 --> 0:12:08.760 but it's a smart business move. It makes sense, and 0:12:08.800 --> 0:12:12.120 for Cisco, it paid off in huge dividends for at 0:12:12.200 --> 0:12:15.199 least the near term. Now back to the history of 0:12:15.240 --> 0:12:19.280 the company. While he gobbled up other companies, Cisco also 0:12:19.320 --> 0:12:22.520 opened up more operations around the world like Hong Kong, Mexico, 0:12:22.559 --> 0:12:24.840 and Belgium, and it would continue to open up offices 0:12:25.280 --> 0:12:28.719 all across the world. By the company hit revenues of 0:12:28.760 --> 0:12:30.880 more than a billion dollars for the first time in 0:12:30.880 --> 0:12:33.960 its history, and they also moved offices from Menlo Park 0:12:34.320 --> 0:12:37.920 to San Jose, California, And a year later the company 0:12:37.960 --> 0:12:40.640 posted a revenue of two point to three billion. So 0:12:41.080 --> 0:12:43.079 they go from a billion to two point to three billion. 0:12:43.120 --> 0:12:46.000 They double their revenue in a year, and it was 0:12:46.040 --> 0:12:48.160 like the company had a license to print money. But 0:12:48.320 --> 0:12:50.360 remember this is also a time when people in general 0:12:50.400 --> 0:12:53.160 were first becoming aware of the Internet as a thing. 0:12:53.600 --> 0:12:56.520 Early nineties. That's when your average person starts to hear 0:12:56.520 --> 0:12:59.320 about internet. Before then, you pretty much had to be 0:12:59.320 --> 0:13:01.160 a college student it or you had to work in 0:13:01.200 --> 0:13:03.400 the field to know what the heck the Internet was. 0:13:03.520 --> 0:13:08.120 Most people before the early nineties had no inkling, and 0:13:08.160 --> 0:13:09.920 it was around this time where people were saying like, 0:13:10.559 --> 0:13:13.440 what does the AT symbol in an email mean? What 0:13:13.520 --> 0:13:17.000 does this Worldwide Web? What does this Information super Highway? 0:13:17.600 --> 0:13:22.520 This was a boom time for network technology. Was also 0:13:22.520 --> 0:13:26.120 when John Chambers would become the new CEO of Cisco 0:13:26.280 --> 0:13:29.160 and John Mortgridge would transition to the role of Chairman 0:13:29.280 --> 0:13:32.200 of the board. I'll talk more about Chambers in just 0:13:32.520 --> 0:13:35.520 a moment, but first let's take a quick break to 0:13:35.640 --> 0:13:46.800 thank our sponsor. John Chambers had earned a Master's of 0:13:47.000 --> 0:13:51.880 Business administration from Indiana University. He had worked for IBM 0:13:51.960 --> 0:13:54.520 in their sales department in the late seventies and early 0:13:54.600 --> 0:13:58.040 nineteen eighties, and then went on to work for Wang Laboratories, 0:13:58.800 --> 0:14:01.440 makers of the Whang compute or Wong if you want 0:14:01.480 --> 0:14:04.360 to use the correct pronunciation, I would say this was 0:14:04.400 --> 0:14:07.000 in the late eighties. This was a computer company that 0:14:07.080 --> 0:14:10.160 one time was extremely successful. A lot of people haven't 0:14:10.200 --> 0:14:15.280 really heard about Wong or Wang computers these days because 0:14:15.320 --> 0:14:18.240 they were again sort of a business to business company. 0:14:18.280 --> 0:14:21.760 But by the time Chambers left the company in nineteen ninety, 0:14:22.160 --> 0:14:25.240 Wong was already on a downward spiral and it would 0:14:25.280 --> 0:14:29.440 eventually declare bankruptcy. It would emerge from bankruptcy, it would 0:14:29.440 --> 0:14:32.240 then get acquired, and ultimately it would end up dissolving 0:14:32.280 --> 0:14:35.040 after a couple more acquisitions. Maybe someday I'll do a 0:14:35.120 --> 0:14:39.160 full episode to talk about the history of that company. Anyway, 0:14:39.160 --> 0:14:41.920 by that time, John Chambers was already part of Cisco. 0:14:42.040 --> 0:14:46.560 He had joined that team officially in nine and he 0:14:46.600 --> 0:14:50.480 would serve as the Cisco CEO for two decades. He 0:14:50.520 --> 0:14:54.280 would stay on a CEO until July two thousand, fifteen, 0:14:54.480 --> 0:14:58.760 and a lot happened in those two decades. So Chamber 0:14:58.840 --> 0:15:02.880 serves as the new CEO of Cisco and its business 0:15:02.960 --> 0:15:05.680 as usual, meaning the company is continuing to grow and 0:15:05.720 --> 0:15:09.320 acquire other companies. This was a time when people began 0:15:09.360 --> 0:15:12.520 to get incredibly excited about the potential of the Internet 0:15:12.840 --> 0:15:15.800 the mid to late nineties. Startups were beginning to bloom 0:15:16.000 --> 0:15:18.440 in the mid nineties, but that would really build to 0:15:18.480 --> 0:15:20.560 a fever pitch by the end of the nineties. It 0:15:20.640 --> 0:15:25.040 got crazy. The Information super Highway was being hailed as 0:15:25.080 --> 0:15:27.640 the next frontier. It was where people were going to 0:15:27.680 --> 0:15:32.280 make their fortune. It was a land grab of massive scale. 0:15:32.680 --> 0:15:35.360 It was where we were all going to live, and 0:15:35.400 --> 0:15:39.120 we were going to have experiences in virtual environments that 0:15:39.160 --> 0:15:43.440 would let us work and shop and play and experienced 0:15:43.480 --> 0:15:46.000 life in a way we just could not imagine before 0:15:46.040 --> 0:15:48.360 the Internet, Or at least that's how it was all 0:15:48.400 --> 0:15:51.480 sold to us. No one was really sure how it 0:15:51.560 --> 0:15:53.960 was actually gonna shake out, but they were all sure 0:15:54.000 --> 0:15:58.440 that it would lead to this amazing virtual future. And Cisco, 0:15:58.840 --> 0:16:01.840 a comedy that continued to supply the technology that made 0:16:01.880 --> 0:16:05.960 Internet connect communication possible, was profiting from this excitement in 0:16:06.000 --> 0:16:10.040 a very real way. More companies were building up networks 0:16:10.040 --> 0:16:13.800 that meant they needed the equipment that Cisco produced in 0:16:13.880 --> 0:16:17.360 order to do that. Uh, they were going to Cisco 0:16:17.520 --> 0:16:20.240 primarily because it was the biggest name out there. It 0:16:20.280 --> 0:16:25.280 was the dominant manufacturer of various network components like routers 0:16:25.280 --> 0:16:28.400 and switches, so if you needed to build out your network, 0:16:28.560 --> 0:16:31.800 chances are you were going with Cisco hardware. They needed 0:16:31.840 --> 0:16:35.360 to establish safe networks, they had an air gap between 0:16:35.360 --> 0:16:38.000 the network and the Internet, so they would go with 0:16:38.400 --> 0:16:41.840 the best, biggest name in the industry. They needed the 0:16:41.880 --> 0:16:44.920 hardware that Cisco was known for, and the company was 0:16:44.960 --> 0:16:51.400 doing business like gang busters. In Fortune magazine would list 0:16:51.480 --> 0:16:55.200 Cisco among the Fortune five Companies list at number three 0:16:55.680 --> 0:16:58.400 thirty two. But in just a couple of years, Cisco 0:16:58.440 --> 0:17:03.160 would become the most valuable company in the world tech company, 0:17:03.200 --> 0:17:08.880 that is, for a short while anyway, Cisco first started 0:17:08.960 --> 0:17:12.280 offering cable modems for end users. This is one of 0:17:12.320 --> 0:17:15.960 the few products the company made for home consumers as 0:17:16.000 --> 0:17:19.320 opposed to enterprises. So they entered the consumer market in 0:17:19.359 --> 0:17:22.960 a limited way, uh and experimented with this for a 0:17:23.000 --> 0:17:26.359 little more than a decade, and Cisco would later purchase 0:17:26.400 --> 0:17:29.640 companies like links Is in two thousand three to increase 0:17:29.760 --> 0:17:33.000 this offering. Links Is makes routers home routers that kind 0:17:33.000 --> 0:17:37.800 of thing and had existed before Cisco came along. Then 0:17:37.880 --> 0:17:42.480 Cisco lumps links us and under its wing. However, Cisco 0:17:42.480 --> 0:17:45.879 would not hold on to all these consumer facing companies 0:17:46.280 --> 0:17:49.239 like links Is, which Cisco sold to Belcan in two 0:17:49.280 --> 0:17:52.400 thousand thirteen, one decade later. In fact, at that time, 0:17:52.440 --> 0:17:56.880 Cisco pretty much divested itself of all home market products 0:17:56.920 --> 0:17:59.639 in general. Interesting side note by the way links Is 0:18:00.119 --> 0:18:03.560 Cisco was founded by a married couple. This would be 0:18:03.800 --> 0:18:07.440 Janey and Victor sal who founded links Is, which originally 0:18:07.440 --> 0:18:11.760 had the name D E W International. And yes, the 0:18:11.800 --> 0:18:15.639 original site for that company was in fact a garage 0:18:15.720 --> 0:18:21.200 in California because the archetype exists for a reason. Marked 0:18:21.280 --> 0:18:26.680 Cisco's fifteenth anniversary. It had hit revenues of twelve billion dollars. 0:18:26.680 --> 0:18:30.000 It had grown so much through expansions and acquisitions that 0:18:30.160 --> 0:18:33.680 now had more than twenty thousand employees, and in March 0:18:33.760 --> 0:18:37.760 two thousand, Cisco hit its peak that it has never 0:18:37.880 --> 0:18:42.920 met since then. Spoiler alert, Cisco's market cap, which when 0:18:42.920 --> 0:18:45.639 it launched was two four million dollars I'll remind you, 0:18:46.000 --> 0:18:52.320 hit five hundred fifty five point four billion dollars in 0:18:52.400 --> 0:18:56.560 March two thousand. That meant Cisco had officially displaced Microsoft 0:18:56.600 --> 0:19:00.840 as the most valuable company in the world. This value 0:19:00.920 --> 0:19:04.680 was fueled again by the fervor around the Internet. Internet 0:19:04.720 --> 0:19:08.520 service providers were furiously building out their infrastructure and relying 0:19:08.520 --> 0:19:11.639 heavily on Cisco technologies to do so. The company was 0:19:11.760 --> 0:19:15.880 in great shape, and then the bubble burst. Now I've 0:19:15.920 --> 0:19:19.040 covered the dot com bubble and other episodes, so I'm 0:19:19.040 --> 0:19:21.119 just going to kind of give a quick summary of 0:19:21.160 --> 0:19:25.400 what happened here in the late nineties and into two thousand, 0:19:25.680 --> 0:19:28.320 even into two thousand one, to some extent, there was 0:19:28.359 --> 0:19:34.400 an almost unreal amount of investment pouring into internet ventures. Now, 0:19:34.440 --> 0:19:36.640 some of those ventures would prove to be good ideas 0:19:36.720 --> 0:19:39.239 that could stand the test of time, like Amazon that 0:19:39.359 --> 0:19:43.639 was able to survive the dot com bubble burst. Others 0:19:43.640 --> 0:19:46.960 were decent ideas, but the people behind them were unable 0:19:47.000 --> 0:19:49.840 to execute those ideas the way they had envisioned, so 0:19:49.840 --> 0:19:52.159 they weren't able to make any money off of this 0:19:52.240 --> 0:19:54.639 cool idea. And it might be that once the bubble 0:19:54.680 --> 0:19:57.200 did burst a few years later, someone else came along 0:19:57.240 --> 0:19:59.040 with a similar idea and they were able to make 0:19:59.080 --> 0:20:02.600 it work. At the time, it just didn't. Some of 0:20:02.600 --> 0:20:06.400 the ideas were just playing bad. But around this time 0:20:06.440 --> 0:20:08.639 in the late nineties, the general feeling was if you 0:20:08.680 --> 0:20:11.480 did not get in on this internet craze, if you 0:20:11.520 --> 0:20:13.560 did not put your money there, you were going to 0:20:13.640 --> 0:20:18.920 miss out on an incredible investment opportunity. The venture capitalists 0:20:19.200 --> 0:20:22.000 were blasting companies with huge investments. I mean, it was 0:20:22.000 --> 0:20:26.639 almost like people were throwing money at these startup companies 0:20:27.040 --> 0:20:30.720 they were finding themselves flush with cash. Some of them 0:20:30.720 --> 0:20:34.479 were finding themselves in possession of way more money than 0:20:34.600 --> 0:20:37.879 was necessary for them to actually do what it was 0:20:37.920 --> 0:20:40.560 they said they wanted to do. And lots of startup 0:20:40.680 --> 0:20:44.399 entrepreneurs went more than a little bonkers with all that dough. 0:20:44.680 --> 0:20:48.400 They started tricking out their offices with lavish furniture and amenities. 0:20:48.760 --> 0:20:51.400 They had spent huge amounts on stuff they didn't actually 0:20:51.840 --> 0:20:55.840 need that wasn't contributing to their business at all. Some 0:20:55.960 --> 0:20:58.720 of them didn't have a business plan to speak of. 0:20:59.200 --> 0:21:02.399 They had a cool idea, something that sounded neat, but 0:21:02.440 --> 0:21:04.879 they didn't have a strategy of how they were going 0:21:04.920 --> 0:21:08.239 to even generate revenue, let alone make a profit. And 0:21:08.280 --> 0:21:11.040 once the initial excitement started to die down, people began 0:21:11.040 --> 0:21:13.919 to ask hard questions, like how the heck is this 0:21:13.960 --> 0:21:16.680 company going to pay back the investment I put into it. 0:21:17.320 --> 0:21:21.440 The market peaked in March of two thousand, fueled by 0:21:21.600 --> 0:21:25.920 rampant speculation, and then the bubble burst. Now, why the 0:21:25.960 --> 0:21:29.680 bubble burst is complicated, as there were there's more than 0:21:29.720 --> 0:21:33.000 just investors waking up, right. It wasn't just people got 0:21:33.000 --> 0:21:35.719 out of bed one day and said hang on and 0:21:35.720 --> 0:21:40.399 then and then the balloon just totally pops. That's more 0:21:40.440 --> 0:21:44.040 simple than what really happened. A lot of startups had 0:21:44.119 --> 0:21:47.240 burned through their initial cash and had nothing related to 0:21:47.280 --> 0:21:50.920 show for it except pending disaster, and the dot com 0:21:50.960 --> 0:21:54.560 crash saw several internet startups go under just months after 0:21:54.600 --> 0:21:57.359 they had made headlines with incredible successful I p o s. 0:21:57.800 --> 0:22:00.760 These were companies that had failed to generate a profit, or, 0:22:00.920 --> 0:22:02.639 like I said, in a few cases, they had failed 0:22:02.640 --> 0:22:05.040 to make any revenue at all. While some of them 0:22:05.040 --> 0:22:08.119 received enormous amounts of investment money, that cash was spent, 0:22:08.600 --> 0:22:11.959 and without a steady source of incoming revenue or more investment, 0:22:12.520 --> 0:22:16.919 those companies couldn't stay afloat, so the market retracted. Cisco 0:22:17.560 --> 0:22:21.280 was in a different space. It was a big, established company. 0:22:21.720 --> 0:22:23.719 It wasn't about to go out of business, but it 0:22:23.720 --> 0:22:27.919 did take an enormous hit from this dot com bubble burst. 0:22:28.320 --> 0:22:31.920 Its stock price declined by more than eighty percent as 0:22:31.960 --> 0:22:34.800 a result, and the company had been on a rocket 0:22:34.840 --> 0:22:37.680 to the stratosphere before this. A lot of people were 0:22:37.680 --> 0:22:40.679 even predicting that Cisco was going to become the first 0:22:40.880 --> 0:22:46.080 trillion dollar company, but it's market cap ended up going 0:22:46.160 --> 0:22:50.040 from more than five hundred billion to one fifty one 0:22:50.160 --> 0:22:52.760 billion in two thousand one, and it would dip even 0:22:52.840 --> 0:22:57.480 lower in subsequent years, so it didn't go out of business, 0:22:58.160 --> 0:23:02.080 but its value was reduced to less than half of 0:23:02.119 --> 0:23:05.000 what it had been at its peak. By the end 0:23:05.040 --> 0:23:08.359 of fiscal year two thousand two, Cisco stocks were trading 0:23:08.400 --> 0:23:12.080 at around twelve dollars per share. The change from fiscal 0:23:12.160 --> 0:23:15.120 year two thousand one to two thousand two is noticeable 0:23:15.160 --> 0:23:18.560 if you look at timelines for Cisco, even once from 0:23:18.560 --> 0:23:22.480 the company itself, because companies tend to not want to 0:23:22.520 --> 0:23:26.880 draw attention to really difficult years, and they sometimes will 0:23:26.920 --> 0:23:30.160 just they don't necessarily fudge results, but they might leave 0:23:31.359 --> 0:23:35.760 details out. But there's an official Cisco timeline that gives 0:23:35.800 --> 0:23:40.880 you revenue and employee count every year from its founding 0:23:40.960 --> 0:23:43.679 up to two thousand thirteen. At the end of fiscal 0:23:43.760 --> 0:23:46.399 year two thousand one, the company posted twenty two point 0:23:46.440 --> 0:23:49.840 three billion dollars in revenue and they had thirty eight thousand, 0:23:49.960 --> 0:23:53.320 four hundred two employees. One year later, that had gone 0:23:53.359 --> 0:23:56.639