On this day in economic and financial history …
On Feb. 16, 1990, just five years after its founding in a San Francisco garage, Cisco Systems, Inc. (NASDAQ:CSCO) went public on the Nasdaq stock exchange at a market capitalization of approximately $150 million. Investor interest quickly picked up in this young networking dynamo, and within a year its market cap, it had grown by 400%. Throughout the 1990s, Cisco would remain one of the hottest names in high-tech. A Fortune feature at the end of 1995 hailed it as “one of the great investment plays of a lifetime” when an IPO-day investment had already gained about 6,000%. Its consistency in beating expectations was seen as ironclad: “[D]uring its first few years as a public company, Cisco used to carry such a large backlog of orders that executives had actually been able to predict on the day the quarter began by how much the company would beat analysts’ earnings estimates.”
Cisco’s shares split nine times by the time it peaked in March 2000 at one of the largest market caps of all time. By that point, the initial investment of $22.25 in one share in Cisco’s 1990 IPO had grown to 287 shares worth more than $22,400 — a 100,600% gain in a single decade. Cisco fell hard from its dot-com peak and has never recovered in market-cap terms, but that hasn’t stopped it from growing its fundamentals. Two decades after its IPO, Cisco’s annual net income had risen to $6.5 billion from just $14 million in 1990, which represents an incredible 36% annualized growth rate for two decades. This consistent growth helped Cisco land a spot on the Dow Jones Industrial Average in 2009, long after its share-price hypergrowth had been replaced by a slow decline. This transition from darling to pariah hasn’t made Cisco a particularly rewarding addition for the index. In the three years following its inclusion, Cisco shareholders lost 14% on a total return basis while the baseline Dow (not adjusted for dividends) grew by 43% on an epic rebound from a deep bear market.
Cisco’s key technologies might have helped push the rapid growth of the Internet, but many key developments in Internet history took place before Cisco was ever formed. For example, ARPANET, the networked predecessor to the Internet, has been around since 1969, and the very first networked bulletin board system was born in the middle of a blizzard on Feb. 16, 1978, before the PC ever existed.
That bulletin board was the brainchild of Ward Christensen and Randy Seuss, who came together (in typical programmer fashion) to develop a way for members of their group of Chicago-area computer hobbyists to post notes for each other without having to leave their houses in a snowstorm. The pair developed a server and software that allowed others to dial into it from their modems to read threads and post updates — essentially the same thing millions of people do every day around the world, and which you can do right now if you’d like by scrolling down and sharing your thoughts in the comments section of this article.
Of course, Ward and Randy’s setup was far more primitive than the Reddits and other message boards we’re used to. Besides lacking even the simple framework of MS-DOS, the first message board colonists had to dial into the server with a maximum speed of 1.2 kilobits per second. To put that in perspective, most half-decent cable modem services now offer download speeds nearly 900 times faster, if not thousands of times faster. If you were trying to read this on Ward and Randy’s bulletin board, you’d have to wait more than a minute for it to load.