Steve Mauzy: I tend to avoid most investment opinions I hear or read on popular media outlets. But occasionally something is said that piques my interest.
Jim Breyer, founder and CEO of Breyer Capital and a partner in Accel Partners, piqued my interest in a recent CNBC interview published on Yahoo! Finance. So, what did Breyer proffer that set my antennae a buzz? Google Inc (NASDAQ:GOOG) has the potential to hit a trillion-dollar market-cap… but with an engulfing qualifier – within the next 10 years.
Breyer’s comment appears innocuous enough, and it just might be. No one knows where any of us will be in 10 years. But if the trillion-dollar chatter goes viral, chances are, contra Breyers, Google’s market value will move down, not up. That is, if recent history serves as a guide.
In late 1999 and early 2000, Microsoft (Nasdaq: MSFT) and Cisco Systems (Nasdaq: CSCO) were the odds-on favorite to reach the coveted trillion-dollar benchmark. This was the first time “trillion” and “market cap” had been cobbled together in investors’ minds.
In December 1999, Microsoft shares hit an all-time high to lift its market value to $616 billion. Microsoft, though, was unable to sustain the momentum; its shares soon backslid into the high $500s.
Microsoft’s deceleration prompted many analysts to unhitch their trillion-dollar wagons from Microsoft and hitch them to Cisco. By March 2000, the influx of bandwagoners had lifted Cisco’s market cap to $610 billion.
Cisco was certainly the belle of the ball: Thirty-seven investment banks offered either a “buy” or a “strong buy” recommendation on Cisco at the time. None recommended a “sell,” or even a “hold.”
But after peaking at $610 billion, Cisco began to lose momentum, and continued to loss momentum through the first decade of the 2000s. By the end of 2010, Cisco’s market cap had dwindled to $125 billion. (Microsoft’s market cap had been taken down to around $220 billion.)
Memories are short. In 2012, tongues were again wagging over the prospect of a new trillion-dollar company. Apple Inc. (Nasdaq: AAPL) had been slotted as odds-on favorite: CNBC, Forbes, The Guardian, BusinessInsider, PC Magazine, The New York Times, The Los Angeles Times, The Economist, and countless other media outlets were openly anticipating, if not promoting, Apple as the world’s first trillion-dollar company in waiting. It wasn’t a matter of if; it was a matter of when.