On this day in economic and financial history...
Duel of the dot-com dominators
Cisco (NASDAQ:CSCO) passed Microsoft (NASDAQ:MSFT) as the world's largest company on Mar. 25, 2000. The networking specialist edged out the operating-system giant with a market cap of $579.2 billion to Microsoft's $578.2 billion. Microsoft, which had topped out at a market cap of more than $600 billion at the close of 1999, had been sliding through 2000 in advance of the dot-com bubble's peak, reached two weeks before the two companies changed places. Microsoft had lost its market-leading position in just a year, and Cisco secured its place among the legendary large public companies -- and legendary bubbles -- of history.
An Indian Reuters recap of the position switch noted:
Quite possibly, Cisco Systems, the biggest maker of equipment that powers the Internet, will become for the Internet what Microsoft, the biggest software company, was for the personal computer.
Judging by Cisco's market capitalization, investors seem to believe that Cisco could become the technology standard bearer for Internet hardware. Microsoft, which was founded in 1975 and went public 11 years later, took 24 years to become the company investors value the most, but occupied that spot for less than one year. Analysts have said Cisco, which was founded in 1984 and went public in 1986, will likely remain top dog for much longer and has a shot at becoming the first firm ever to be worth $1 trillion.
This isn't quite true, as Cisco actually went public in 1990. This glaring flub of the facts also helps underscore the folly of predicting a $1 trillion valuation. At the time, Cisco's P/E was more than 200, which was nearly triple Microsoft's inflated 70 P/E. The decade that followed Cisco's market-cap triumph was not kind to either company -- but Microsoft, as you might expect, held up a bit better. From 2000 to 2010, Cisco's P/E fell nearly 90%, while Microsoft's fell almost 80%, and for the decade Cisco's stock posted a miserable loss of nearly 70% to Microsoft's near-40% haircut.
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The tragedy that shaped a labor movement
A fire broke out at the Triangle Shirtwaist factory in New York City on Mar. 25, 1911, shortly before quitting time. Fire escape exit doors had been barred shut, and the only fire escape collapsed as the panicked workers attempted to flee. The flammable fabrics of the textile factory quickly made for an inferno on the eighth through 10th floors of the 10-story building. Fire trucks that raced to the scene found that their hoses lacked the water pressure to reach the burning upper floors. Within half an hour, nearly 150 workers -- mostly young women, many under the age of 18 -- had perished, either from the effects of the fire or from fatal attempts to leap to safety.
The tragedy was the worst industrial disaster in New York City history, and it galvanized support for labor movements and unions across the country. Two years earlier, more than 15,000 garment workers had walked out of work, and within two days a massive labor uprising had taken more than 20,000 workers off textile factory floors. Smaller factories quickly capitulated to labor leaders' demands, but Triangle Shirtwaist's owners were undaunted -- an attitude that would haunt them after the fire. Triangle's owners formed a manufacturing association with other large textile factories, and within days a brutal crackdown saw police arrests and brutality carried out against the strikers. Harsh legal penalties were levied on arrested strikers that might remind us today of a Stalinist roundup -- some judges sentenced people to service in labor camps.
The remaining strikers were undaunted, and the strike continued until early 1910, when most (but not all) of the factories agreed to labor's demands. Triangle, most notably, had refused to address demands specifically requesting better fire safety features at its factory. In the aftermath of the fire, Triangle and other adamant antilabor factories were forced to address their glaring safety oversights by a rapid push for labor rights in the New York state legislature. Within two years, more than 30 new pro-labor laws had been passed and New York had its own state Department of Labor, which became a model for later New Deal-era labor reforms. The tragedy of Triangle Shirtwaist had at last brought long-overdue reforms to the dangerous factory floors of New York state -- and, in time, the rest of the country.
The EU before the EU
The European Union has a longer history than many people think. It was barely a decade after the close of World War II when six European nations signed the Treaty of Rome on Mar. 25, 1957, creating the European Economic Community, or EEC, popularly known as the Common Market. With its economic supremacy destroyed by the largest war humanity had ever seen, Europe faced a stark choice: cooperate or fall into irrelevance. France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg chose cooperation, unifying various economic policies under one common structure. Labor and capital enjoyed more free movement across European borders than had existed in decades -- prior to the outbreak of World War I, the continent employed a surprisingly liberal spirit of economic cooperation.
The EEC became the foundation of the European Community in 1993 with the ratification of the Maastricht Treaty, which helped shape the modern EU to this day. It took decades for Europe to grow closer together. Will it take decades more to complete the task, or will this continental experiment end in tragedy?
Color your world
RCA began producing the color TV that would set the industry standard on Mar. 25, 1954. It was not the first color TV, but it was the first to provide backward compatibility for black and white programming, which still dominated the airwaves. At a cost of $1,000 (about $8,000 today), the 15-inch RCA CT-100 didn't claim a lot of living rooms, but it set the stage for the rise of NTSC television transmission in the U.S.
Within months, RCA came out with a 21-inch model for $895, but it would be years before consumers caught on to the color TV. When they did, it marked a permanent (with a few "artsy" exceptions) shift towards all color, all the time -- on movies, TV, and eventually on computer screens, as well. The RCA CT-100 was later awarded the title of Greatest Gadget of All Time by Wired magazine's readers in 2007.
The Big Standard steps up
Standard Oil of New Jersey, the largest of the Baby Standards and the most direct heir to Standard Oil's legacy, began trading on the New York Stock Exchange on March 25, 1920. This was a long-overdue listing for what was already one of the world's largest companies, and it was a direct reaction to Standard of New Jersey's 1919 decision (then unprecedented among the Baby Standards) to raise $100 million through the sale of 7% preferred shares.
In 1919, Standard of New Jersey produced an immense amount of refined product: 8.8 million barrels of gasoline, 8.1 million barrels of "refined oils," 12.6 million barrels of diesel-type fuel oils, 1.9 million barrels of lubricating oils, and 1.8 million barrels of other petroleum byproducts. Estimates for 1920 were for a 10% increase in these figures, which had produced nearly $60 million in profit for the completed year, equivalent to about $700 million in present terms. Standard of New Jersey was no longer the unchallenged oil-industry monopolist it had once been, but it had certainly carved out a substantial chunk of the roughly 500 million barrels of total American oil-production at the time.
Eight years later, Standard of New Jersey joined the Dow Jones Industrial Average (DJINDICES:^DJI) when the index expanded to 30 components, and it has remained a component ever since. This makes it the second-oldest continuous member of the Dow -- you know it today as ExxonMobil (NYSE:XOM).
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