How The Mighty Have Fallen

The past decade has been rough on many companies, but technology companies appear to have bore the brunt of it. Check out Fortune’s biggest losers over the past decade over on Eight are technology companies, and all make Ariba’s Market Cap Loss of 46 B [as chronicled in James Kwak’s The Myth of Ariba and discussed in my post on Will Private Equity Players Offer You Better Value Than Public Equity Players] look like pocket change!  (Ariba Peak: 47 B, Recent: 1 B, approx.)

Company Loss Peak Market Cap Recent Market Cap
Cisco Systems  425 B  557 B 132 B
General Electric  423 B  601 B 178 B
Intel  400 B  509 B 109 B
Microsoft  390 B  642 B 252 B
Nortel  283 B  283 B     0 B (bankrupt)
Lucent Technologies  274 B  285 B   11 B
America Online  219 B  222 B     3 B
WorldCom  186 B  186 B     0 B (bankrupt)

Lesson learned? Besides the fact that market valuation should never exceed a reasonable multiple of revenue (10X might be okay in extreme situations for true up-and-comers, but 100X is ridiculous), I’d have to say that this also teaches us that Software and Hardware is not worth more than the value you are able to extract from it.