The stock price of Cisco, a darling of the stock market for a long time, fell 16% and contributed to a 73 point drop in the Dow index on November 11, 2010. SalesForce, on the other hand, shot into the upper atmosphere, up by 18%. Interestingly, Cisco market cap fell by $24 billion, more than the total market cap of SalesForce.
While stock swings are not as common, what made these two companies change their market value so rapidly? Investors usually peer into the future and buy or sell stocks based on the projections. Cloud computing is being recognized by investors as an engine of growth and rewarding certain companies like SalesForce.
Cisco, the sixth largest technology company by market value(1), has some products that are challenged by solutions delivered free or virtually free. One example is the consumer facing umi telepresence compared to Skype or Gtalk. Also, the next iPad is rumored to have a camera built in and there is a plethora of smartphones planned or that have with video chat capability. In this example, Cisco is going after a video conferencing market already crowded with cheap solutions. I expect for Cisco to make some good cloud start-up acquisitions to enhance their server product line capabilities in the cloud market.
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