Cisco was the world’s most valuable company — then it wrote off $2.2B in inventory

In March 2000, at the height of the dot-com bubble, Cisco Systems became the world’s most valuable company with a market capitalization of over $500 billion. The company was the dominant supplier of networking equipment that powered the internet boom. CEO John Chambers had predicted a “paradigm shift” that would create exponential demand for bandwidth.

When the dot-com bubble burst in 2000–2001, demand evaporated faster than any forecast had anticipated. Cisco was caught with massive inventories of components and finished goods it had ordered based on optimistic projections. In May 2001, the company announced a $2.2 billion inventory write-down, the largest single inventory write-off in US corporate history at that time.

The write-down contributed to a net loss of $1 billion for fiscal year 2001. Cisco’s stock fell from $48.87 in 2000 to $11.80 in 2002, an 80% decline. The company lost $431 billion in market capitalization. Cisco survived the crisis and eventually recovered, but the inventory write-down became a textbook example of supply chain forecasting failure in a boom-and-bust cycle.