Cisco second-most-valuable company

Cisco announced a 49 percent increase in earnings and a 53 percent increase in sales at the close of the market yesterday. The resulting stock jump of more than $7 to $132.81 in early trading placed the company's market value at more than $455 billion, surpassing GE's market capitalization of nearly $449 billion. Shares were up $3, or over 2 percent, to $128.81 at market close.

GE was down 6 cents in early trading to $137.06. At 1 p.m. PST, the close of regular trading, shares fell $2.43 to $134.75 on the New York Stock Exchange.

"The growth potential underlying the business is more favorable for Cisco and the market is reflecting that," said Martin Pyykkonen, financial analyst with CIBC Oppenheimer. "You've got a new breed of company."

Cisco now trails only Microsoft, which has a market cap of $559 billion. But while Cisco's stock has surged about 125 percent in the past year, Microsoft's has grown only about 30 percent during the same period amid its ongoing legal woes.

The changing of the guard at the top of the most valuable companies in America is indicative of the economic shift underway in the country, as Internet and related technology companies reap the benefits of the technology boom. Cisco supplies equipment to many of the Net service providers (ISP) and communications companies that individuals and businesses use to access private networks and the public Net.

Pyykkonen said Cisco's success offers further evidence of a "meaningful inflection" in the spending patterns of communications companies and ISPs, as more and more carriers choose to invest in Internet-based systems over classic phone-switching technology. Competitor Lucent Technologies, which makes equipment for older phone networks, recently warned of slowing profits.

"There's no substitute for being in the right industry at the right time," Cisco chief John Chambers said in an interview following the company's latest earnings.

Chambers called it an "honor" to be mentioned in the same category as GE, thought to be the model for how a large company should be run in business circles.

Displaying typical caution, Cisco executives warned that the company's upcoming quarter is "traditionally very challenging."

But good times show no signs of slowing down for the firm. Chief financial officer Larry Carter said the company planned to hire another 3,000 employees this quarter on top of any personnel gained via acquisitions.

Cisco ended its second fiscal quarter with 26,140 employees.

Separately, Nortel Networks--a traditional competitor of Lucent--surpassed that company in market value, even though Nortel is about half the size of Lucent in terms of annual sales. Nortel closed today's Wall Street trading with a market value of $167.2 billion compared to Lucent's $166.6 billion.