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Is This the Next 3Com?

Published: Wednesday, 11 Nov 2009 | 9:05 PM ET

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By: Tom Brennan
Web Editor, Mad Money

JDS Uniphase looks ready for a comeback, Cramer said during Wednesday’s Mad Money.

This telco-testing equipment and optical-components business finally is scraping back from the 2000 era tech bust that hurt many of these stocks. Now a tie-in with Cramer’s latest favorite growth trend – the mobile Internet – offers the chance for redemption.

Cramer based his call on the work of a key analyst, Sanford Bernstein’s Jeff Evenson. Evenson turned bullish on JDS Uniphase [JDSU Loading... () ] after the company reported a better-than-expected quarter on Nov. 5 and has since raised his price target on the stock to $8.50. The six other analysts covering JDSU should soon follow his lead, which should push the share price higher.

Why trust Evenson? Because when it comes to JDSU and the networking-equipment industry, he’s the “ax,” or the best analyst covering a stock or sector. In the past, Evenson has been right about Brocade [BRCD Loading... () ], Cisco Systems [CSCO Loading... () ], F5 Networks [FFIV Loading... () ], 3Com [COMS Loading... () ] and Juniper Networks[JNPR Loading... () ], and Cramer expects him to be on point this time as well.

JDSU is no speculative pick. The company’s at a veritable sweet spot, selling the test and measurement equipment and services that telco carriers need to build out their broadband and wireless networks. And as Cramer has discussed, new infrastructure is in great demand.

JDSU also makes communications and commercial optical products. The company sells optical components allow Alcatel-Lucent and Cisco Systems’ network equipment to transmit and transport video, audio and test data over high-capacity fiber-optic lines. JDSU has continued to innovate, its technology helping these companies replace a number of discrete components with a single photonic chip.

In addition, JDSU sells lasers used for high-precision biotech, graphics and materials-processing work, security technology that protects against counterfeiting and even 3-D glasses. Believe it or not, these glasses were a big driver of revenues last quarter. For this reason, Cramer called JDSU a play on IMAX [IMAX Loading... () ], which is doing well right now.

So how much is JDS Uniphase really worth? Thomas Weisel Partners valued each division separately and came up with an $11.33 share price for the stock. That means JDSU, which closed Wednesday at $7.20, is trading at a 36% discount. Cramer saw this as evidence that the company might be worth more if it were broken up.

It might make an attractive takeover target, too. The strong business and cleaned-up balance sheet could turn JDSU into the next 3Com, which received a $7.90 takeover bid from Hewlett-Packard [HPQ Loading... () ] on Wednesday. That’s almost $3 more than the price at which Cramer recommended COMS as a speculation play.