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The Curious Case of JDS Uniphase

Back in the late ‘90s, when tech stocks were flying high, JDS Uniphase capped out at $1,227 a share, giving it a bigger market cap than both Cisco Systems and Intel have today. But then the bubble burst, taking JDSU down 99.8% and changing its name on Wall Street from “Just Don’t Sell Us” to “Just Don’t Sue Us.” Certain high-level managers, including two CEOs, a CFO and a COO, were charged with cashing out before the fall, leaving investors to fend for themselves.

But JDSU beat the case. And in the past year, since the market’s early March 2009 bottom, the stock has roared higher to the tune of 387%. No doubt JDS Uniphase, which makes test and measurement gear as well as optical components for telco, cable and networking companies, is a key player in Cramer’s newest favorite growth trend, the mobile Internet, but is that enough to warrant such a meteoric move?

First, let’s put this in perspective. JDSU climbed 41% in the last month, but that’s still far less than 1% of its decline following the dot-com bust. And besides, Cramer said, the underlying business here is solid. So not only is the move legit, but there’s reason to believe there are more returns to come.

The big growth driver here is the mobile Internet exposure. JDS Uni’s test equipment allows companies to maintain their standing networks and bring new infrastructure online. And this latter point is especially important these days, as wireless operators expand their 3G networks and start rolling out the fourth generation.

Here’s another way to think of JDS Uniphase’s role in the Internet build-out overall: As slow as YouTube may be sometimes, in 2008 it still consumed more bandwidth than the entire US Internet traffic load in 2000. Companies now are racing to meet the demand, and they can’t do it without, at least in part, JDSU.

There are other divisions contributing to the earnings as well. Communication products like optical components that enable the transmission and transport of video, audio and test data over high-capacity fiber-optic lines. JDSU also makes 3-D glasses, which Cramer has said is a growing entertainment trend worth watching. And the company makes lasers, medical and aerospace gear and even helps fight currency counterfeiters.

Regardless of the product, Cramer said, JDS Uniphase seems to have more business than it can handle. That’s a high-quality problem. And if peers Akamai Technologies and F5 Networks are doing well, then why not this company?

One of Cramer’s favorite technical analysts has said the stock’s support level, the price at which buyers overwhelm sellers, is $9. Cramer recommending buying a quarter of a position in JDSU now at $11 and then waiting for it to drop the two points before picking up the rest.

“When a stock has a strong story” like JDSU, Cramer said, “we cannot be deterred from buying this one.”

Cramer's charitable trust owns Cisco Systems and Intel.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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