The mobile Internet’s growth is a trend on par with the mass adoption of the personal computer, Cramer said. Smartphones, which handle everything from voice to video to data, soon will be as ubiquitous as the PCs we now take for granted. This means that the related companies, and their shareholders, should see gains for many years to come.
To track the trend, Cramer created the Mad Money Mobile Internet Index, a group of 21 stocks at the heart of the industry. The index starts at 100, and its rise and fall will directly relate to how these companies – and the mobile Internet – fare. See the slide show for a full list of the constituents.
Note: Cramer is not rating all of these stocks as buys at all times. The index exists only to gauge his prediction that the mobile Web is tech's next big growth trend. And many of these picks are speculative, so readers must do their homework before buying, if they choose to do so. That being said, if smartphones continue their exponential growth as Cramer expects, then these are the companies that should benefit.
Cramer’s charitable trust owns Apple, Cisco Systems and Qualcomm.
The popularity of the Web's top search engine should carry over to mobile handsets, Cramer said. But he also likes Google's exposure to the ad industry. As the economy revs up, so does ad spending, and that's good for GOOG. But there's a double win here: Ad dollars are more and more moving online, which again is a positive for this company. At publish time, Cramer had a $750 price target on this stock.
Would a list of top mobile-Internet companies be complete without the maker of the revolutionary iPhone? Probably not. And that says nothing of Apple's ever more popular Macs and iPods. As of publish time, Cramer's price target for this stock was $300.
Before iPhone addicts there were CrackBerrys, a term of affection of sorts for users' compulsive checking of their RIM BlackBerry smartphone. While Cramer’s Mobile Internet Index is in no particular order, Research in Motion does play second fiddle to Apple in his mind. Still, the company is a major player in the space and therefore deserves to be included here.
Palm qualified for this list thanks to its latest smartphone release, the Pre. Cramer has said he's watching the company because it would make a great acquisition for dumb-phone maker Nokia.
Many smartphone users probably don't think much beyond their respective handsets and carriers, but those cool features we've come to depend on – text messaging, voice mail, video – wouldn't be possible without the proper infrastructure. That's where ADC Telecom comes in. This company makes the cables, connectors, “digital distribution frame modules” and other products that are essential for wireless networks.
ARM is a leading semiconductor intellectual-property supplier, designing chip technology that is used in high-tech gadgets, including most of the world’s mobile phones. The company then licenses that tech out to the industry’s major players and collects royalties. Right now about five chips in every smartphone are based on ARM’s design, and that number’s increasing as the mobile Internet continues to grow.
“We expect the market for mobile data to double every year through 2013,” Cisco Chief Strategy Officer Ned Hooper told The New York Times in October. Hence the company acquiring Starent Networks that month. Cramer couldn’t agree more, and it’s one of the many reasons he’s such a big fan of this network-equipment maker.
After Cisco Systems picked off Starent Networks, Cramer said, there were two remaining M&A targets among the telco-equipment suppliers. Ciena was one of them, with Juniper Networks the possible suitor. Admittedly, CIEN is a more speculative play than other stocks on this list, but the company's products help wireless networks handle bandwidth-hogging applications. That is key for meeting consumers’ demand for high-quality digital content.
Takeover target number two after Ciena was Tekelec, Cramer said, and it too is a speculative pick. He likes the company for its local-number-portability technology, which allows customers to keep their phone numbers when switching cell carriers. Tekelec also produces equipment for transmitting text messages and managing voice traffic on wireless networks, another important part of the infrastructure needed to deal with the growing data overload.
Much like Ciena, Tellabs is a speculative network-equipment maker that offers products and services to handle wireless voice, video and data transmission.
Cramer likes CommScope, which makes antennas for wireless base stations and other transmission equipment, as a play on China's $40 billion wireless infrastructure build-out and the surge in Indian mobile customers. The company reported 45 million new users on the Subcontinent in just the first quarter of 2009 and expected 100 million by year's end. CommScope won't be left out of the US stimulus, though. Cramer said CTV should benefit right along with Cisco Systems and Ciena, among others.
Cramer has said he expects big things from Qualcomm, which develops digital wireless products and licenses them to equipment manufacturers, in 2010. Every time a 3G phone that contains a QCOM chip is sold, the company collects a royalty. It’s a low-cost business with margins of about 90%. And with 3G penetration expected to increase to between 70% and 80% in 2012 from 40% in 2009, business should only get better. Qualcomm also has struck a deal to supply Nokia with chips for its smartphones, starting in 2010.
Combination semiconductors are what really give Broadcom its edge. This technology allows Bluetooth, FM radio, Wi-Fi and a global positioning system, which would normally require separate chips, to be placed on just one. It’s a huge money-saving proposition, Cramer said, and it hasn’t yet been widely adopted. Broadcom’s management stated that only 5% of smartphones use combo chips for Bluetooth, wireless LAN and FM, but it expects that number to reach 75% in the next three to four years.
RF Micro, like many stocks on this list, is part of Cramer's “tech specs,” or smaller, riskier names that could offer more upside. Sure, investors can buy usual suspects like Apple, RIM and Palm, but why not go with a play that has more room to move? Cramer endorsed RFMD because the company is a huge beneficiary of the 3G wireless build-out, and as we know customer demand is high.
This company has a direct link with Apple’s hugely popular iPhone. Skyworks makes the power amplifiers used in 2G or 3G phones that speed up a wireless Internet connection, as well as high-performance circuits and semiconductors for both mobile phones and broadband markets. The stock had a solid 2009, and Cramer sees the upward momentum continuing.
ON, maker of power-management components for tech gadgets, soared about 55% between Cramer’s May 7, 2009, call and the end of the year. But should investors assume more of the same in 2010? The Mad Money host certainly thinks so.
Cypress operates a strong business in touch-screen technology for both cell phones and notebook computers. The top five handset original equipment manufacturers use the company’s winning designs, as does a Windows 7 laptop expected to launch in early 2010. The new portable PC “wasn’t quite as cool as Minority Report,” the movie where Tom Cruise moves data and images around on a transparent computer screen, CEO T.J. Rodgers said on a conference call, “but you could see the beginning of it.”
Tessera operates in the semiconductor miniaturization business, reducing the space needed for chips and thereby making possible much smaller gadgets. One product in particular allows for tiny yet better cameras in cell phones and computers. This technology shaves $2 off the total cost of the camera, and Tessera in return collects a 35-cent royalty. A number of companies are already licensing the product, Nokia among them, and Cramer sees the potential for virtually every other company climbing aboard as well.
In December 2009, memory chip prices were on the rise, as SanDisk's clients – Samsung, Hynix, Toshiba – were running at full capacity and supplies were constrained. That was notable because pricing should be down, not up, at the end of the year, but the demand forced a switch. Cramer saw this as one of many reasons why 2010's Q1 could be “the biggest first quarter for tech in a decade.”
NETL deals in “deep packet inspection,” which allows networks to filter data packets to prioritize the order in which they are sent. Put simply, the technology gets you quality video more quickly when you’re watching TV over the Web.
Xilinx controls just over half of the $3.5 billion programmable-logic-device, or PLD, market. Rather than being application specific, customers can reuse and reprogram PLDs at will. You’ll find them in high-end systems like routers, switches, base stations, servers, storage systems, radar and more. This adaptability is a cost-effective benefit for Xilinx’s customers. They buy more to meet various needs and save money in the long run. Cramer likes this as part of a long-term, secular trend away from one chip with limited uses and toward another – Xilinx’s multiuse PLDs.