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This Year's Hottest IPO?

On Monday, Cramer told viewers how to play the best of the new IPOs set to price this week: MaxLinear.

MaxLinear is expected to hit the market on Wednesday and will trade under the symbol MXL. The company designs high-performance, low-cost radio-frequency chips that capture and process broadband signals. This allows us to watch broadband video on cable boxes, digital TVs, mobile phones, computer-vehicle displays and other networks.

Broadband video on your phone? That’s Cramer's favorite growth trend right now, the mobile Internet tsunami. Cable boxes? Sounds like Verizon’s FiOS and the move to more broadband services. MaxLinear is a direct beneficiary of both these trends.

This is a venture capital-backed IPO coming from US Venture Partners, Battery Ventures and Mission Ventures. Out of the $65 million expected to be raised in the offering, just $15 million is going to selling shareholders—none of them executives—and $50 million is going to the company to fund growth. And the lead underwriters are Morgan Stanley and Deutsche Bank.

Now, MaxLinear has a proprietary edge, as its products are protected by nine issued patents and 82 pending patents. Its radio-frequency receiver chips cost less, use less power and are more reliable than the current generation of broadband receivers being used today.

MaxLinear makes its money by selling to customers in Asia who then incorporate the chips into other devices. Panasonic is its biggest customer at 23 percent of revenues, and its top 10 customers made up 83 percent of sales in 2009. The company also sells to Sony , Casio, Samsung, Dell and Arris Group , among many others.

The company predicts that its operating margin—the amount of profit it gets from every dollar of sales before taxes and interest payments—will eventually go from 11 percent in 2009 to 20 percent. Even better, the Mad Money host said, MaxLinear’s balance sheet has $61 million in cash and no debt.

So, how much should investors pay for MaxLinear? With the company expected to grow at about a 35 percent annual clip for the long term, Cramer said he would pay up to $18.

Lastly, the Mad Money host reminded viewers that if they want to get in on the IPO, they should not buy in the aftermarket.

The bottom line: Cramer thinks MaxLinear might be the hottest deal so far in 2010.

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