Another Hot Tech IPO?

The IPO market refuses to cool down, with $45 billion in deals coming in 2010’s first quarter alone. And there’s another one coming in two weeks that Cramer thinks you should consider: Alpha & Omega Semiconductor.

A&O and its cohort are being driven by two major forces right now, the mobile Internet and renewed consumer and corporate demand for computers. And Alpha & Omega’s specialty is the “power chip,” used in computers, flat-panel displays, set-top boxes, portable media players and netbooks. Basically the company makes smaller semis that improve energy efficiency and extend battery life, Cramer said, and that’s “exactly what’s in right now.”

Power semis are a subset of the analog chip market, which is supposed to grow to $54 billion in 2011 from $45 billion in 2009, for a compound annual growth rate of almost 10%. And A&O counts among its customers Acer, Dell , Hewlett-Packard and Samsung. The value proposition for these companies is that A&O uses its proprietary packaging technologies to combine multiple power chips into one small package that offers an integrated solution to all of a device’s power needs. And it’s proved itself both prolific and cheap: Alpha & Omega has released 100 new, low-cost products a year over the last three years.

With the wave of positively revised first-quarter guidance from chipmakers over the past couple of weeks – 10 companies, including Altera and Texas Instruments – Cramer’s feeling bullish about A&O. Especially when you consider the success of other semiconductor IPOs this year, namely MaxLinear and Avago .

So how do you play it? Alpha & Omega, which will trade under ticker AOSL, is price between $17 and $19 on April 26. Cramer said that, based on valuations of similar companies like ON Semi and Diodes, the stock is still buyable up to 12 times next year’s earnings, or $23 a share. If you can get in on the deal at the pricing, he said, you can buy as much as you want. But at $23, he recommends buying only half a position.

Whatever you do, though, don’t buy in the aftermarket. That’s one of Cramer’s cardinal rules. Too often the stock shoots higher, killing your chance to profit. So as good as the A&O deal looks right now, you’ll just have to take a pass if you can’t get in on the pricing.

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