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[Beginning of
Cramer's
verbatim
comments for
this segment...]
Jim:
Got some good
news after the
bell…
Cisco
(CSCO*),
a name that I
own for trust
here, just
reported John
Chambers says, a
dramatic turn in
orders… the
number of
positive signs
this quarter in
our economy and
our business…
but wait a
second, you know
that is part of
the tsunami… the
mobile internet
tsunami… and I
have talked
endlessly about
it… that is the
widespread
adoption of
smart phones and
other devices
that give you
access to the
web anywhere…
which I think is
the biggest
trend in tech
since the rise
of the internet
itself… or even
the personal
computer...
You know... the stocks
that are
spearheading this
move…
Apple (AAPL)
with the
iPhone… the
indomitable
Research
In Motion (RIMM)
with
Blackberry…
QualComm Inc. (QCOM*),
a
charitable trust
name, owns the
wireless technology
that makes it all
possible… but these
high profile stocks
are not the only way
to play such a
massive product
cycle… we have got
the
ON Semiconductor Corp. (ONNN)… we got
the
Broadcom Corp. (BRCM)… we got
tons of companies
that we talk about
every night…
Skyworks Solutions Inc. (SWKS),
RF Micro Devices Inc. (RFMD)… we also
have the companies
that are behind the
curtain… the ones
that literally makes
the guts of the
mobile internet… and
the plain old
vanilla internet
too… supply the
weapons to
Verizon
(VZ)
vs.
Comcast (CMCSA).
These are mostly
speculative telco
equipment stocks
that trade in the
single digits… but
if you can stomach
the risk… they are
capable of
generating huge
returns…
One of my favorites
as you know has been
Tellabs Inc. (TLAB)...
I always
call it TLAB from
when I helped bring
it public in the
‘80’s… it is a $5.77
telco equipment
maker that is a play
on the increasing
demand for
bandwidth… the stock
is up a whopping 46%
since I recommended
it here at $3.96 on
December 12th
as one of my first
tech specs… and as
you should
definitely take some
profits, of course,
if you bought it
down there… because
bulls make money,
bears make money,
hogs get
slaughtered… I still
think that there is
some room to run.
Tellabs does not do
anything sexy and
glamorous… it has
got a lot of
products that are
hard to understand
cause they have like
the 4400, the
5200... but, what it
does is necessary…
the company makes
digital cross
connects, broadband
access equipment and
routers… products
that enable the
delivery of triple
play voice, video
and high speed
internet… I saw
Verizon had it for
$79 now… I would rip
my system out and
put it in but I have
Verizon… this is for
both the phone and
cable companies… and
it facilitates
delivery of next
generation wire line
and wireless
services.. I want
you to think of the
stock like this… the
telco companies need
to spend massive
sums of money
rolling out a lot
more band width to
support the mobile
internet tsunami…
not to mention the
huge increase in
traffic from video
over the internet.
Tellabs will be one
of the biggest
beneficiaries of
this spending…
because it has the
products that we
need to update our
broadband
infrastructure…
Tellabs reported a
monster second
quarter last week…
beat the streets
consensus by a
penny… on stronger
than expected sales…
remember most people
just manufactured
their earnings…
stronger than
expected sales… more
important though is
the fact that its
orders in the second
quarter were the
best in the past
year… indicating
stability in telco
spending… worldwide…
with possible
increase upside in
2010 courtesy of the
governments
broadband stimulus
spending which was
actually talked
about on the call…
Tellabs also had
record revenue for
its data products
business… its
fastest growing
product category… in
the first 6 months
of 2009... compared
to all prior
comparable periods…
so you can see how
things are picking
up.
Oh, on top of
everything else…
Tellabs has $3.12 in
cash in equivalent
per share…no debt…
stock nice cushion,
in case something
goes horribly wrong
with my thesis… I
like the stock.. but
it has got a big run
up from where we
recommended it… even
compared to other
tech names… so
before I give
Tellabs my continued
speculative thumbs
up… I want to do a
little more
homework… I want to
hear from the
companies CEO Robert
Pullen, about the
state of business at
Tellabs…
▼ ▼
▼ ▼
▼
Jim:
Mr. Pullen, welcome
to Mad Money.
Robert:
Thank you,
Jim, it is a
pleasure to be here.
Jim:
It is great to
have you on… now,
Mr. Pullen, I read
thru all of the
research before you
came on… I do not
know, I have known
your company since
the ‘80’s… I think
your company is
about the best that
it has been
positioned in about
20 years… but these
guys, an interesting
evaluation, lacks
catalyst, do not
care for it here…
underperformer… Bank
of America and
Merrill Lynch, they
have a sell on you…
do these guys not
understand the
history of your
company and how good
you have it right
now?
Robert:
Jim, we have
refocused the
company over the
previous year and
half. In fact, we
have been trying to
innovate both our
customers succeed
and our company
succeed. If you
think about it, what
we have been doing
is positioning into
the data and optical
space which is
growing faster than
the overall cap x in
the industry. In
particular, we are
focused on the
mobility space as
well. And you are
right on target,
when you think about
it, there is a macro
economic trend in
the world. Everyone
around the world
wants mobility and
they want broadband.
And we are focused
on that mobility
space. And right now
as you know, the
phones are moving
from just phones, to
mobile phone
services, then into
mobile video. We
suspect over time
that it is going to
move into mobile
commerce. And the
US, for example, has
not even started in
that space yet. And
we are playing a big
roll there.
Jim:
But, I look at
what you are doing…
I was surprised,
given the fact that
I know that Verizon
has not turned the
spigot on yet…nor
AT&T… North America
was not as strong as
I thought it would
be… is that a back
half story?
Robert:
Well, it
could be a back half
story, and there is
talk about customers
spending more in the
back half than the
front half of the
year. But as you
noticed, about 3% of
our second quarter
revenue was from
outside of North
America. That was
the highest
percentage that we
have in roughly five
years. It is a good
story. We are now
expanding our
customer base
globally. We now
deliver service to
the top 41 of the
top 50 service
providers around the
world. I mean, let
me give you an
example, how we are
expanding our
customer base. We
are doing business
now with Telstra in
Australia. We doing
business with
Telecom Italia in
Italy. Vodaphone and
all of their
properties. British
Telecom in the UK.
As well as with
Verizon and AT&T in
North America.
Jim:
You left out my
favorite one here,
on page six, China
also actually also
impacted our
quarter… how about
China?
Robert:
You are
right. We made a
conscience decision
roughly about a year
and a half ago to
invest more in
growth markets as
well. Those included
China, Brazil,
India, and Russia.
We also invested in
positioning the
Federal government,
as you just
indicated, that is
starting to pay off
for us. There is
some really positive
news there. And we
are trying to expand
our global
footprint. If you
think about it, most
of the capital
expenditures in the
world, 2/3’s of them
are outside of North
America. North
America is extremely
important, but we
should expand beyond
that.
Jim:
I also, I do
not think that the
analysts got it… the
Nico’s guy, he is a
smart guy.. but
Nortel, their kind
of demise has got to
be in your sweet
spot, right… I mean
even though a lot of
it is legacy
business… their
business that
competes against you
is kind of influx
right now, isn’t it?
Robert:
Absolutely,
in fact, part of our
growth products. In
fact, this past
quarter our optical
networking products
had the biggest
growth ever as well.
We actually compete
against Nortel, and
we are winning new
customers around the
world.
Jim:
Now, can you
give me a sense on
if I am Verizon, or
AT&T, or a cable
company, why I need
you to win the war
telco vs. cable?
Robert:
Well, first
of all, right now we
are delivering
common services,
voice, data and
video. Over time
that is going to
move into content.
And you are going to
need to handle the
intelligent public
network to be able
to handle that
network over time.
For example, right
now mobile commerce
is not very popular
in the US but it is
popular in Japan and
in Scandinavia.
Today in Japan you
can use your mobile
device to go up to a
soda machine to buy
a soda. Or use your
mobile device to
even start a care.
We expect that
intelligence to
continue on. In
fact, I expect one
day whether it is a
cable company, or a
wire line company,
or a wireless,
everyone wants
broadband. And you
are going to need
increased band
width.
Jim:
The President
wants it too.
Robert:
Exactly, in
fact we are using it
right now. We are
telecommuting with
you right now with
this video feed from
Chicago to New York.
Jim:
Let me ask you
one quick question
and then we have to
go…one of the
problems that I have
with your company,
and I think that the
analysts do too, and
it is a high quality
problem… you have
got so much cash
that you cannot earn
any money on it…
what are you going
to do with all that
cash?
Robert:
Well, Jim,
my competitors would
love to know what I
am going to do with
that cash. But let
me suffice to say,
we are very customer
focused, and
shareholder focused.
We are going to do
the right thing both
for our customers
and our
shareholders.
Jim:
Robert Pullen,
you have got a great
story. Robert
Pullen, CEO of
Tellabs Inc. (TLAB)… thank you
so much sir for
coming on,
appreciate it.
Robert:
Thank you
Jim, I really
appreciate it too,
thank you.
▼ ▼
▼ ▼
▼
 Jim's
comments AFTER the
interview:
Guys... sweet spots
everywhere… sweet
spot telco… sweet
spot cable… sweet
spot mobile… look I
know we are up huge
on it… but I would
tell you something…
I would not sell a
share… as a matter
of fact, under $6...
buy, buy, buy.
[verbatim recap]
[end of segment]
Read Jim's next Segment
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