[Beginning of Cramer's verbatim comments for this segment...]

Jim:        After a mega pullback like we had yesterday and today's ridiculous intraday drop that panicked people out of the market instead of enticing them, as it should have, if you've been watching this show. You know we like to fall back on our long term themes. But is it enough for a company to be tied into a hugely important multi-year theme like the mobile internet tsunami, can that carry it? Will that wave carry all boats into Smartphones sea higher? Or to mix metaphors…do these companies need to do more than just be a part of the mobile internet food chain if they're going to make you money. Yeah, they do! They have to know how to surf the tsunami, which in this case means they need to be able to execute. And that's what I got to find out here. Admittedly I'm somewhat concerned when I look at Aviat Networks, Inc. (AVNW). This is a company formerly known as Harris Stratex. We recommended the stock, it was back in September 11th. It was trading around $6.68. Pretty much where it is now. We said it was the speculative way to play the wireless infrastructure buildout that's necessary to support the enormous and ever increasing amount of bandwidth that these Smartphones and Netbooks, pretty soon the iPad, take up around the globe.

Aviat makes what are called microwave back whole radios. These are in short supply in America. They're used to connect cell towers with the actual wireless network. We believe in this technology because it's much cheaper than running a coper wire or a fiberoptic line between 2 points. That's why 60%, 60% of backhaul connections worldwide are done using microwave radio. Here's the problem. Wednesday night, Aviat reports, right it reported a quarter that Wall Street was not happy with. And its stock fell 12.5% from Wednesday's close of $7.27. Aviat beat earnings by a penny from what people were looking for. But its revenue came in below the Street's consensus, meaning what the Street thought, and to make things worse the company's guidance for the next quarter fell short of expectations as well. It was, no word mincing, a terrible quarter. And I know that the analyst felt it was one of the worst that they've seen this year. I'm trying to figure it out myself.

Stocks become a playground for short sellers. Shortages are about 11% of the float, we don't like to see this. My hope is that the problem is not one of demand. that would hurt our mobile internet tsunami thesis. My hope is that it is just about execution, meaning that orders didn't yet come true or contracts didn't yet close. That's a different matter and it's a positive one. In other words, it may just be a bookkeeping issue and the whole thing's blown out of proportion or the shorts are pressing the case and the longs in panic mode. Frankly the stock could represent a fabulous speculative opportunity right here after the bad news, or maybe it remains a lagger. I got to tell you we got to find out. We need to do more homework. And that's why I'm thrilled to have the CEO of Aviat Networks, Inc. (AVNW), that's a changed name from Harris Stratex, Harald Braun on the show.

Get The Wall Street Journal for 75% off!

Jim:        Mr. Braun, welcome to Mad Money…

Mr. Braun:    Hi Jim.

Jim:     Alright, we got to get to the bottom of it, right? Because you know the conference…look…it wasn't like you guys were upbeat, you were tough on yourselves…

Mr. Braun:    Yup.

Jim:     But you also gave us some explanation that seemed to indicate there was a lot in the works, it just didn't close in time. Fair analysis?

Mr. Braun:    Fair analysis Jim. So, our shippings and bookings, right, support actually a bigger revenue right. And we are not alone in this deal, right, we have a big deal in the Middle East, so we are not alone in it. And, you know, it's a complex situation, and we would have thought, you know, we can take more revenue on it. But you have this Revenue Recognition Rules, right?

Jim:     Right.

Mr. Braun:    And, they actually didn't allow us to take all the revenue. We could only take a portion of it. We needed to bundle something on this deal and there are other recognition rules and we played by the rules and we couldn't take all of that. Otherwise we would have been somewhere up there, right?

Jim:     But, yeah but, a lot of the companies that are engaged in this backhaul business are blooming and can't even fill all their orders. Do you, is there something in the geographic area you have or with the competition, that you are not struggling to meet demands?

Mr. Braun:    Yeah, you know, it's a mixed bag somehow, right. So when you have a simple deal and you ship a box and you know you book it in the quarter you take revenue in the quarter, you take the cash and everything's done. Complex deals with tier 1 customers worldwide, and…

Jim:     Can you explain tier 1, because, you know, we're not analysts.

Mr. Braun:    Oh yeah, there are the big telecommunication operators like the AT&Ts and the Verizons. And they are complex deals. They go over several quarters, right. And of course you don't have everything done in one quarter. As I said we're not only alone in this deal. The fundamentals are in place, as you said before the fundamentals are there, and the demand is there. But you can not all the time, time it. It's a timing issue for us and in this particular case it is now in differed revenue, that means, it will hit later on in other quarters…

Jim:     But, why couldn't you signal to people who follow your company closely that this maybe developing, because I felt that when I listened to the conference call that many of the analysts were somewhat betrayed by what they thought was going to happen with your company.

Mr. Braun:    Yeah. I think we portrayed it in a way that there is a differed revenue, it's building up and it will be taken in the next quarters and with all our new announcements with new customers worldwide, we are pretty much…they know that we have the bookings. The bookings support also in the future there's internet tsunami, how you call it right. So, therefore say, for the maintenance in place, everything is fine. It's a timing issue, and some revenue recognition rules which we have too.

Jim:     But it wasn't like you said that this quarter's going to be a blockbuster either.

Mr. Braun:    Yeah, so, that is the thing right. So the going forward guidance, so, can we really say that we can take this differed revenue in the next quarter. So that we have to see and therefore we were a little bit cautious there because you know…

Jim:     Yeah, but, okay…I mean again, I mean you're in a segment that is so booming.

Mr. Braun:    Right.

Jim:     I'm trying to figure out why we should stick with Aviat versus going to another backhaul.

Mr. Braun:    Yeah, I think the, there again I think the and that's what I heard also on the call that the bubble or the burst of it, I think it's a quarter or 2 away. Because with all this load on the demand and with the best worldwide customer base and that differed revenue what we can take there. So, I think it's just a short term issue, where the bubble burst in the next whatever…in the next 2, 3 quarters I think that's what we see…

Jim:     You mean like the orders will start really flowing?

Mr. Braun:    Flowing into revenue.

Jim:     Okay. So what do you do…you have $2 in cash right and no debt?

Mr. Braun:    Ahum [nodding his head in agreement].

Jim:     I mean, what do you do with the money? I mean if the stock gets hit, are you allowed to buy back yet or you're really not because it's a spinoff, right?

Mr. Braun:    No, I think from my philosophy I would say we have changed the company. I'm 18 months in changed now. We have changed the company to a what's more excess play and we also have some core connections now and a good service opportunities. There are some pockets where we think we can even be stronger…

Jim:     India? India?

Mr. Braun:    India is a good place.

Jim:     Do you have that market to yourself?

Mr. Braun:    Not only for ourself, there all the players are there. But the union new announcement which we made last week was a fantastic one. 22 regions in India we can serve.

Jim:     Okay so what happens? We've lowered expectations for the next quarter but you think that 2011 is when everything kicks in or you talking about in the 2nd half of 2010 we can begin to get excited.

Mr. Braun:    I think that in the calendar year 2010 we will see more of the mobile operators expanding and I think towards the 2nd half we will see…

Jim:     I'll tell you what? We're going to hold you to it. Because you know, our necks are out. In September we recommended it and we're not down on what we're recommended but I did think that the beginning of 2010 would be huge, that's not happening yet. But we'll hold you to it, let's see how we do in the 2nd half…fair?

Mr. Braun:    Fair!

▼   ▼   ▼   ▼   ▼

Jim's comments AFTER the interview:     Okay. Thank you to Harald Braun, President and CEO of Aviat Networks, Inc. (AVNW). We're holding his feet to the fire and after the break we'll try to make you some money. Thank you sir.

[verbatim recap]

[end of segment]

*Note:  An asterisk next to a stock indicates that Jim owns it currently for his charitable trust.  If you are interested in a particular stock, Jim Cramer recommends that you always do the homework on each stock, and that you wait at least one trading week after his show recommendation to evaluate whether it is a good stock trade or investment for you. 

To help you with this, we have created an ONGOING STOCK PORTFOLIO which provides the changing stock prices for each major stock recommendation after 1 week, 1 month and 1 quarter for you here >> 

Read Jim's next Segment here  

Market Results today: Dow:  + 10 Nasdaq:  + 16 S&P 500:  + 3 1 3 4 5 6 See all of tonight's stocks mentioned on Yahoo! Finance, here...