Playing the resurgence in telco spending

Several companies are set to benefit from this trend -- and it's not too late to buy in.

By Jim Cramer Sep 9, 2013 9:33AM

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Global communication (© Maciej Frolow/Brand X/Getty Images)One word: optical.


OK, it's not exactly like in "The Graduate," the fabulously funny movie in which Dustin Hoffman's character is told that the future is in plastics.


But if you did want to invest in the cyclically hottest area of tech right now, it would have to be in telco equipment, specifically anything related to higher-performance video through your cell phone.


The group's been a confusing one because of the quarter reported last by Cisco (CSCO), which contained almost nothing about telco-equipment spending. In fact, that quarter did more to obfuscate the unfolding positive story about telco spending than anything else because it kept a lid on Ciena (CIEN) and Finisar (FNSR). After all, investors presumed, how good could it be for these also-rans when it's bad for Cisco?


In fact, I now think it is glaringly obvious -- although the market disagrees with me -- that Cisco is actually having an amazing quarter. But can you really say that as you lay off 4,000 people? Can CEO John Chambers declare, "This is the age of renewed telco spend, but forgive us while we ax 4,000?" No, he can't. Not Chambers. That's not his style. Unfortunately, that means you won't know that anything really good is happening there until you see the quarter, which is ages away.


But there are so many other ways to play it. Last Friday I posited that the news flow out Alcatel Lucent (ALU) is going to get better and better. New management -- even, at last, a new chief financial officer -- will at last be in shape to translate orders into profits, and I think that Alcatel Lucent is going to get more than its fair share of European orders. Don't forget that Vodafone (VOD) will be flush with cash to build out whatever it needs, and that means some hefty orders for Alcatel Lucent. Alcatel might be one of the most exciting speculations in the world right now. I love how people tell me how I have missed it because the stock had been at $2. But that's the same catcalling I heard when I said that Nokia (NOK) was too cheap to avoid at $4. Where was I at $3?

We know that Finisar just reported a terrific quarter. I think it is still cheap, but how about the test and measurement of optical fibers? That's a business that's owned by JDS Uniphase (JDSU). JDSU is a cats-and-dogs company that, as the orders come through for its equipment, might be worth dramatically more now than what the stock is selling for. The company isn't due to report until Oct. 30, but it's hard to believe it won't have some big orders to announce by then.


There's been a lid on Juniper (JNPR) ever since Cisco spoke. Everyone's always gun-shy about Juniper after multiple years of disappointment, but need I remind you that a rising tide does indeed lift all boats? I think that Juniper's having a fabulous quarter, but no one wants to get behind it. That's a mistake.


We know from Ciena that business is very strong, but that stock's just had a humongous move, and I think you need to see a pullback before you go after it again. However, last week, when I spoke to Xilinx (XLNX), the company made this very clear: The money from Sprint(S), T-Mobile (TMUS) and AT&T (T) is being spent with alacrity now that the first two have rich foreign backers and the last is furiously trying to catch up in quality to Verizon (VZ) Wireless. Don't forget, again, how much Vodafone has to order from Xilinx in order to get its network up to snuff.


This fourth quarter, historically strong for this group, could be explosive. Only Ciena reflects that right now. Soon they all will, but it's not too late to buy any of them to play this next generation of telco spending, the one that seems to have been delayed for years and that is at last upon us.

 

Cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long CSCO.

 

 

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61Comments
Sep 9, 2013 12:24PM
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Returning to an earlier issue:

 

Thumbs up if you feel that Americans are being brain washed.

 

Thumbs down if you feel that Americans are not being brain washed. 

Sep 9, 2013 11:12AM
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Rome
Not sure anyone trusts the data coming out of China.
The Syria BS will be over in a week and a half, once USA and Russia agree that the red line they drew can be used to measure their d__ks they can negotiate a face saving exit from all the war talk.  
Sep 9, 2013 10:42AM
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The three sectors that seem to be doing the best in the stock market right now are QE, BS and PROPAGANDA. Just look at the wonderful volume.
Sep 9, 2013 1:25PM
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At least the fooball season has started.

 

 

Sep 9, 2013 10:12AM
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Jim, and his telecom blanket bets he throws out there every few years...Juniper, you cant buy in Wal-Mart.  There is a pick with a dip by the way, WMT.  Stay way out of Alcatel wrath.  Don't bet on it, let his charitable trust do the work.  Buy the ETF if you believe him, minimal exposure and diversification.  New Idea's Jim?  How about stocking up on steel and materials.  Alcoa, for a rebound? 
Sep 9, 2013 10:31AM
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Yes -- this will improve John McCain's online gambling experience.
Sep 9, 2013 10:06AM
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Kind of weird to think that in 40 years, we'll look back on the current smart phones and their current video capability and laugh at the "rudimentary" technology involved.

"Can you believe people would actually watch stuff on those itty bitty screens?  And the picture quality was so horrible, not to mention the audio distortion.  And the batteries in those things only lasted for a day or two.  Man, I don't know how people got by with that crap."
Sep 9, 2013 3:34PM
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Rules and sanctions coming on high-speed trading? Doesn't the premise of "rules and sanctions" put the whole corrupt marketplace out of business?
Sep 9, 2013 11:54AM
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Tog
Putin is a thug, a thug with a ton of power mind you, but a thug.
Many don't trust the data coming out of China, not sure what to think myself.
Cleaned up corruption within Russia, he did no such thing.

Sep 9, 2013 4:10PM
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Good economic data out of China and a good plan out of Russia re Syria .. lifted the markets today --- now lets hope President Obama decides not to invade Syria.
Sep 9, 2013 10:45AM
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"......but need I remind you that a rising tide does indeed lift all boats? ....."

Not if the boat has holes below the waterline !
Sep 9, 2013 11:51AM
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"Some" Americans are being "brainwashed"....NTU.
Sep 9, 2013 9:46AM
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I think Prince already sang this song.  Party like its1999.  All the same 90's trader stocks all over again? 
Sep 9, 2013 11:41AM
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I just can't believe this hack keeps his job...I try to rationalize how but it seems impossible that CNBC lets him clown around and ruin their programming......they know he is a hack because they put up a disclaimer......yet they keep him on the air
Sep 9, 2013 10:56AM
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It's hard to figure out what Bobo is saying about Chambers here. Is he chiding him for laying off 4,000 people when (in Bobo's opinion)  the company is having a great quarter or is he patting him on the back. That paragraph is a little odd.
Sep 9, 2013 11:02AM
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It won't be long before traders, the cesspool that makes up Wall Street, begin manipulating Syria and QE, and ignore the economic gains made in China,  

Sep 9, 2013 10:46AM
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There is something suspiciously wrong with the way the NASDAQ is climbing .....not sure what ....it just seems phoney !
Sep 9, 2013 2:25PM
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I'll play the next telecom boom, by not playing.
Sep 9, 2013 2:46PM
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   Yup unemployment with another improvement, although corrected the other way for June & July, companies reporting good earnings although some earnings are pulling back a bit. Things look all roses right? Well maybe but there is one figure not openly reported buy our transparent government that worries me, the labor participation rate dropped to a 35 year low of 63.2%. This figure better start trending upward before to much longer or we could be in for a world of hurt.                        From  a  personal investment  perspective it  dos not matter that much, I thrive on crisis investing. But have kids and grandkids that depend on a good economy so I hope this improvement is for real and not mostly left over Bush & Obama stimulus spending, preretirement spending and running down inventories. Good investing!                                                                        
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