Web, Apple, storage stocks lead tech

Companies that make the Internet faster, abet Apple in its global domination or allow data to be stored remotely are the current winners. Forget about everything else.

By Jim Cramer Sep 20, 2010 9:07AM

jim cramer of thestreetBy Jim Cramer, TheStreet


Cloud and Internet, yes. Everything else in tech, no. That's pretty much what the charts said in my weekly perusal of the pictographs courtesy of the hand-delivered S&P chart book I have been getting for 25 years.


The charts never get old, and they always show the key trends in what is loved and what is hated. Anything that touches cloud computing, making data more accessible, more storable and more secure wins. Anything having to do with anything else, except perhaps Apple (AAPL) and its mobile applications or video, is getting no love -- and no multiple -- at all.


Take Sourcefire (FIRE), a company that most people have never heard of. This networking security company is the quintessential play of the moment, one that has vaulted from $18 to $29 in a month's time. The propulsion is due to both takeover -- does it look like Radware (RDWR), ArcSight (ARST), 3Par (PAR) or McAfee (MFE)? -- and earnings. The ramp here is reminiscent of the Salesforce.com (CRM) takeoff.

Or take Citrix (CTXS), a ho-hum "go to my PC" player that I always considered a desktop enhancement that now can brand itself as a desktop cloud play. It has the chops to prove it -- a breakout quarter that makes it likely to be acquired if its chart stumbles, even if its earnings don't. Given that this was the first great quarter, I doubt the business can stumble that quickly.

Tech security is a continuing theme, in part because the objection to the cloud at the enterprise level is that it can be hacked -- that was ArcSight's claim to fame. People don't even care at this point if the security that is offered helps make cloud storage stronger. They just care about whether a company can be in the category.

If it can, a la McAfee, it gets a heightened multiple. So VeriSign (VRSN) fares better, and so does Symantec (SYMC). It doesn't matter whether either company has any momentum, although each has a division that seems to be doing well. People want it. They see that it could augment the security quotient of another company -- an Oracle (ORCL), an SAP (SAP) or a Dell (DELL). Doesn't matter that it could be fanciful thinking -- the traders want to be in on the home run that is Radware/3Par/ARTS/McAfee, and they are willing to overlook any weakness.


Of course, storage for cloud is out of control. NetApp (NTAP) is not quitting. I think that company would have to say "our stock is too high" to stop that monster. Same with VMware (VMW), which is making such a strong move that people are beginning to recognize that the company is owned by EMC (EMC). I think both companies are strong into the fourth quarter.


What else? Look at Akamai (AKAM) and Netflix (NFLX), disruptive technologies that are allowing the disintermediation of cable and entertainment. They are making it so the next generation can watch its favorite programs on the iPad -- great in bed because the TV is either hard to see or is on a wall in the living room. I know tons of people who watch it without their contacts in! I kid you not.

Of course, there is the youth quotient that thinks the cable bill is a big rip-off. Hard to justify the move in DirecTV (DTV) over this trend but easy to see why the cable companies are totally stalled.


Netflix is a winner. The companies willing to buy anything related to storage should just go buy Akamai, but I have been saying that for $3 billion in market cap now. Cisco (CSCO) should buy it, but it is too smart for Cisco -- which I am now beginning to believe is simply not as smart a company as I once thought. It has done nothing for years.


Not many other winners in tech. You see some Apple-like winners, notably Skyworks (SWKS), odd because it represents all other handset companies; Qualcomm (QCOM) because it is in Apple's intellectual property for next versions of devices; and two that I think should be higher, ARM Holdings (ARMH) and Cirrus Logic (CRUS). I think Intel (INTC) would be much higher if it had bought either of those rather than the bonehead McAfee.


The ironic thing about acquisitions is that, if you look at Oracle, it knows how to do it. Sun was a dog. But Intel, Microsoft (MSFT), IBM (IBM), Cisco, Dell and Hewlett-Packard (HPQ) either don't have a clue or don't know how to exploit. They are all perceived as buyers because they need to acquire companies to show growth. It is just that they, unlike Oracle, don't know what to do with the growth they acquire. (Microsoft owns and publishes MSN Money.)


I mean, think of it. How long has F5 (FFIV) been out there, screaming to be bought by Cisco? Yet Cisco doesn't care, or doesn't know, or doesn't believe. Or Cisco thinks, like the old IBM, that it doesn't need to do anything bold because John Chambers is CEO for life. He is the king, isn't he? I don't mean to pick on Cisco. Couldn't IBM have seen this? Intel? HPQ? Nah. They never believed that it would come to this, that disruptive technologies would challenge their basic business.


Plus, all of these companies were always focused on the enterprise. They didn't care about the consumer. They didn't know how.


Isn't that why Apple is tearing up the joint and doesn't need to do acquisitions? Its technology, so dominant in retail, is so much better than the other guys' that it can now take on the enterprise. I am convinced that the shrinking market caps of all the other players except storage and Web are because Apple is about to take over the enterprise via the iPad. It sure has killed the growth area that was netbooks.


So the market is making sense in its own speculative way. You make the Web faster, you abet Apple in its global domination, you allow the data to be stored remotely so the desktop/iPad is empowered, and your stock goes higher.


Everything else?


Forget about it. Value traps. Period.


At the time of publication, Cramer was long Apple, Cisco, EMC and Intel.


Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.


Click here to learn how to follow Jim Cramer's trades for his Charitable Trust.


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