Cramer's Mad Money - Distressed Tessera (11/4/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday November 4.

Distressed Tessera (NASDAQ:TSRA) CEO Hank Nothaft

One of Cramer's "mobile internet tsunami" stocks seemed to have passed through its own private storm; Tessera's stock price got "totally bent, spindled and mutilated," and declined from $26.86 before the company reported earnings to $20.87 in less than a week. Cramer invited CEO Hank Nothaft onto the show to explain the reason for the decline.

Two of Tessera's clients are getting volume-based pricing incentives, which means Tessera will get lower prices for its products. These incentives had a 10% impact on fourth quarter earnings a year ago. Tessera beat its 3rd quarter guidance, but lowered its fourth quarter guidance, and as a result, there was a decline in the company's stock price. When Cramer asked the CEO why he lowered guidance, Nothaft said analysts were very bullish on the stock at first and didn't realize the impact of the volume-based pricing. "The thesis is still intact," said Nothaft.

Cramer is unhappy that the CEO overpromised and underdelivered, but thinks Tessera "will live to play again."

Battling the Bears

Stocks fell following a rally, but Cramer insists there is much that is good in the market, and decided it was time to critique the bears' thesis. Cramer sees Buffett's purchase of Burlington Northern (BNI) as a bullish sign of a recovery, whereas the bears are implying that the "Oracle of Omaha" has lost his touch.

October retail sales were good, but cynics blame the cold weather for increased shopping. However, they had no explanation for solid back to school sales, and Cramer says he would like to see what they have to say about better-than-expected auto sales in October. The bears predicted a housing disaster with the end of government subsidies, but now that funding is going to be extended, the bears are strangely silent on the issue. Cramer also wonders how they can simultaneously predict a housing bubble and a housing crash.

"It is fun to be a bear," said Cramer, "...but pooh-poohing the positive is a great way not to make money."

CEO Interview: Daniel Junius, Immunogen (NASDAQ:IMGN)

Immunogen has teamed up with Genentech-Roche (Private:DNA) to create T-DM1, a breast cancer drug which may become the leading treatment for the deadly disease. Phase II results will be released on December 12, and if the company reports good news, Immunogen will "be up gigantically." Cramer says T-DM1 is an improved version of Genentech-Roche's Herceptin, and may end up replacing the drug.

If T-DM1 is released, Immunogen can expect $350 million in royalties compared to its current $390 million market cap. But is this "fantastic speculation" a slave to the fortunes of T-DM1? Daniel Junius says the stock is speculative, but there is plenty to buffer the company, thanks to its many partnerships (with Sanofi-Aventis, Amgen and others). Since Immunogen gets "milestone payments" for every phase of drug development, it will still make money even if a drug is not approved. Cramer said to Daniel Junius, "You could be a huge company if you get this right," and told viewers that Immunogen is an "excellent speculative stock."


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