Cramer's Mad Money - Highway to Dell (7/29/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday July 29.

CEO Wall of Shame, Michael Dell, Dell (NASDAQ:DELL), BP (NYSE:BP)

With the resignation of Tim Hayward, the CEO that presided over one of the worst ecological disasters in history, Cramer inducted a new member on the CEO Wall of Shame; "boy genius" Michael Dell, CEO of Dell (DELL). At first Cramer thought Steve Ballmer of Microsoft (NASDAQ:MSFT) deserved the dubious honor, since his company has been down 50% since 2000 when he took the helm, but Cramer found Dell has been worse; the company's stock is down 70% for the same period. Michael Dell's main fault is laziness, his allowing Dell to go from leader to laggard. While Michael Dell was a legend in the 90s, he has been resting, or rather, sleeping, on his laurels.

While Dell has tried to diversify, it has started too late in the game, and 50% of the company's revenues are still derived from the moribund PC market. Right now, Dell has the worst PCs and doesn't spend enough on product development. This CEO is one of the highest paid and yet owes the SEC a $100 million fine for accounting tricks.

Wall Street's Lunatic Calendar: Kellogg (NYSE:K), Colgate (NYSE:CL), Apple (NASDAQ:AAPL), Boeing (NYSE:BA)

Wall Street doesn't run according to the solar calendar or the lunar calendar, but according to the lunatic calendar. The upcoming earnings reports are not going to be talking about profits for 2010, but for 2011. Once August comes around, people on The Street will stop caring about the remainder of 2010 and will talk about next year. Cramer concludes if this is the case then "hope springs eternal." Sure there will be more roller coaster days like Thursday when the Dow jumped up and down as rotation chasers, who were moving into soft goods stocks, were finally faked out after disappointing earnings from Kellogg (K) and Colgate (CL), which dropped 6 and 3 points respectively. Cramer thinks the focus on 2011 in earnings reports will bring new hope to investors.

However, tech might still be in the doldrums, because August is historically a down month for the sector, in addition to the "It's all about Apple (AAPL)" mentality.

Boeing (BA) is an example of the effect of the lunatic calendar. It reported a disappointing quarter, but the stock barely suffered because of the focus on the potential for 2011 and the dream of the "Dreamliner."

CEO Interview: Moshe Gavrielov, Xilinx (NASDAQ:XLNX)

Chipmaker Xilinx (XLNX) reported a genuine upside surprise, beating estimates by 5% and increasing sales by 58%. Yet nothing happened to the stock. While Xilinx had run up 44% since March prior to the quarter, it still deserved some kind of lift, given the company's double digit growth in all of its divisions, great balance sheet and respectable 2.3% dividend. Its biggest obstacle is supply constraints, a "good" problem.

Cramer told CEO Moshe Gavrielov; "You've always been a very honest barometer of the strength of the business." Currently, analysts are saying the chip industry is in trouble. Gavrielov responded; "Well, I think that's absolutely as far away from reality as it could be," and discussed "burgeoning trends" in wireless and "insatiable bandwidth."

Gavrielov said that the new trend in 3-D, particularly in sports, will drive chips. He also pointed to the fact the company has a very broad array of applications, from military to high-end consumer to scientific. When asked about the idea that summer is historically difficult for tech, Gavrielov answered "in this environment, seasonality is out the window," and European business has gone "from strength to strength." In a nutshell, Gavrielov said the macroeconomic trends do not take into account the new applications that are driving business, particularly demand for upgrades.

CEO Farooq Kathwari, Ethan Allen (NYSE:ETH), Williams Sonoma (NYSE:WSM)

"We all need an antidote to the media's unrelenting, and I think irrational, negativity on housing... on retail." The company raised its forecast last week. However, the stock has been on a wild ride from $7 in March 2009 to $25 in May of this year to its current level of $15.35. The initial rise in stock price was backed up with strong fundamentals, as sales increased 5% and inventory dropped 10%. Cramer praised Ethan Allen for taking full advantage of the recession to streamline the company. Kathwari said the consolidation of factories and cutting costs has helped put the company in an excellent position. Ethan Allen is now looking at hiring again.

After 2009, "the worst fiscal year" Kathwari had seen in 30 years running Ethan Allen, the company was able to come back from a 30% decline to end up in positive territory. Cramer said Ethan Allen and Williams Sonoma (WSM) are the only two high-end stocks he would recommend now.


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