Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 22.
Motricity is one of the most misunderstood tech companies and, as of late, one of the worst performing mobile stocks. The company gives feature phones, or non-smart phones, a gateway into the wireless mobile internet. The speedy transition from these feature phones to smart phones in the U.S. and the company's change of policy on guidance from quarterly to annual caused investors to panic and the stock to get pummeled. Currently, Motricity is down 22% for the year and Cramer wondered, at a low price of $14, if the decline is a buying opportunity.
A deal between AT&T and T-Mobile could bring T-Mobile "back into Motricity's stable," said CEO Ryan Wuerch, who added T-Mobile has been a valued client for 8 years. Motricity enables non-smart phones to access Facebook, Twitter and My Space with one application. However, the sudden growth of the smartphone "caught everyone unaware," said Wuerch, but the company can deal with this trend by expanding internationally, where non-smart phones still dominate. Wuerch expects the company's international segment to grow to 50% in the next few years.
Wuerch explained that although Motricity has switched from issuing guidance from quarterly to annually, the company provides a "high degree of transparency." The stock is selling at a low multiple with a high growth rate. When asked about the fluctuations in the stock price, he replied "We don't focus on stock price, we focus on results."
Interview with AT&T Mobility & Consumer Markets CEO, Ralph de la Vega
The consolidation of AT&T and T-Mobile will mean a sea change for mobile, with only two players locked in serious competition. While there are fears of price rises for customers, AT&T shareholders are reaping the benefits, particularly with its 6.1% yield. While AT&T is no longer the exclusive purveyor of the iPhone, its last quarter was the best ever in terms of net wireless subscriptions. Upgrades increase the average revenue per customer, a key metric, and the merger will mean improved service to handle the revolutionary technology.
Ralph de la Vega thinks the merger is a match made in heaven and is the best deal for both companies since their technology is compatible. Both have benefited from the dramatic growth in mobile broadband, which is up 8,000% in the last few years and should continue growing, especially in rural areas.
AT&T is so confident the deal will go through that it has offered a $3 billion break up fee. "We feel very confident." Even with only two major mobile players left, Ralph de la Vega thinks there is still plenty of room for smaller players. "We will still be the most competitive marketplace in the world." The expansion of broadband will be good for society and the economy and will also create jobs; Ralph de la Vega commented that for every $1 billion the company spends, 7,000 jobs will be created.
Netflix is one enormous elephant in the tech room, and is a "freeloading data hog" which takes up 20% of all nighttime internet activity. However, Netflix is not just a problem, but it can be the solution if it is bought by Sprint or Verizon (VZ). Cramer reversed his warning to stay out of Netflix, since the stock has gotten pounded. He thinks that once the Facebook IPO becomes a reality, it will be crystal clear how undervalued Netflix is. Cramer called Netflix the "iPod of the streaming video space," in that it will destroy competition. While there is noise that Amazon (AMZN) could give Netflix a run for its money, Amazon's "heart just isn't into it." Cramer agrees with Goldman Sachs' $300 price target, since the company is "growing like a weed."
Netflix has no formidable competitors and plenty of interested suitors. The stock price could double with the Facebook IPO, so Cramer would get in before the earnings explosion happens.
CEO Interview: Dan Hess, Sprint-Nextel (S)
Now that it looks like the AT&T and T-Mobile deal will go through, Verizon (VZ) and AT&T will be left controlling 80% of the postpaid wireless market with Sprint Nextel as the odd man out. Sprint's stock has been hammered, but there might still be plenty to like about this company, especially with a stock at $4. Recently Sprint posted its first quarter in years with additions to its postpaid wireless customer base.
How will Sprint survive the aftermath of the giant merger? Hess admits the news was a shock, and that he didn't think it was possible that the top first or second company should be allowed to acquire the third or the fourth largest company; "We thought the likelihood of something like this was very remote. There is no question it requires a lot of concentration in the hands of just two companies." However, Hess thinks Sprint will survive thanks to its great innovative power and competitive pricing.
One of Hess's concerns with the deal is it may enable AT&T to restrict the access of smaller companies, but ultimately, Hess expressed confidence in Sprint's future with its cutting edge 3G and 4G devices.
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