Friday, June 5, 2009
(Cont'd from above)...

Jim (cont'd):   


Jim:       Given the fact that the darn thing is investable for the first time in ages, I haven't been focusing on the top brass... not that I dislike the Four Horsemen... I absolutely like them... as much as possible without loving...

No. Instead, most of the tech stocks I've been talking about have been lowly-worm, practically tramping through the mud as they trade in the single digits, lowly speculative stocks... tech specs... or, to extend the military metaphor throughout this whole segment, just to bore the heck out of you... I've been recommending the "infantry"...

The logic to that is perfectly sound, as the tech rally, while it's based on a foundation of improving fundamentals... especially in smartphones... and even more so in the semiconductor companies... well, it's fueled by the crate loads of money that the top-performing mutual funds are getting from normal investors... who want to come in from the sidelines, but don't feel comfortable picking stocks themselves.

Then the mutual funds, almost all of which really like tech more than anything else... they've already made lots of money in tech and they're flush with cash... and they're willing to spend...

Sure, the tech specs we've been recommending have done pretty well. Some have soared fabulously like Tessera (TSRA)!... up a whopping 34% from a week and a half ago, on May 26th... That stock's an NCO (i.e., non-commissioned officer) if I ever saw one... Not to mention CIENA (CIEN), up 12% from May 15th... a Corporal, or at least a Private First Class... Brocade (BRCD), 27%... a company that was once a modern Major General back in the days of the dot-com bubble, but got busted back into the ranks... a Staff Sergeant...

The tech specs are working, but the tech stock I'm about to recommend tonight isn't from their ranks... It's a big company that's tapped into the hottest major growth markets out there...

This was an old favorite of mine... I was in on the IPO... I knew the old management well, which doesn't really put me in a good stead...

It's called Broadcom Corp. (BRCM)!... one of the mightiest semiconductor stocks in the world...

Now, we heard from loads of the semis, and I think anyone who doesn't believe in the semiconductor bottom is totally kidding themselves...

If you've had your fill of tech infantry men for now, BroadCom just might be what you need... a full-bird Colonel... that's right, below a Brigadier General...

BroadCom is another leader, even if it isn't as high profile as the Four Horsemen... Best of all, close to every chip BroadCom produces either goes into the broadband market or the wireless market... where there's a whole lot of action. Wireless keeps growing, and BroadCom's looking to make a big push into cellular phones.

Right now, the company gets just 5% of its revenues from selling chips for wireless handsets. Upside could be tremendous... Plus, while BroadCom has plenty going on all by itself, its chips also provide the Bluetooth and Wi-Fi in the iPhone... got your interest there, right... Don't forget, iPhone price gets cut on Monday and later next week we're going to see iPhone in China... The new iPhone model is being released in July... It's BroadCom...

Although it's not as sexy as anything Apple-related, Colonel BroadCom has made deals with Nokia (NOK) and Samsung, and is expected to send them their chips through the end of this year.

On the ethernet side... a little more complicated... BroadCom has the greatest share of the market in chips for ethernet devices... a 42% chunk... which just about everybody uses at some point or another in the process of hooking up the internet.

It's also the number one player in making chips for cable set-top boxes; they've been a dominant player in that forever... and wireless area network equipment, or LAN... just tech jibberish for the wireless equipment you might have at your house or your school.

The company's chips also fall in a healthy second place in satellite set-top boxes, Bluetooth devices, and GPS devices too... anything gadget... BroadCom.

Now here's the real key success...

The one thing that gives it a razor-sharp edge over many of its competitors is that it makes something called "combination chips." We heard this term, by the way, from David Aldrich at Skyworks (SWKS)... Basically, these are chips that integrate different technologies. So you could have technologies like Bluetooth, FM radio, Wi-Fi and GPS all on one chip, that can then be placed in a device, saving BroadCom's customers serious money, since they could stop buying chips for each function, and just buy the one.

That saves the customer a lot of money, so they're obviously drawn to BroadCom.

How big?...

So far, according to BroadCom's management, only 5% of today's smartphones carry combination Bluetooth, wireless LAN and FM chips. They think it's going to be 75% in the next 3-4 years. That's amazing growth.

Now, please... Let's remember what I said was the best piece of research that's come out so far in 2009... I'm talking about Morgan Stanley's Catherine Uberty... who said, or what I paraphrase from her research notes... remember, she's recommending Apple (AAPL)... She said that mobile internet is the next major tech product cycle, and it's going to be 40 times the size of the move to computers with internet access. Remember, a lot of that is because you and I may watch TV, but my nephew, who is 24, has never even heard of it. Everything's on the iPhone. There isn't anything he doesn't watch...

Now, you've probably heard about the hostile takeover BroadCom is attempting with Emulex Corp. (ELX)...  Uh, the board at Emulex blocked that so BroadCom initiated a tender offer at the same price. The stock's still moving higher... We like this deal... but we don't like the dirty way Emulex is slinging mud at BroadCom's management. Memo to Emulex... go read last Sunday's New York Times Business Section. There's an article called, "The Boss," about the squeaky-clean guy who currently runs BroadCom. So the nonsense about once Cramer-fave, Henry Nicholas, the old wild man boss of BroadCom, just won't wash!

We say BroadCom gets Emulex at a good price, and move into still one more business... the cards that let computers connect to data storage networks... a cozy duopoly between BroadCom and Emulex...

Here's the bottom line...

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