[Beginning of Cramer's verbatim comments for this segment...]

Jim:        We've got a problem... we surfers have a problem... We have a problem when it comes to surfing the mobile internet tsunami. You see, we need a new surfboard...

On Tuesday, Cisco (CSCO*)... the spinal column of the Mobile Internet, as well as the old-fashioned internet... announced that it's acquiring Starent Networks (STAR). Hey, that's a fabulous deal... because it gives us a 79% gain in Starent, as I first recommended on May 8th, not that long ago, and a 52% gain since the launch of the Mobile Internet Index on August 11th...

Things are tough here in Cramerica. We need a replacement for Starent because, remember, we are not arbitragers... we ring the register once a stock's been acquired. So I searched and searched and searched to find something that could be the next cell phone, smart cell phone, mobile internet play!... Replacing Starent is tough! I mean, this is a stock that originally added to my list of tech specs... Why? Because so many viewers called in and asked about the company, for heaven's sake.

The best play on managing wireless content out there, with a massive share in CDM technology, turned out to be a huge winner... so how do we find the next Starent?... How about going back to the same well that gave us the first one... with a speculative stock that, so far, three viewers have already called in to complain about, in its lack of inclusion in the mobile internet index... and I listen to our viewers. One of them just called me out on it yesterday...

You know what stock I'm talking about?... I'm talking about ARM Holdings (ARMH)...

ARMH is the new winner and undisputed champion of the mobile internet index!...

Why ARM?...

Like Starent, this company has practically unrivaled market share. It has more than 95% of market share in all mobile phones... Now ARM is an intellectual property play like Cramer-fave tech spec, Tessera Technologies (TSRA)... but it's one that's even more concentrated, just in the mobile and smartphone markets.

What's that mean exactly?...

I'm always emphasizing how important it is to know what you own, because in the period from 1999 to 2001, people lost so much money with tricky technology names, and they can be tricky, especially ones that, like ARM, don't actually make anything physical... they make stuff that's like ether, okay...

So what's it do?...

ARM is a leading semiconductor intellectual property supplier. It designs technology for chips that are the heart of all kinds of high-tech gadgets, including the processors in most of the world's phones. Here's how the business works... ARM uses its expertise in research and development to create advanced semiconductor technologies. Then it licenses that tech out to leading semiconductor companies who then create innovative chip designs with these patents. Why do they go to ARM? Because it's cheaper. The design work that this company does requires enormous amounts of R&D investment and expertise. Every semiconductor company would need to spend between $50-150 million a year to simply reproduce what ARM does for them.

By designing once, and then licensing many times, ARM spreads the R&D cost for making better and better chips across the entire industry, which is why the callers keep telling me to recommend it.

This is a huge change from back in the 1980s, when the semiconductor manufacturing process was the key to success, and every company claimed to have the superior process. Today, semiconductor manufacturing is costly and not a particularly lucrative line of business, and fab-less semiconductor companies - those that don't have any "fabs"... manufacturing facilities and just do design work - they are abound now, because chip design has become the key to success...

ARM makes its money... by doing critical design work, then licensing that critical design work out to the major players and collecting royalties. ARM totally dominates the portable electronics game... I'm talking about things like mobile handsets, MP3 players. It has 95% share of that.

Some companies are practically monopolies, simply because no one else can come close to doing what they do. ARM's one of them. Listen, on average, there are two ARM processor-based chips in every mobile phone, although there are many more in smartphones than there are in "dumb" phones (e.g., that just make phone calls)... which is why this is why this is an internet tsunami play... with some smartphones containing up to five chips based on ARM's technology. This had a right to be in the index from the beginning.

This is a huge mobile internet tsunami play, simply because the number of ARM-based processors per phone is increasing, courtesy of the smartphone revolution, as smartphones increase.

How important is this company?...

Okay, QualComm Inc. (QCOM*), a stock that my charitable trust owns, ActionAlertsPlus.com... is behind the technology that makes the 3G and 4G wireless networking possible, and QualComm's chips are all based on ARM's underlying architecture. Now ARM is also on the verge of what could be a major takeoff in the PC market... So far, all notebook and desktop computers have been run on the X88 architecture... that's the old one designed by Intel in the 70s... and this is what both Intel and AMD use as the basis for their processors. ARM has finally come up with a viable alternative for netbooks... remember, I was looking for a netbook play... where its processor design has nearly caught up with Intel on performance, while requiring substantially less power.

ARM recently announced a new processor design that's capable of delivering two gigahertz of processing speed. That's the same as Intel's "Atom" line of netbook processors. This is all about power. Pretty much all mobile devices run on ARM architecture, because it's more power efficient. All PCs, remember, were originally desktops... and they were plugged in, so energy efficiency was never a big deal, right... But handsets, on the other hand... handsets have always run off of batteries... so energy efficiency is a big deal.

Now, as more and more people buy netbooks - small, cheap ultraportable computers, where people need lots of battery life - there's a huge potential for ARM's technology, as it can give you double the battery life. Some people are really worried about ARM's technology. I'm not. And I think Intel (INTC)'s a buy at $20.

Plus, ARM is a major partner with Cramer-fave, Google Inc. (GOOG), on the launch of its new Chrome operating system which could help the company start taking share in the netbook market in the 2nd half of 2010. So whenever you hear "Chrome from Google," you should be buying ARM.

The stock seems expensive... up 101% since the March lows... trading at 25 times forward earning. Whew... I think that's relatively cheap though, given that ARM's earnings are projected to grow at a 30% clip. Wow... How many do I have over 30%? Count them on these fingers... (where Jim is holding up all ten fingers)...

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The Bottom Line!:     We need a replacement for STAR in the mobile internet index, and I can't think of a better stock than one provided by you, our own viewers... ARM Holdings, plc (ARMH). This is one of the best long-term stories in the semiconductor world, with huge, huge growth coming from the mobile internet tsunami and market share gains... Hey listen to me... this one should have been an original member of the mobile internet index. My bad. Thank you Cisco (CSCO*) and Starent Networks, Corp. (STAR) for making room, and making a cool 79% gain for all of Cramerica!

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