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Jim Cramer
Yesterday was a milestone event. Analysts cut numbers for AT&T(T Quote) and it didn't go down. At first I thought this non-selloff was the work of my friend and fellow Eagles fan, Seth Tobias, who has been doing some thoughtful work as co-host on Squawk. He really is the best co-host they have and I found myself being proud that I worked with Seth for a time and regretting that it didn't work out -- although that was none of my doing! But Seth's positive words for AT&T couldn't carry the whole day. I think what happened is that people checked in with AT&T and discovered that it has aggressive plans to roll out cable modems with some terrific incentives -- free phone calls -- that shows creative, intelligent thinking. I think what happened is the stock bottomed when it didn't go down on the bad news of number cuts. And like it or not, even if it is part of a planned effort, it is bad news. How can that be? Pretty simple when you think about it. These were cuts brought on by AT&T's desire to expedite cable telephony rollout. Michael Armstrong is taking a page from the no-prisoners boys at SBC Communications(SBC Quote), a company which has seen its stock vault hugely by becoming a tech play. Armstrong's being smart. He sees SBC now stumbling on its goal to put DSL in every home. He sees Verizon(VZ Quote) in trouble on its DSL rollout because of the effects of the strike. And he sees how much people love their cable modems. I have been a big champion of DSL but I recognize that the providers of DSL are now, all of sudden, stumbling. That's the opportunity AT&T needs to get back in the groove of telephony. I think that this company is going to finish the year well ahead of its projected goals for cable telephony and that it will reclaim some of that high-tech glow from SBC. But that's not enough to get the stock back to the 50s. To do that, Armstrong is going to need some of that John Malone magic. He is going to need the cash flow, the Earnings-Before-Interest, Taxes-and-Depreciation halo that Malone extended to TeleCommunications Systems, Inc. and that Brian Roberts is lending Comcast(CCZ Quote). He needs a tutorial day to show that he is running a high tech-company with high cash flow. And he needs to start wielding cable power by making the programmers pay to get on his cable. His network is now so big and so valuable that he can call the shots. That should be enough to take this stock all the way back. You couldn't ask for a better risk reward down here for a Dow stock than AT&T. Yahoo! is a different story. I have loved Yahoo! -- the company and the stock -- for years and years. But I can't be blinded to what my colleagues in the office or on the site are saying. The interview in the Journal was dreadful, with Yahoo! warning of trouble for a couple of quarters. Everybody from Jim Seymour to Jeff Berkowitz is prying my eyelids open and saying, "look it is not a knock on the company, but the stock can't stay up here during this transition." I know many of the fine people at Yahoo! and I know they will get through this period. But the simple fact is that I have acceded to going the other way on Yahoo! until the stock hits $100. That's right ... as I indicated I might have to in the RealMoney trading diary two days ago, we have sold our Yahoo! and made a small bet that this stock goes lower. We expect the stock to decline about 25% here before it bottoms perhaps before the quarter is reported when I suspect we will jump right back in. But not now. Not yet. Events have overrun my short-term bullish case so we are going the other way. It pains me, but I can't do the wrong thing for my partners, even if my heart says this company is, along with AOL(AOL Quote), the big long-term winner.
Yesterday was a milestone event. Analysts cut numbers for AT&T(T Quote) and it didn't go down. At first I thought this non-selloff was the work of my friend and fellow Eagles fan, Seth Tobias, who has been doing some thoughtful work as co-host on Squawk. He really is the best co-host they have and I found myself being proud that I worked with Seth for a time and regretting that it didn't work out -- although that was none of my doing! But Seth's positive words for AT&T couldn't carry the whole day. I think what happened is that people checked in with AT&T and discovered that it has aggressive plans to roll out cable modems with some terrific incentives -- free phone calls -- that shows creative, intelligent thinking. I think what happened is the stock bottomed when it didn't go down on the bad news of number cuts. And like it or not, even if it is part of a planned effort, it is bad news. How can that be? Pretty simple when you think about it. These were cuts brought on by AT&T's desire to expedite cable telephony rollout. Michael Armstrong is taking a page from the no-prisoners boys at SBC Communications(SBC Quote), a company which has seen its stock vault hugely by becoming a tech play. Armstrong's being smart. He sees SBC now stumbling on its goal to put DSL in every home. He sees Verizon(VZ Quote) in trouble on its DSL rollout because of the effects of the strike. And he sees how much people love their cable modems. I have been a big champion of DSL but I recognize that the providers of DSL are now, all of sudden, stumbling. That's the opportunity AT&T needs to get back in the groove of telephony. I think that this company is going to finish the year well ahead of its projected goals for cable telephony and that it will reclaim some of that high-tech glow from SBC. But that's not enough to get the stock back to the 50s. To do that, Armstrong is going to need some of that John Malone magic. He is going to need the cash flow, the Earnings-Before-Interest, Taxes-and-Depreciation halo that Malone extended to TeleCommunications Systems, Inc. and that Brian Roberts is lending Comcast(CCZ Quote). He needs a tutorial day to show that he is running a high tech-company with high cash flow. And he needs to start wielding cable power by making the programmers pay to get on his cable. His network is now so big and so valuable that he can call the shots. That should be enough to take this stock all the way back. You couldn't ask for a better risk reward down here for a Dow stock than AT&T. Yahoo! is a different story. I have loved Yahoo! -- the company and the stock -- for years and years. But I can't be blinded to what my colleagues in the office or on the site are saying. The interview in the Journal was dreadful, with Yahoo! warning of trouble for a couple of quarters. Everybody from Jim Seymour to Jeff Berkowitz is prying my eyelids open and saying, "look it is not a knock on the company, but the stock can't stay up here during this transition." I know many of the fine people at Yahoo! and I know they will get through this period. But the simple fact is that I have acceded to going the other way on Yahoo! until the stock hits $100. That's right ... as I indicated I might have to in the RealMoney trading diary two days ago, we have sold our Yahoo! and made a small bet that this stock goes lower. We expect the stock to decline about 25% here before it bottoms perhaps before the quarter is reported when I suspect we will jump right back in. But not now. Not yet. Events have overrun my short-term bullish case so we are going the other way. It pains me, but I can't do the wrong thing for my partners, even if my heart says this company is, along with AOL(AOL Quote), the big long-term winner.
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