'Mad Money' Spotlight: The Smartphone Sector

Jim Cramer says smartphones will drive a tech boom -- names the companies that stand to gain the most.
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On last night's "Mad Money," Jim Cramer devoted a good portion of the show talking up the smartphone revolution. And why shouldn't he?

The

Palm

(PALM)

Pre hit the market last weekend to mostly good reviews.

Sprint

(S) - Get Report

, the phone's carrier, said in a release that the Pre broke sales records, while a JP Morgan analyst said sales likely passed the 50,000 mark in the first two days.

Apple

(AAPL) - Get Report

announced a few upgrades to its iPhone and a new entry level model price point that rivals even standard cell phones. There are even rumors that

Research in Motion

(RIMM)

may be coming out with a new BlackBerry Storm in September.

Multiple reports have been heralding this smartphone new world order, with TechCrunch calling this the

summer of smartphone love.

So, what's not to love? Cramer said Wall Street may still be sleeping on the device and not recognizing it for the technological paradigm shift that it represents. Smartphones are not a simple luxury item, according to Cramer. Rather, the devices are quickly becoming a necessity, powering many of our life's needs -- surfing the web, taking pictures, sending texts, shooting e-mails, locating ourselves through GPS, listening to music and watching television.

Oh, and making phone calls.

Indeed, Cramer is calling it the first true secular growth trend in a decade. And while others are making hay about shaky economic indicators, Cramer said to remember one thing: product cycles trump all.

Apple, RIM and Palm represent the biggest phone makers at the moment, said Cramer. But for a stock play, he also recommended easing back in to the big boys slowly because of a small correction in tech.

All three were changing hands in positive territory by late morning, with the big winner being Palm. Shares were up a little over 8% on the day so far. The upward swing came after news yesterday that Palm CEO Ed Colligan will be replaced by Jon Rubinstein, a former Apple executive.

RIMM was up nearly 2%, while Apple was up 60 cents to $140.86.

But the smart phone movement doesn't end with them, and Cramer said the market isn't close to saturation. Devices like the Pre, the BlackBerry and the iPhone bring together a host of chipmakers, software makers, hardware manufacturers and wireless developers.

If you want any indication of a smartphone's derivative effects, just consider applications. An entire army of devoted developers have turned the iPhone app store into an industry standard. Apple said during the World Wide Developers Conference this week that it now has 50,000 applications available in the store. This came after Apple's announcement in April of its one billionth app download.

Cramer pointed out that chipmakers like

Skyworks Solutions

(SWKS) - Get Report

,

Starent Networks

(STAR) - Get Report

and

Sandisk

(SNDK)

are in prime position to take advantage of the wave, considering that they create wireless parts and data-storage systems.

But he saved his favorite play on the smartphone market for a repeat favorite:

Qualcomm

(QCOM) - Get Report

. As a big part of Cramer's charitable trust, the wireless chipmaker also provides components for

Amazon's

(AMZN) - Get Report

Kindle. Jeff Bezos's online book kingdom began shipping the newest version of the device -- the Kindle DX -- yesterday with a $489 price point and a wireless connection. The device also comes equipped with an even bigger screen compared to previous iterations.

As further evidence of the smartphone revolution, Cramer mentioned China's big wireless infrastructure build coming on the horizon, thanks to its massive economic stimulus package. With one of the world's fastest growing economies jumping onto the expanding communications bandwagon, really, can anyone doubt the future of the smartphone?

If so, well, there's probably a good rotary phone outfit out there somewhere you can invest in on the cheap.

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