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Imagine a company with an offering that allows you to do mobile payments in advance of entry into the store while offering you all sorts of loyalty deals and comforts -- a turnkey system that can be integrated on pretty much every platform that's secure and steadfast. If that company were to come public right now, I bet it would have an instant valuation of at least $10 billion -- if it could go public.
I just don't think it would be given that opportunity. It would more than likely be acquired by another company, such as Facebook (FB) or Google (GOOG), and it would be integrated into a handheld strategy as, of course, everything is in your phone. It would be the holy grail operating system that could be used for everything from restaurants and retailers to purchases online. It could, if you designed it right, eliminate the anti-competitive middlemen that are Visa (V) and MasterCard (MA). It could be a boon, therefore, to the consumer and the retailer.
I could see a bidding war between Google and Facebook and perhaps even a newly aggressive Microsoft (MSFT) (which is not an oxymoron -- give me a break). Then we'd see a hand-and-glove transition that would be adopted by all those who want to do business with people who are in a position to take a consumer's cash. Who knows? Maybe the company would be so compelling that even Apple (AAPL) would buy it, perhaps, instead of its own stock, because it would be able to augment growth.
But what if it isn't for sale? What if it is buried within Starbucks (SBUX)? What if Starbucks is so far along in this development that it is game-set-match against everyone else except that it doesn't compete against all of these players? How can we reconcile something that could be worth $20 billion to the right acquirer being subsumed by $57 billion in market capitalization?
I think that's precisely the dilemma in which Starbucks finds itself right now. It has the best technology in the industry. It understands social and mobile better than any other publicly traded enterprise. But, at the same time, it is a coffee-and-tea company that isn't in the business of payment processing and mobile ordering as anything more than a way to get more loyalty and get more customers through the register -- the fabled throughput consideration.
So here is what I think has to happen. With Starbucks CEO Howard Schultz moving over to a more digital role within the organization -- and still working in lockstep with incredibly able chief operating officer Troy Alstead to execute on the grand vision -- you could see the beginning of a breakout of this business. It could happen in a way that would demonstrate the value being created, not unlike what PayPal is for eBay (EBAY).
I know that is a fraught analogy right now, given the challenges that Carl Icahn has thrown at current management to break up eBay and bring out value. But obviously that's not an issue with Starbucks, as you aren't going to get credit for a division within the company unless it's at first noticed as a division. I can see a lot of juicy licensing deals happening with this technology, and you just don't want to see those lost within nothing more than a latte line item. As you may have heard Wednesday, there are retailers knocking on Schultz's door to license this tech. The door will open.
Ultimately I think Starbucks has to figure out how big it wants this division to be. Can it be funded at a level that allows it to take on a MasterCard or a Visa? Does it have to merge with Square in order to get a soup-to-nuts payment system going? Does Starbucks need to spend $5 billion to buy VeriFone (PAY) to get the system established by fiat?
No matter. Suffice it to say that these are the highest of high-quality problems, and I am confident that they will be solved in a way that will make owning Starbucks long-term an even better play. But after spending a day at the annual meeting, I can tell you that it sure isn't being given any credit for its amazing system right now.
Editor's Note: This article was originally published at 8:02 a.m. EDT on Real Money on March 20.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB, GOOG and AAPL.