Transcripts For KPNX Mad Money 20161029

Then after further review, the money flowed right back. The dow closing down just eight points. S p declining 0. 31 nasdaq dipping 0. 50 . What the heck is going on here . I dont know what will happen with fbi director james comeys reviewing of new emails related to Hillary Clintons personal server. But i do know this. I do know that this market seems to want some certainty, or it wouldnt have plunged so hard midday when the news came out. Beyond that im leaving the politics to the pundits. But heres what i do know. The overall performance of the average today obscured one of the most vicious rotations i have ever seen in my career. Health care stocks, which had been under pressure throughout the campaign season, bled from the eyeballs today thanks to a couple of monster shortfalls in the Health Care Cost containment and pharmaceutical arenas, particularly biotech. These declines were so brutal, so pronounced, that we ripped up the show plan tonight and are going to spend a whole segment on what the heck happened today weeks game plan has to address these issues headon because so Many Companies that report next week are caught in the rotational madness that tore the Health Care Stocks asunder this afternoon. We wont have to wait long to see if theres a second day of selling in the Drug Distribution stocks since Cardinal Health reports monday morning. Today cardinal fell almost 10 when its competitor, mckesson, acknowledged theres a price war going on in its corner of the health care industry. When cardinal speaks, theyre going to have to address it headon. The health care scourge, which started with compression in both branded and generic pharma during the primary season, finally hit the medical device segment this week when a couple of highprofile device makers reported disappointing numbers. The selling tsunami spilled over early in the week to the stock of an excellent company, zimmer biomet, which also reports monday morning. If the whole group werent in the dog house, id tell you just it may not matter. It may not matter with money coming out of the Health Care Sector like a fire hose. We also want to get some clarity monday about what General Electric is doing. What is g. E. Doing with the Oil Service Company baker hughes . What are these talks about . We heard everything from maybe theyre buying baker hughes to maybe theyre spinning out their oil and gas business to baker hughes. I wish theyd spoken their piece today. The limbo is too much for me. While my Charitable Trust does indeed own g. E. , if it gives away its oil and gas business at the bottom, which is where i think it is right now, i believe at that might make the stock no longer worth owning. We got reports today from exxon mobil and chevron, and the market applauded chevrons growth while it went thumbs down on exxons retrenchment. Next tuesday we get results from more Oil Companies royal dutch and occidental petroleum, which i own for my Charitable Trust. This groups all over the map. Oil fell more than a buck today because apparently both iran and iraq dont want to play ball with the pending opec output though, then i think we need to take advantage and do some buying of some oil stocks. You might want to consider the stock of pioneer natural resources, which reports tuesday after the close. Pioneer has been the most aggressive buyer of undervalued american Oil Properties during the downturn. Its got the best Growth Prospects of all the independents because its taken so much action, particularly in the permian basin, which has the lowest finding costs in the country. The biotech stocks have been under so much pressure of late, and the selling continued today with the crushing of the stock of amgen. Pricing pressure mentioned on its earnings call. I can only wonder what gilead, which is fighting against price cutting for it gigantic hepatitis c franchise, will have to say when it reports on tuesday afternoon. Wednesday, we will get more health care madness when we hear from amerisourcebergen, which along with cardinal and mckesson has been hammered by the knockdown, dragout price war for the generic business of americas pharmacies, which i said were going to talk about later. This is the culprit that started the price war. And if amerisourcebergen can bounce, maybe these stocks can start putting in the process of a bottom. Otherwise, please wait until after the election to do any buying. These stocks just dont seem very safe to me even after this decline. Now, it has been a rough ride for clorox shareholders lately since this companys highyielding stock peaked at 140 right at the time of the big Interest Rate trough. Thats not a coincidence. Thats the way it works, people. Clorox has been heading down almost in a Straight Line to 119. I think the stocks getting mighty interesting here. I like that probiotics line that they have. But the prospect of a rate hike will trump the fact this is indeed still considered by many to be a bond market alternative or equivalent stock. You know investors are still buzzing about that at t decision to buy time warner for 85 billion, right . What exactly are they getting . Why dont we listen to the conference when time warner reports wednesday . Maybe we can find out. I cant wait. Jeff bewkes by the way, the ceo, is a great american. After the close, we hear from one of the hottest companies in the universe, facebook, fb. But do you know that when the stock has run up going into the quarter, historically its almost always paid to wait until after facebook reports to buy it. So thats my suggestion to you. My Charitable Trust has a big position. Just as facebook has been red hot, the stock of whole foods has been ice cold. There are so many buyers waiting on the sidelines for the whole foods ship to right itself. Given how much people love to shop there i love mine you might be tempted to buy it before the company reports. I think thats been a mistake, and im taking a guilty until proven innocent approach to dont guess ahead but actually hear about it. Believe me, youll get a chance to buy it if whole foods fortunes really start to change. Plenty of opportunity. After the closing thursday, were going to hear from two companies with stocks that have been all over the map for the last year starbucks and skyworks exclusions. My Charitable Trust has been buying starbucks but for the long term, people, because even as we expect the u. S. May not have strong numbers, their overseas markets have been quite strong, and i think china is on fire. Youd like to buy more lower. You might get your chance if the pattern of the last few quarters plays out. We just heard from skyworks on this show, and it had a lot of good things to say about all the devices its products go into. But when skyworks talks on its earnings call, all investors seem to want to hear about is what one of their largest clients, apple, might be up to. By the way, apple doesnt let any of its suppliers talk about its business. Thats the rule. However, apple is such a huge part of a companys revenue stream, like in the case of skyworks, its hard for them to we know apple stock has been well, look, we know whats going on, right . Its had a 24point run from its bottom five months ago although its given back some of its gains since the Company Reported earlier this week. Some naysayers think the best is behind them. Do i really have to go into it . Its friday. If skyworks talks about a surge of orders, then it might be game on for the next leg of the apple rally. Of course, the inverse could be true too. Finally, on friday we get the last nonfarm payroll report before the election. If its strong, i think we should be bracing ourselves for pressure on the Interest Ratesensitive stocks has been about. Its also why the stocks of the banks have been among the strongest in the market. I wish wed just get it over with already frankly, but all in due time. So heres the bottom line. The parade of earnings continues unabated next week, but its bookended by washingtons politics and email investigations and a Labor Department payroll number. So we cant just focus on the quarterly reports without thinking about the broader prism that keeps stocks in check or checkmate depending on how you look at it. Dave in california, dave. Caller hey, jim. Thanks for taking my call. Quite welcome. Caller jim, i was reviewing one of my larger holdings, novagold, and i noticed in addition to being partnered with barrick gold, novagold is also partnered with a company ive never looked at. Its Teck Resources limited. Jim, is tck worth a better look . I did a lot of work on tck as part of delivering alpha. Heres my problem with teck it is up 445 . Now, you say, hey, when it was up 300 , you should have been recommending it. I did take a hard look at it, but ive got to tell you this is a momentum play. Momentum players, if you want to play the stock with the most momentum, it is indeed Teck Resources. Alex in new york, alex. Caller booyah from new york city, jim. Thank you so much for having me on the show. Of course. Of course. Good to have you. Caller im calling in about Public Storage, psa. Jim, i thought this stock could do no wrong. Thei line from 09 to 2015 looks and they held their own pretty well in early 2016 when the rest of the market was reeling. Now theyre in a freefall the likes they havent seen since 07 and 08, and we all know what was going on then. My question to you is do you think this sudden drop in Public Storage is a sign of something bigger . No. No, it is a sign strictly of the fact that the fed is going to tighten in december. Thats what people think,and they want to get out of a stock that yields about 3. 8 because they feel like its going to go lower. Theyll probably go right back in even if we dont get one. Tim in arkansas, tim. Caller big tgif booyahs, jim. Indeed. Big weekend. Bingeing on strike back this weekend. Whats happening . Caller a new and now avid follower of mad money. Ive got a new selfdirected ira so im in this for the long term. I bought diageo, deo, in midseptember when they had positive comments. They have great products, Johnny Walker blue by the way. Goiv good merger candidate. There have been other m a in this sector. Pound is still weak, but the stocks down 5 . Thats okay. Look, im friendly with that whole Johnny Walker family. Really standup guys. I do believe that deo comes down a little bit because people are selling those kinds of stocks. I think deo is a buy, and if it gets to par, which is authentic wall street gibberish for 100, pull the trigger. All right. Keep your head on a swivel next of washington to keep us worried. On mad money tonight, shares of health care giant mckesson corp. Went sliding today. Im focusing on the fallout and giving you the prognosis for the company. Then dingdong, avon is calling. As the stock went down, is it worth answering the door, or should you pretend youre not home . And the next big thing when it comes to data. Im talking to a private player on how its keeping all of your information secure. So stick with cramer announcer dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet cramer, madtweets. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something . From the first moment you met it was love at first touch and all you wanted to do was surround them in comfort and protection thats why only pampers swaddlers is the 1 choice of hospitals to wrap your baby in blanketlike softness and premium protection mom . Oh hi baby . So all they feel is love wishing you love, sleep and play. Pampers whatcha doin . Just checking my free credit score at credit karma. What the . Dont you know that checking your credit score lowers it. Actually, checking your own credit score with credit karma doesnt affect it at all. I guess i could just check my credit score then. 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Why take medicines that only last 4 hours, when just one mucinex what the heck just happened to the drug wholesalers . Suddenly a group of stocks that were widely viewed as lowrisk safe havens suddenly getting put through the meat grinder. With mckesson down 22 in the which then dragged down their two main competitors, sending amerisourcebergen tumbling 13 and crushing Cardinal Health for 9. 76 . Whats going on here . First of all, mckesson just reported a huge top and bottom line miss this morning, and then cut its fullyear Earnings Guidance by 8 . But as bad as those numbers were, it was the commentary on the Conference Call that really terrified investors. You see, these drug wholesalers all act as middlemen between the phce pharmacies that buy them. For years the drug wholesaling business has been a benign oligopoly. Together, mckesson, cardinal and amerisourcebergen control about 97 of the market, and for ages they all did well because they didnt really try to compete against each other. At least too hard. But now all of that seems to be changing. Why . Okay. Before we go into the details of mckessons quarter, you need to understand that this whole industry seems to be under attack from within. Recently spoke at a Morgan Stanley conference and basically said theyre tired of losing market share and plan to take it back by competing aggressively on price. Once that kind of competition starts, everyone else needs to keep up, and price wars of course are anathema to profits. Now, these drug wholesalers have two main earning streams. One comes from the bigbranded Drug Companies that pay them to distribute their merchandise. Thats not whats under fire today although it hasnt been as strong as it used to be, in part because political pressure has ramping up prices the way they used to. But theres a second stream, which is the independent drugstores paying them to get breaks on generic drugs. Its the second stream that now seems to be in jeopardy. Allow me to explain. These companies typically work on threeyear contracts. When a deal is up, the drug wholesaler bids on the business and typically gets to keep it. But these contracts apparently have an out. A drugstore chain can switch to another pharmacy benefit manager if it is offered a big enough contracts price. Apparently amerisource, which reports wednesday, is offering just those kinds of discounts. Thats right. Amerisourcebergen has set off a real rootintootin price war, one that no one expected because after all, this industry has been a benign oligopoly for a decade and a half. Mckesson made it very clear that this is the problem on their Conference Call. Ceo John Hammergren said, and i quote, i can tell you that build sustainable relationships with customers or value for shareholders with a priceoriented approach, and i know at least one company in our sector has been pretty public about growing revenues above market and about regaining market share, particularly in the independent space, end quote. In other words, they think price cutting is a real bad idea. But one company, amerisource, has gotten pretty aggressive about it. Stock lost 22 of its value today, its worst decline in 17 years. And it might not be done going down. How is that possible . How bad could it get . In the past when price wars have broken out in this industry, the stocks of these companies have been eviscerated. It doesnt happen all overnight. I know down 22 seems like an evisceration, but it might not be. There could be more ahead. Now the investors who own these drug wholesalers are freaking out because who knows where the price war ends . Here . Lower . Does mckesson try to win those pharmacies back with even bigger concessions . Do other drugstore chains demand similar discounts . Thats the fear. We dont know the answer. Of course on their Conference Call, mckesson said they dont expect aggressive price cutting on their part to continue. But if their competitors keep cutting prices, i dont see how mckesson will have much choice even as it obviously wants to hold the line. The stocks gigantic decline today is screaming that they cant, which is why i cant pound the table on this discount and say this is where you should start buying. Now, theres some other wrinkles to the story you need to know. For example, walgreens owns a amerisourcebergen, the price cutter. Walgreens stock was down today. Should it be . Maybe the numbers are too high, but they really arent a loser in this. I mean we told action alerts subscribers it doesnt hurt them. Really, you know what . You could argue that the pharmacies could be helped by this. Theyre likely to get lower prices. What else . Mckesson does have other businesses that are worth a lot. Theyve got overseas pbms, a data company thats helping them diversify away from the drug wholesaling space. They are unaffected by the price wars and are valuable entities plus, remember i said there are two revenue streams. Branded drugmakers Pay Companies like mckesson to sell their products, and pharmacies pay them to get better prices on generics. Its only the second revenue stream thats really threatened here. The branded pharmaceuticals, not doing so hot as i mentioned, but most drugmakers are worried about raising prices at the moment given the political climate. Its the generic side thats in real trouble because maybe prices start going up again after the election. Now, of course we are indeed in an election year. Down. But that has nothing to do with the blowup today at mckesson. This is about what happens when an oligopoly goes from benign to vicious. Look, if the drug wholesalers are getting into a price war when it comes to the business of distributing generic drugs to pharmacies, all i can say is wow. It may not end here. So the numbers, as you can tell from the research today, might have come down even bigger than today, and thats amazing. By the way, theyve already come down about a half billion dollars for mckesson alone. Your stock doesnt lose a quarter of its value or almost a quarter for a garden variety shortfall. Plus its not just the price r. Many pharmacies are starting to deal directly with the drug manufacturers. Theyre cutting out the middleman like mckesson. Boom. Theres really not much that can be done about that. Heres the bottom line. For a long time the drug distributors had a really nice equilibrium going, a threeway competition where no one tried to compete too hard and everyone benefited as a huge number of highprofile drugs went generic over the past 15odd years. But now the supply of branded drugs going generic shrunk, and the drug wholesalers have started to compete on price, creating a vicious price war led in that kind of situation, everyone gets hurt, and theres no telling when the pain ends. Based on what we heard from mckesson today, i think this could be a very tough situation, which is why you should continue to steer clear of the group and maybe Even Health Care altogether, at least until after election day. Theres much more mad money ahead. Avon has been in business for more than 125 years, but history hasnt done much for the stock. With shares rallying as of late, could it paint a pretty picture for your portfolio . Then nutanix more than doubled in price since its first day of trading, but s could one of its main competitors be taking share . Ive got the ceo of private player simplivity. And im nominating a ceo for sainthood. Ill tell you who just ahead. . When youve got. . . Nausea, heartburn, indigestion, upset stomach, diarrhea . . Nausea, heartburn, indigestion, upset stomach, diarrhea . Heres pepto bismol ah. . Nausea, heartburn, indigestion, upset stomach, diarrhea . Grumbily, grumbily . No more questions for you ooph, that milk in your cereal was messing with you, wasnt it . Try lactaid, its real milk, without that annoying lactose. Good, right . Mmm, yeah. Lactaid. The milk that doesnt mess with you. coughs that cough doesnt sound so good. Well i think you sound great. Move over. Easy booger man. Take mucinex dm. Itll take care of your cough. Fine ill text you in 4 hours when your cough returns. One pill lasts 12 hours, so. Looks like im good all night not fair you guys waffles are my favorite ah some cough medicines only last 4 hours. But just one mucinex lasts 12 hours. Start the relief. Ditch the misery. Lets end this. Its time to talk about the incredible rebound in Avon Products. Heres a company that spent years locked in a hideous downward spiral. Avon stock topped out at around 24 bucks in 2013, then plunged all the way down to below 2. 50 roughly a year ago because they just couldnt get their act together. Yep, just 12 short months ago, this company had been written off and left for dead. Since then, though, avons made a remarkable comeback with its stock rallying 165 in that period of time, and its not being talked about enough. At a certain point we have to wonder whats driving this move. Is it sustainable . After years of being written off and left for dead, avon seems to be actually turning itself around, which is why i want to figure out if its become investable again. Maybe we missed it. Maybe theres a lot more ahead. Lets take a step back and understand what avon actually does. This company is the second largest player in the 132 billion direct sales space. Multilevel marketing companies, recruit salespeople who then sell products right at your door or in your living room. Avon calling. Avon has about 7 of the total direct sales market with the Company Getting roughly threequarters of its sales from Beauty Supplies and the other quarter from apparel and home related products. Now, until a year ago, avon was a total dog. Its easy to understand why. Their business was in stark secular decline, particularly in north america and to a lesser extent, asia. Avons falling sales coupled wi serious downward pressure on the companys Gross Margins, which in turn crushed the earnings. When you crush the earnings per share, you crush the stock too. A little over a year ago, a lot of people were actually worried about the companys long term viability. That is how bad this story had become. But after tumbling last november, avon stock has made a remarkable reversal and its been working its way higher ever but first, sheri mccoy came over from j j and took over as the new ceo back in 2012. At the time the company had been run into the ground by her predecessor, and for the first three and a half years of her tenure, frankly the stock did get obliterated. I think she was dealt a real bad hand. But mccoy took a good, hard, long look at what had to be done, recognized it couldnt happen overnight, and set in motion a plan to separate avons the ailing north American Business from the rest of the company. She deserves credit for whats occurred here. The d rolling in december of last year when mccoy announced a Major Partnership with cerberus, the huge private equity firm, in a deal that was finalized this past march. There were two prongs to this transaction. A little complicated but first cerberus bought 80. 1 of avons troubled north American Business for 170 million and took that part of the company private. Second, cerberus bought a 16. 6 stake in the rest of avon, the part that was actually quite with cerberus, the old avon was able to break itself up, selling most of its troubled north American Business and getting a lot of cash to build out its more solid business in the rest of the world. The struggling north American Vision suddenly became privately held, and it can focus on turning itself around instead of meeting the short term expectations of public investors. You know how hard that is. More important, the remainder of avon became free to focus on improving itself and taking share in the high growth internatl america. Considering the global direct selling market is expected to expand by about a 5. 1 compound annual growth rate, but north america is only going to be growing around 2 . Better to be overseas. With the troubled north American Business taken off the table and the remainder of avon given a big cash infusion, you can see why this partnership was a real turning point for avons stock. Suddenly the company had a future. It had a plan and a means to execute on that plan, and it didnt need to worry about its this deal gave ceo mccoy exactly what she needed to mastermind a real and lasting turnaround. So sure enough, avon kicked off 2016 with a big analyst day where management outlined its turnaround plan. They pointed out opportunities for cost savings worth 350 million a year and said they were targeting mid single digit organic growth long term. Thats high. Then they brought in some guys from cerberus who made the case that avon stock was significantly undervalued versus its peers. Of course turnarounds take time to execute. Its not surprising that avons february and then in may they were, lets say, nothing to write home about, at least not in terms of headline sales and earnings numbers although the analysts pointed out that the companys costsaving initiatives seemed to be on track. But it was in early august when avon reported its Second Quarter results that the turn here became really obvious. The Company Posted a five cent earnings beat off a two cent basis, higher than expected sales. Avon also took some major steps to clean up its balance sheet, in 2022 in order to help pay down 650 million in debt that would have come due over the next three years. Look, it wasnt just the headline numbers. Avon saw positive growth in nine of its top ten markets, which gave the company its fastest revenue gains in more than a year, including a sevenpoint acceleration in latin america. I still couldnt believe that. It finally seems to be finding its footing down there. The stock jumped 14 in response that same day, and since the people are jumping on the bandwagon because this story has improved so dramatically. You want to get a good read on wall streets new attitude toward avon . Just consider this recent piece from citigroup where they said the stock had gone from untouchable to investable. Citi pointed out many of the things i just mentioned, the refinancing thats helped avon allay the worries about potential bankruptcy, the investment by cerberus making people feel more comfortable that management knows what its doing, the sale of a loser north American Business, the improvement in numbers during the first half, and the fact that the u. S. Dollar seems to that gets the vast bulk of its sales overseas. The bulls at citi thinks that this 6. 63 stock could be headed to 8 bucks, and a lot of investors have jumped on the avon bandwagon. Where do i come down . Look, i have no doubt that avon has begun to turn around really in a serious way. I think sheri mccoy is doing a remarkable job as she promised when she came on the show last january, and the stock has given us an amazing 150 gain since then. How about that . She came here, told a great story. If you bought it when you listened to her and i loved what she said you made a ton of money. But that said, there is still a monster amount of room for improvement here. Management seems on the right track, which means the numbers could go a lot higher. In short, i think the turnaround is big. I think its real. I think the cerberus partnership is clearly the turning point and everything is paying off. But all that said and this is a big but avon reports again next thursday, and the earnings season has been brutal to the stocks of companies that have run up dramatically going into so if the quarter fails to totally impress, i wouldnt be surprised if the stock pulls back. Thats when you pull the trigger, not beforehand. After the quarter. Heres the bottom line. I believe in the turnaround at Avon Products under the leadership of the incredible sheri mccoy, but the stock has run so much that i think you need to be careful. If you dont own any, i recommend putting it on a small position maybe before the company reports, but really waiting until after the quarter to buy it because lately, i got to tell you, theyve been pounding even the good ones. Caller thanks for taking my call. Im calling about one of your faves, iff. They report in about ten days. How would you play it . Okay. Were not playing for quarters because if we play for quarters, thats a bit of a suckers game. What we do is we say Andreas Fibig is doing a fantastic job, iff. If you want to buy some before, maybe you do. Tremendous amount of value long term, and thats the only way to look at that company and that stock. I like it. Kelly in texas, kelly. Caller hey, jim. Thanks for taking my call. Quite welcome. Caller im on wayfair, and with the large pullback in the last month, do you think its time to double down, or should i get out . No, no. The furniture business has turned tough, and this company is in the crosshairs of a lot of shorts. Look, i like money. I like money to be made. These guys arent doing it. I say stay away. All right. The turnaround in avon is real, but so is its recent rally. Be cautious if youre putting it on a new position. They report next week. Much more mad money ahead. Nutanix became the second unicorn to ipo this year. Its considered a pioneer in i. T. Infrastructure. But im eyeing a private player thats hot on its tail. Then just call me one of the faithful. Im revealing which company deserves more praise despite a decline after earnings. And a thank god it is friday cramer. . . . . . . . . . . Geico motorcycle, my cold medicines wearing off. That stuff only lasts a few hours. Or, take mucinex. One pill fights congestion for 12 hours. Guess i wont be seeing you for a while. Why take medicines that only last 4 hours, when just one mucinex lasts 12 hours . Its the Phillips Lady anyone ever have occasional constipation, diarrhea, gas or bloating . [ simultaneously ] she does. Help defend against those digestive issues. Take Phillips Colon Health probiotic caps daily with three types of good bacteria. Question, are my teeth yellow . Have you tried the tissue test . Ugh yellow. What do you use . Crest whitestrps. Crest 3d whitestrips whiten 25 times better than a leading whitening toothpaste i passed the tissue test. Oh yeah. On mad money were always looking for the next big theme. Sometimes we need to go off the tape, check in with privately held companies, ones you cant buy shares in that are developing potentially gamechanging technologies. Take simplivity, a technology as hyperconverged infrastructure. Basically they package up the components of servers, networking equipment, and storage into a single system that runs more cheaply and more efficiently than traditional servers and takes up a lot less room. This is a rapidly growing business that could represent the future of Information Technology infrastructure. Earlier this week, i got a chance to check in with doron kempel. Hes the ceo of simplivity. Take a look. Doron, im going to give you the hardest job ever. Youre going to explain to our viewers what hyperconverged infrastructure is and where simplivity fits into the food chain. Lots of long words. Lets start by reminding everyone what an iphone does. And im not promoting iphone. But if you think about the iphone here on the left, it displaces pretty much a lot of gear, equipment products that we loved for many years. Cameras, laptops, radios, et cetera. Right. So if you think about that, this is consumer electronics. Similarly, when you look at the Information Technology infrastructure, the Largest Companies in the world run their data centers on gears such as that. In other words, there would be a room, a data room, or there would be like whole buildings that have all these different machines . Exactly. Depending on the size of the corporation and at t is very much in the news these days they have large, i would call it, buildings. Okay. Filled with this gear. Which costs money to have big and the software and the installation. Exactly. If you think about the stack of equipment here, the world consumes about 110 billion of this gear every year. Okay. So thats a lot of as well as generating a huge amount of heat, which people care now about sustainability. Heat, power, labor, services, and so forth. Now, similar to the concept of a smartphone, basically what simplivity tried to do is displaces all of the gear we see here on the left with a single atomic i. T. Building block, basically a standard server. Thats hyperconvergence. Now, there are different hyperconvergence vendors, and they differ along two dimensions. One dimension is the number of these products they displace. Some will displace two or three. Some will displace all. Dont i want something to replace all . Absolutely. And thats why i want simplivity . Exactly, and thats to come. Why dont i want nutanix, which came public and is fantastic . Nutanix is a great company. Youre not flogging them . Absolutely not. We have Great Respect for them. In fact, were very happy for their successful ipo, which has basically separated hyperconvergence from the legacy stack. So this is very useful. And if you can just tell people legacy stack might be emc, near where you are, or so lets look at it from the top down. At the top of the stack, you have servers. Servers could be cisco, h. P. , dell, lenovo and many others. Absolutely. Then you have the world of data or storage. This is a complicated world. If you look where my finger is right here, this is basically a storage switch. From it all the way down, you have different products that have to do with data management, data protection, data mobility. This is a very complicated world. What simplivity does uniquely, having invested more than any other company, including nutanix, in developing core technology, is basically displace the whole stack. So thats one dimension of differentiation. What is sc the other dimension is very important is how far upmarket can you deliver these products . Do you offer them in very small companies, or can you deliver them to the largest of the companies in the world . All right. Well, let me just stop you for a second. I look at this, and i say to myself why is anyone using that when they could use this in the sense that why would anyone use anything other than an iphone or similar to it as opposed to having all these different products . Is it legacy . Are there i. T. People that dont it takes time. Were all familiar with the concept of early adopters. Show me some more, then. So in order for the world to start moving from left to right, what we need are reference customers. Plus this all sounds unbelievable. Yeah, it does. Well, let me show you one of the 50 Largest Companies in the world, and this is one of six data centers that they had before simplivity. 34 racks, okay. This is one of their data centers on the west coast. I visited them on july 12th. Confidential. Cant share their name but theyre one of the 50 Largest Companies in the world, generating more than 100 billion in revenue. This is one of their six data centers. Now, what we see here are racks, basically refrigeratorsize racks of gear. This is storage. They have servers, switches, et cetera. There are 34 racks of gear. This is their legacy environment. Having partnered with simplivity. All of this just in one data go to just three racks on the right. Its an 11 to one conversion. Of what . Of gear that you dont purchase. It unifies. Instead of having ten different products in 34 racks, you now have one type of product. You can manage from one screen globally. Think about all the space. Think about all the power. According to them, theyre reducing the total cost of ownership by 100 billion excuse me. Im ahead of myself. 100 million over five years. But what does that mean . This particular picture, it tells you this is yesterdays world, and this is the iphone. So just solve this for me. On 10 24 of this year, simplivity sheds staff. Same day forbes says that you are really the second place rival but growing much faster and doing much better. Can they both be the same stories . Absolutely. Why is that . Just like the patriots or the denver broncos, they win a championship, they still need to retool and prepare for the next when the Company Grows as fast as weve grown, basically twice yearoveryear, you need to make adjustments and need to do that in a program attic matter. You need to shift people within the company and sometimes you need to add new staff. The growth is still accelerating. Everything is going on the right path. I got to tell you this is pretty telling stuff. Im going to be watching your company for a long time. Thats doron kempel. Hes the chairman and ceo of simplivity. Understand it is a private it does compete against one that we talked about positively just last week, nutanix. Mad money is back after the break. She thinks it smells fine, but her guests smell this. Sfx ding, flies, meow after cat lands music starts febreze air effects heavy duty has up to. Two times the odoreliminating power to remove odors youve done noseblind to [inhales] mmm. Use febreze air effects, till its fresh and try febreze small spaces. Febreze small spaces and air effects, two more ways [inhale exhale mnemonic] to breathe happy. Mmm. I cant believe its so delicious. I cant believe it has 40 fewer calories than butter. I cant believe its made with real, simple ingredients. I cant believe my role isnt bigger. Oh, its real. Real ingredients. Unbelievable taste. It is time it is time for the lightning round thats where i take your calls rapid fire. You tell me the stock. I tell you to buy, buy, buy or sell, sell, sell. Well play this sound [ buzzer ] and then the lightning round is over. Are you ready, skeedaddy . Its time for the lightning round on cramers mad money. Lets start with tom in new york, tom. Caller booyah, jim. You made my day. Im looking at smith wesson. I think that represents great value. Lets go to dave in pennsylvania, dave. Caller hey, jim. My stock is ex. I happened to be listening to the chairman of cnbc. He interviewed Steve Schwartzman last night, who is the ceo, and i feel pretty good about the prospects of the company. Lets go to mark in where my daughter lives, oregon. Mark. Caller hello, mr. Cramer, and a good day to you. Caller hey, its a nice, sunny, warm day out here today. Good. My daughter lives in the high desert. Its always warm there. Whats going on . Caller i wanted to know what you thought about anika therapeutics. I like that company. I know its a little speculative. Its a good company. The stocks down on its luck right now, but its okay. Lets go to luke in pennsylvania. Luke. Caller booyah, cramer. I had a question about nat, nordic american tankers. Fleet. No. Thats on i. R. Nordic american is on i. R. I dont want to touch it. Lets go to lois in missouri, lois. Caller hi, jim. Hi. Hey, jim, im calling about boston scientific. It seems like even with the good news that came out that its kind of really acting very weird. Im not sure what i should be doing. Lois, i want to twist that whole logic. Heres why. Thats the only Health Care Stock thats still up. Shadi in new jersey, shadi. Caller hi, jim. My stock for today is juniper. Juniper preannounced better than expected numbers. If that stock comes in, bingo. How about madeline in florida, madeline. Caller hey, jimmy. I called in a couple hours ago about corbus pharmaceutical, but i ended up selling everything. Really . That was it . Its very speculative stock. We talked to them the other day. I have to tell you thestreet. Com has got some coverage of it that little skeptical. Lets go to harvey in oregon. Another oregon, wow. Harvey. Caller yes. Very beautiful, sunny ashland, oregon. Ive been an investor, not a trader, in diebold for years. Whats going on with the reduction in the dividend . Which one is that . Diebold. All right. Listen, shakespeare, i think diebold has a problematic situation developing. Ashland is where the Shakespeare Festival is. Thats why i called him no, i dont like that stock. They really have not delivered on their game plan. Lets go to marcus in oregon. Come on, there cant be three oregonians. Marcus. Caller jim, what do you think of gilead . When do they get out of the dog house . I dont know. It feels like the trail blazers after bill walton retired. I believe they report next week. Maybe we can put in a bottom, but i dont see one happening right now. That, ladies and gentlemen, is the conclusion of the lightning round announcer the light round is sponsored by td ameritrade. Im talking about the rise of the selfie, including their food. I constantly see people taking picture of their food. Its like the old zen riddle. If a tree falls in the woods and theres no one there to post a photo of it on twitter or instagram, does it make a sound . [ crickets chirping ] look, youll probably never take a selfie as good as mine. On tonights special edition of the lightning round. Then its Strong Enough to change the view of last nights oh, theres two words. [ buzzer ] ill reveal the king of the merger just [ buzzer ] this is going to be too long. Caller real quick i want to let you know i ran into a 3yearold on the street that had a mad money binky. Thats good news. Then its Strong Enough to change the view of last nights theres two i used to blame the weather for my frizz. Turns out my curls needed to be stronger. Pantenes prov formula makes my curls so strong. They can dry practically frizz free. Because strong is beautiful. war drums beating fight heartburn fast. With tums chewy delights. The mouthwatering soft chew that goes to work in seconds to conquer heartburn fast. Tum tum tum tum. Only from tums. Whatcha doin . Just checking my free credit score at credit karma. What the . . . Youre welcome. I just helped you dodge a bullet. But i was just checking my. Shhh. Dont you know that checking your credit score lowers it just be cool. Actually, checking your credit score with credit karma doesnt affect it at all. Are you sure . Positive. So i guess i can just check my credit score then . Oooh check out credit karma today. Credit karma. Call me crazy. Youre crazy. Thank you. But im a believer in faith, faithbased investing, as in i have faith in amazon ceo jeff bezos, so im going to buy shares in his company. Last night amazon rocked the community by revealing its aggressive plans to spend lots of money in order to win over the parts of the world it hasnt conquered yet as well as to boost initiatives that support artificial intelligence. On wall street, you dont spring unexpected plans about the need skepticism. For example, earlier this week, kevin plank, the ceo of under armour talked about how his Company Needs to spend in order to grow and to gain market share. Immediately his stock plummeted because to wall street, that spending implies lower Gross Margins and therefore lower profitability. It also means perhaps the demand isnt as strong as we thought, hence the brutal decline in under armour, down more than 25 for the year as investors decide to pay less for the companys sh thats why the decision amazon announced on its Conference Call to beef up spending freaked so many investors out last night. Thats why the stock dropped 5 today. Id buy that logic for pretty much every company, every company save amazon. Time and again, weve seen amazon stock rise and then have a chunk of its rally repealed when periodically the company sees an opportunity to spend when the return on the investment could be huge. Off his nose to spite his face or please wall street, which is filled with shorttermers. He recognizes that he cant be constrained by what the analysts and Money Managers want, which is typically a nice predictable earnings stream driven by predictable spending. Nor can he bother with the skeptics who opine he wouldnt be spending as much if things were slowing down worldwide. Bezos takes his own counsel. People look at these periodic selloffs and wonder why didnt i snap up amazon stock given how much i like amazon prime or the convenience or the speed of delivery, the customer service. The answer is simple. Because they get scared off after days like today. They cant stand the volatility. But every time we hear about a big new round of spending, it always leads to that kind of kneejerk shakeout which means the stock hard to own for the scaredy cats but an excellent stock to buy for those with fortitude. You either have faith in jeff bezos, or you dont. You either buy into his success or stick with something less for me, this decline is one more buying opportunity in the long upward climbing road that amazons been traveling seemingly forever. Now, that doesnt mean you have to go buy it on monday. We have real sellers out there and they might not be done unloading the stock. But it does mean youve got a sale going on. Would you take advantage of a sale on amazon . If you would, then you might want to take advantage of this sale on the stock of amazon, especially since were seeing one more iteration of what historically has been a very predictable pattern of when opportunity comes aknockin. Jack be nimble, jack be quick, jack knocked over a candlestick onto the shag carpeting. And his pants ignited into flames, causing him to stop, drop and roll. Luckily jack recently had geico help him with renters insurance. Because all his belongings went up in flames. Jack got full replacement and now has new pants he ordered from banana republic. Visit geico. Com because im a woman. Do you think im gonna crack under pressure or conquer the field . Defy expectations any day with always infinity. Made with flexfoam. You know, when you finish a show and you realize that a stock has been completely lost in the shuffle and hasnt been addressed but youve still got a few seconds to do so, i got to do it. Im talking about the stock of alphabet, google. This was a terrific quarter, and if the market werent all over the map today, particularly the nasdaq heavy, i would be pounding the table to tell you that this company, which is a remarkable quarter. Ruth porat, who im now nominating as maybe the best cfo in america, tells a fabulous story about why this stock is tremendously undervalued, including a huge buyback theyre doing. So if this market goes down and you see an opportunity next week, i am going to pound the table that this might be the chance for you to buy alphabet because you know what . It was one of the best quarters weve had since this earning i like to say theres always a bull market somewhere. I promise to try and find it just for you right here on mad money. Im jim cramer, and i will see you monday you tomorrow this buddy is my family. He is my best friend. Ashley roberts voiceover yes, they say a dog is a mans best friend. And thats certainly true when it comes to my canine companion, cooper. So tonight, in honor of my four legged fur ball, you want some chicken . Ashley roberts voiceover to five star digs is that a pedicure a pawdicure. Oh, excuse me. Ashley roberts voiceover we will be meeting some very colorful characters. Look at this oh my goodness Ashley Roberts voiceover proving that its a dogs life after all. Welcome to the bark side. Tonight on 1st look