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Blog Warren Buffett announces multi-billion dollar investment in IBM
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  • Author Author: Joshua_Evans
  • Date Created: 23 Nov 2011 6:08 PM Date Created
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Warren Buffett announces multi-billion dollar investment in IBM

Joshua_Evans
Joshua_Evans
23 Nov 2011

He spent decades claiming that he would forever avoid the technology sector, but last week legendary US investor Warren Buffett confirmed that Berkshire Hathaway, the investment company he chairs, has acquired a significant stake in International Business Machines (IBM).
The news surprised investors on Wall Street and prompted people within the technology world to ask why Mr Buffett had chosen to plough $11 billion of Berkshire's money into the firm. Why, after years of insisting that he would not invest in technology stock because he didn't know enough about the sector, has Mr Buffett made such as decisive move?
Berkshire has steadily built its stake over the last eight months, with his shareholding rising at a similar pace to the firm's price. While IBM is expected to increase earnings 11 per cent over the next 12 months - unremarkable by Wall Street standards - few firms offer the same mix of growth and value attributes.
Speaking to the US television station CNBC, Mr Bufett explained that he was impressed by IBM's plan to attract IT firms outside the US to sign up to its services. "If you're in some country around the world and you're developing your IT department you're probably going to feel more comfortable with IBM than with many companies," the 81-year-old said.
"It is a big deal for a big company to change auditors, change law firms, or change IT support," he observed. "There's a fair amount of presumption in many places that if you're with IBM, you stay with them."
In the interview, Mr Buffett explained that he had not told Sam Palmisano, IBM's chief executive, about the investment before announcing it on TV. However, he said that he does not intend to increase his stake, hence he was comfortable talking about it.
Prompted on other potential investments in the technology market, Mr Buffett said that he would never buy a significant stake in Microsoft, pointing to his close friendship with the firm's chairman, Bill Gates, as the reason. Mr Gates also serves as a director at Berkshire Hathaway.
Reflecting on the investment, Louis Miscioscia, managing director at financial advisors Collins Stewart, said: "[Mr Buffett] is looking for a business that will have double digit bottom line growth and will be reasonably stable in good times and bad."
He added that this is exactly what IBM offers investors, "bearing in mind their software and services business is very consistent".

He spent decades claiming that he would forever avoid the technology sector, but last week legendary US investor Warren Buffett confirmed that Berkshire Hathaway, the investment company he chairs, has acquired a significant stake in International Business Machines (IBM).

 

The news surprised investors on Wall Street and prompted people within the technology world to ask why Mr Buffett had chosen to plough $11 billion of Berkshire's money into the firm. Why, after years of insisting that he would not invest in technology stock because he didn't know enough about the sector, has Mr Buffett made such as decisive move?

 

Berkshire has steadily built its stake over the last eight months, with his shareholding rising at a similar pace to the firm's price. While IBM is expected to increase earnings 11 per cent over the next 12 months - unremarkable by Wall Street standards - few firms offer the same mix of growth and value attributes.

 

Speaking to the US television station CNBC, Mr Bufett explained that he was impressed by IBM's plan to attract IT firms outside the US to sign up to its services. "If you're in some country around the world and you're developing your IT department you're probably going to feel more comfortable with IBM than with many companies," the 81-year-old said.

 

"It is a big deal for a big company to change auditors, change law firms, or change IT support," he observed. "There's a fair amount of presumption in many places that if you're with IBM, you stay with them."

 

In the interview, Mr Buffett explained that he had not told Sam Palmisano, IBM's chief executive, about the investment before announcing it on TV. However, he said that he does not intend to increase his stake, hence he was comfortable talking about it.

 

Prompted on other potential investments in the technology market, Mr Buffett said that he would never buy a significant stake in Microsoft, pointing to his close friendship with the firm's chairman, Bill Gates, as the reason. Mr Gates also serves as a director at Berkshire Hathaway.

 

Reflecting on the investment, Louis Miscioscia, managing director at financial advisors Collins Stewart, said: "[Mr Buffett] is looking for a business that will have double digit bottom line growth and will be reasonably stable in good times and bad."

 

He added that this is exactly what IBM offers investors, "bearing in mind their software and services business is very consistent".

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