Buffett's Berkshire bets $11bn on 5.5 per cent stake in Big Blue
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Tuesday 15 November 2011
After years of saying he did not know enough about technology to make any investments in the sector, Warren Buffett has placed a $10.7bn (£6.7bn) wager on shares in IBM, the pioneering computer company.
Mr Buffett's conglomerate, Berkshire Hathaway, has taken a 5.5 per cent stake in IBM, he disclosed yesterday, making it the company's first tech investment – but the buying reflects a strategic shift by IBM more than it shows Mr Buffett has thawed in his attitudes to new technology.
The company dropped production of personal computers more than a decade ago and acquired the consulting arm of PricewaterhouseCoopers, and has since focused on becoming a full-service IT consulting firm. Last month, it sealed the transformation by appointing the architect of the PwC integration, Ginni Rometty, as chief executive. "They have laid out a road map and followed it extremely well," Mr Buffett said yesterday. "I don't know of any large company that really has been as specific on what they intend to do and how they intend to do it as IBM."
Mr Buffett is the world's most famous – and richest – value investor, who has eschewed fads in favour of buying into or acquiring companies with predictable cash flows. He said he had been turned on to IBM by talking to the IT managers of Berkshire Hathaway subsidiaries.
"There's a fair amount of presumption in many places that if you're with IBM, you stay with them," he told CNBC television.
Mr Buffett's big bet on Big Blue – IBM's nickname – already appears to be in the money. At $10.7bn, Berkshire would have paid an average price of $167 per share, compared with IBM's share price yesterday of almost $188. The company has been secretly buying shares for more than six months, winning a waiver from regulators to rules that would otherwise require disclosure of the stake because it had not yet completed the purchases.
Berkshire was due to make public the precise size and cost of the stake in IBM last night in its quarterly regulatory filing.
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