Oracle of Omaha went long on Big Blue after reviewing IT operations at Berkshire Hathaway's various holdings.

Paul McDougall, Editor At Large, InformationWeek

November 14, 2011

3 Min Read

100 Years Of IBM: 25 Historic Milestones

100 Years Of IBM: 25 Historic Milestones

Slideshow: 100 Years Of IBM: 25 Historic Milestones (click image for larger view and for slideshow)

Normally tech-shy investor Warren Buffett revealed Monday that he has been quietly stockpiling shares of IBM over the past several months in order to build up his position in a company he said has "done all kinds of things right."

Buffett, through his Berkshire Hathaway holding company, has spent about $10.5 billion on the acquisition of IBM shares, beginning in March, giving him a total stake of about 5.5% in the tech giant, the stock picking legend disclosed during an interview Monday on CNBC.

The move makes Berkshire Hathaway IBM's largest institutional shareholder, assuming its previous biggest investor, State Street, or other institutional buyers, have not significantly upped their stakes recently. And Buffett said he might not be done. "If we have enough money coming in and IBM went down we might buy more," he said.

Buffett told CNBC that a review of IT operations at some of Berkshire Hathaway's companies helped convince him that IBM was a good bet for the long haul. "We looked at our own IT operations through many of our companies," said Buffett. "I don't know anything about the IT operations, but basically I was interested in learning about the decisions they made, the stickiness, what they might be doing three years from now, five years from now."

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Berkshire Hathaway's many businesses include Geico, Fruit of the Loom, Benjamin Moore, and NetJets. NetJets, which leases private aircraft, is using IBM's Websphere portal to facilitate employee communications and collaboration across its various offices.

Buffett also cited the fact that IBM has issued a public earnings roadmap with specific goals. Under its current plan, the company wants to deliver earnings of $20 per share by 2015. "I don't know of any large company that has been as specific as IBM about what they intend to do, and how they intend to do it," said Buffett.

Buffett's investment is also seen as endorsement of IBM's leadership succession plan, which will see global sales head Ginni Rometty take over from Sam Palmisano as CEO on Jan. 1.

"I don't know her, but I've read things she's said, and they are batting a thousand in the last two CEOs they've come up with," said Buffett, referring to Palmisano and his predecessor, Lou Gerstner. Gerstner is widely credited with turning IBM around in the late 1990s and remolding it from a hardware specialist into a services giant.

IBM shares were up 0.89%, to $189.84, in morning trading Monday.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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