Warren Buffett And IBM: Berkshire Hathaway Accumulates 5.5 Percent Stake In Tech Company

Warren Buffett announced on CNBC's Squawk Box Monday that his company Berkshire Hathaway had purchased $10.7 billion worth of IBM shares since March 2011 -- good for a 5.5 percent stake in the company,

Buffett, who Forbes labels the third-richest man in the world, is known for making surprise investments. The IBM bet is especially noteworthy, however, because of Buffett's history of avoiding tech companies. His reason for remaining skeptical all these years? He often doesn't "understand" what the companies themselves do, CNBC reports.

But after reading IBM's 2010 annual report "through a different lens," Buffett said he'd changed his mind.

"I don't think there is any big company that I can think of, that has done a better job of laying out where they're going to go and then having gone there," Buffett told CNBC. "They laid out a road map. I should have paid more attention to it five years ago."

In particular, Buffett praised former CEO Lou Gerstner for saving the company from bankruptcy, and current CEO Sam Palmisano, who he said has "delivered big-time," according to Fortune.

IBM has recently benefited from an emphasis on higher-margin businesses such as data-analysis services, the Wall Street Journal reports. The positive public reception of Watson, a super-computer who bested human competitors on the game show Jeopardy, also gave the company extensive positive press. Indeed, Watson eventually led the company to an Internet achievement award: the Webby for "Person" Of The Year.

This isn't the only high-profile investment Buffett's made recently. In August, Buffett invested $5 billion in Bank of America, a company plagued by negative publicity after a plan to charge customers $5 fee to use debit cards caused a national uproar. Still, Buffett told CNBC on Monday that the BofA CEO Brian Moynihan is following a "very logical path" to get the bank back on track.

Outside of his Berkshire Hathaway duties, Warren Buffett has personally taken on the issue of tax rates for America's richest taxpayers, writing in August that "while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks." President Obama subsequently named a proposed millionaire's tax the "Buffett rule."

As of 12:15pm, IBM's stock was up .37 percent for the day, according to Google Finance.

Here are ten other big moments in Warren Buffett's career:

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Comments

[Hussein Abdulrasul]

10:37 PM on 01/28/2012

IBM is accelerating its earnings and cash flows generating $29.5 billion in revenues in the fourth quarter 2011. Gross margin stands at 50% and it generated $19.9 billion in Cash from operating activities in that quarter. From these cash inflows, the company spent $4.1 billion in CAPEX and paid dividends of $3.5 billion as well as bought back stock worth $15 billion. This tells me the company has a lot of room to raise its dividend while accelerating earnings in 2012. IBM has returned an annualized total return of 7.5% in the last 10 years and has grown its dividend from $0.15 per share to $0.75 per share paid quarterly. Source: http://www.bestdividend-paying-stocks.com Current dividend yield is 1.6% and market capitalization of $225 billion.

[Freedland]

02:57 PM on 11/23/2011

Buffett does not have to disclose his equity purchases under a special exemption granted only to Buffett and no others until after a period of time elapses to prevent the prices from going higher due to excessive trading by those who follow his acquisitions. Those who followed him into Bank of America (he has preferred shares and options on the common) and IBM over the short term may find that he is not infallible. He has made mistakes before. Goldman Sachs has been another loser but he has the staying power to hold during downturns while many investors would be forced to sell out at a loss. Why does he have this exemption? He is the ultimate insider.

[s0uthparkc0nservative]

10:56 PM on 11/15/2011

If I had a nickel for every "unusual move" Buffett has made betting on a company in the last year, I'd have enough to buy soap for almost all the OWS protestors.

[itschuck2c]

10:06 PM on 11/15/2011

Lets see..IBM payed a dividend of 75 cents a share 3 times this year and one of 65 cents..close to 3 bucks a share. Take that times the 64 million shares that they now own. Call it around 190 million a year..then there is the fact he bought at an avg price of 170 bucks a share and it is trading in the high 180's now..(188.75 today)... He made a killing on the deal

[Freedland]

03:02 PM on 11/23/2011

He usually does make a killing as he did with Goldman Sachs,GE and Bank of America where he has preferred shares and options to buy the common stock at a stated price plus the dividends. Bank of American and Goldman Sachs have been losers to those who owned the common stock but Buffett has the preferred and benefits if the common shares go higher over the next years. Those who followed him and bought the common shares have lost money and had no opportunity to purchase the preferred shares. Last year, Buffett dumped all of his Bank of America common shares before purchasing the preferred this year. He is well protected but the common shareholders take on the risk. He is the ultimate insider.

[Kevin Arthus]

10:57 AM on 11/15/2011

A man of the people buying another company.

[FreedToChoose]

10:10 AM on 11/15/2011

Good move. One thing, though. IBM is no longer a high tech company, but a service company with high tech products and support and an eighty year track record through thick and thin.

[justleft]

08:11 AM on 11/15/2011

When is "I dont pay enough taxes" Buffett going to pay the over 1 BILLION in Taxes + Interest + Penalties that "his" company BH OWES the IRS??

BTW - If BH UNDERPAID its Federal Taxes, it also UNDERPAID State Taxes!! :-(

[FreedToChoose]

10:07 AM on 11/15/2011

If you read the details they are negotiating a dispute. Corporate taxes aren't cut and dry. Neither are personal taxes. As a former corporate owner and occasional visitor to the local IRS office, I found them to be very professional and considerate.

As for the more than one billion the IRS feels he owes, he has stated that they are negotiating the dispute and will pay whatever is agreed. That they have not paid yet suggests they are certain that all or part of the IRS claim will be dismissed. Berkshire Hathaway has professional tax people who will work this to a resolution and pay what is decided.

[justleft]

12:32 PM on 11/15/2011

With all due respect, I've forgotten more Federal Corp Tax Law than you will EVER know!
I am a CPA with over 30 years tax experience & also have a MS in Taxation.....

Mr. Buffett is a FRAUD when it comes to wanting to pay more taxes....
"Do what I say & NOT what a do"..... Sound Familar???

[fredfellon]

07:33 AM on 11/15/2011

they made it the old fashion way,,, THEY EARNED IT>>>>

[Bostontru2u]

11:22 PM on 11/14/2011

I wouldn't give 2 cents to Bank of America.

[mscellanus]

10:27 PM on 11/14/2011

The guy gives me the creeps. He's sly and a Liberal do gooder but still likes to make his millions while not paying the taxes he is supposed to.

[FreedToChoose]

10:08 AM on 11/15/2011

He has never refused to pay the taxes he owes.

[1logicalthinker]

03:25 PM on 11/15/2011

mscellanus wrote, "The guy gives me the creeps"

You probably had the creeps, long before this. :)

[mscellanus]

10:26 PM on 11/14/2011

Did he ever pay those millions in taxes he owes the government???

[FreedToChoose]

10:09 AM on 11/15/2011

He doesn't owe them until the dispute with the IRS is resolved. If he owed them the IRS would have him in court, which they do not.

[bjwjr]

09:55 PM on 11/14/2011

I just wish Mr. Buffet would look at GEICO and see how they treat the consumers. I've been with them for nine years accident and ticket free when a teen with a cellphone ran a light and totaled out one vehicle, and just recently one had gotten stolen. All GEICO had to say was sorry for your luck. They never helped on the first and they only want to pay $1,000.00 on the second. I'm changing insurance companies and running a story in my union paper. It will reach about 80,000 people.

[pinetrale]

08:48 PM on 11/14/2011

Mr. Buffet is quietly calmly doing his investment thing, acquiring huge iconic American Company shares with global imprint no matter what the times. Just like his stockholders would expect him too. His job is to see thru all the current noise and make some moves. Unlike congress which rejects this concept.

[garyms4]

08:26 PM on 11/14/2011

Hope you go belly-up Buffet.

[fireart]

08:00 PM on 11/14/2011

Does anyone remember the great whiz kids that bought out companies, fired the employees and paid off the co. with the retirement fund ? They called these men brilliant investors. We called them sharks and thieves. Never the less ( IT WAS LEGAL) . The employees dont think so, but they dont contribute much to elections. Now if you screw the little guy ,then promise to give the money to a charity you are a great phli??