Renowned US billionaire Warren Buffett announced that his Berkshire Hathaway investment firm has been quietly buying up shares in technology giant IBM to the tune of US$10.7-billion since March this year.
Speaking to television network CNBC, Buffet said that his company’s investment in IBM amounts to about 64-million shares, or a 5.5% stake.
If accurate, the investment would see Berkshire Hathaway become IBM’s second biggest shareholder, behind investment advisory group State Street.
The 81-year-old Buffett, sometimes called the “Sage of Omaha” for his investing skills, said that his company had paid an average price of US$170 a share, some 10% lower than the previous week’s closing price of US$187.38.
While IBM’s shares were up 1.3% in the wake of Buffett’s TV appearance, Berkshire’s most widely traded “B” shares fell 0.3%.
Buffett was quick to quash any speculation he intended investing any further in the tech giant.
“I wouldn’t be talking about it if I did,” he said.
Bufett praised IBM, which celebrated its centenary earlier this year, for having a strong vision of its own future, saying: “They’ve done all kinds of things right.”
The tech giant recently announced that Vriginia Rommety, its current head of sales, would take over as chief executive in 2012. This would make her the first woman to lead the firm, which helped pioneer large-scale computing.
Buffett is renowned for his stock picking prowess, which has made him the world’s third richest man, with Forbes magazine estimating his personal fortune at around US$50-billion.
Buffett’s stock portfolio is diverse, although he has seldom ventured into the tech world.
In fact, Buffett had faced criticism for not capitalising on the heavy rise in dotcom stock during the late 1990s.
Once the bubble burst, Buffett wrote a letter to employees in his company panning the “irrational exuberance” which overtook investors in 1999 and 2000.
Buffett was particularly stinging in his criticism of companies who issued shares ahead of widely anticipated floats, only to close shop a few months later.
“Value is destroyed, not created, by any business that loses money over its lifetime,” he wrote.
He also noted that the inflated returns of teach companies in the midst of the boom had dulled some into complacency.
“After a heady experience of that kind,” he said, “normally sensible people drift into behaviour akin to that of Cinderella at the ball.”
“They know that overstaying the festivities… will eventually bring on pumpkins and mice.”
Perhaps most damningly, Buffet slammed the business model of many of the companies in the midst dotcom bubble as little more than copying the “old-fashioned chain letter”.–AFP, with additional reporting by Staff Reporter