Warren Buffett has invested big in Big Blue.
The ‘Oracle of Omaha’ prior to trading on Monday announced that his holding company, Berkshire Hathaway, had bought $10.7 billion in IBM common stock (64 million shares), giving him a 5.4 percent stake of ownership in the company, CNBC reported.
The buy is significant not only for its size (Berkshire Hathaway’s entire investment portfolio is worth over $62 billion, according to CNBC, and IBM is currently the second largest company in the portfolio by holding value, after Coca Cola), but also because Buffett has famously avoided technology stocks for most of his career.
As he told CNBC, this is because he doesn’t “understand” the fundamentals of most tech company’s businesses, but in the case of IBM, he was “hit between the eyes” by its business strategy.
“It’s a company that helps IT departments do their job better,” he told CNBC’s Squawk Box. “It is a big deal for a big company to change auditors, change law firms,” or IT providers.
In addition, it probably didn’t hurt IBM in Buffett’s eyes that the company recently became the second-most valuable tech company in the world, beating Microsoft in market value in September. Microsoft, of course, was founded by Buffett’s friend Bill Gates, and Buffett said he wouldn’t ever invest in the company due to their friendship.
Plus, IBM has recently made several ambitious public announcements on where it sees its future and the future of computing, touting the real-world health diagnosis applications of its “Jeopardy”-winning artificial intelligence system Watson and promising it will build a computer about as complex as the human brain by the end of the decade.
The news of Berkshire Hathaway’s investment sent shares of IBM up 0.6 percent in the first 90 minutes of trading, Forbes reported. At the time of this posting, shares of IBM were up 0.45 percent.
Buffett told CNBC he hadn’t discussed the investment with IBM prior to going for it, let alone with current CEO Sam Palmisano (who is due to retire in 2012 giving way to the company’s first female CEO, Virginia Rometty).
We’ve reached out to IBM for more information on what specifically might have interested Buffett in the company and will update when we receive a response.
