Tags: Druckenmiller | IBM | Buffett | cloud

Druckenmiller Shorting IBM in Bet Cloud Computing to Replace It

Friday, 22 Nov 2013 03:06 PM

Stan Druckenmiller, who boasts one of the hedge-fund industry’s best long-term track records of the past three decades, said he’s betting against the shares of International Business Machines Corp. because the company’s business will be replaced by technology such as cloud computing.

“It’s one of the more higher-probability shorts I have seen in years,” Druckenmiller, 60, said in an interview with Bloomberg TV’s Stephanie Ruhle at the Robin Hood Investors Conference in New York. “IBM is old technology being replaced by cloud technology.”

IBM fell 1.7 percent to $180.99 at 2:13 p.m. in New York. James Sciales, a spokesman for IBM, didn’t immediately respond to a phone call and e-mail requesting comment on Druckenmiller’ position.

IBM’s sales have dropped for six straight quarters as the growth of services such as cloud computing have failed to make up for slowing demand for older businesses like hardware. The company is selling less-profitable divisions and is devoting cash to stock repurchases to help reach its forecast for growth in earnings per share.

IBM said last month that it added $15 billion to its buyback plan, part of Chief Executive Officer Ginni Rometty’s plan to achieve $20 in adjusted earnings a share by 2015, up from $15.25 last year. The hardware unit, which makes servers and other devices for business users, reported a loss last quarter.

Shares of IBM were down 3.9 percent this year through yesterday, compared with a 26 percent gain for the Standard & Poor’s 500 Index. If IBM ends the year in negative territory, it will be its first annual decline since 2008. Rometty took over as CEO in January 2012.

IBM’s Backers

IBM’s backers include billionaire Warren Buffett, who has said long-term investors should root for IBM shares to languish in the short term, giving it a lower price to repurchase stock.

Druckenmiller, a former chief strategist for billionaire George Soros, shut his hedge-fund firm three years ago and now manages his own wealth through his Duquesne Family Office LLC. From 1986 through 2010, he produced average annual returns of 30 percent at his hedge fund Duquesne Capital Management LLC.

He said in September that he had only a few small trades on as he waited to see who might replace Federal Reserve Chairman Ben S. Bernanke when he steps down at the end of January. Vice Chairman Janet Yellen has since been nominated to the post and is awaiting confirmation by the Senate.

In May, Druckenmiller said investors should bet against the Australian dollar. The currency has since fallen about 9.8 percent against the U.S. dollar.

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Stan Druckenmiller, who boasts one of the hedge-fund industry's best long-term track records of the past three decades, said he's betting against the shares of International Business Machines Corp. because the company's business will be replaced.
Druckenmiller,IBM,Buffett,cloud
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2013-06-22
Friday, 22 Nov 2013 03:06 PM
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