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Forbes.com: 5 Reasons Buffett Should Cut IBM Losses at $2 Billion

Forbes.com: 5 Reasons Buffett Should Cut IBM Losses at $2 Billion
Warren Buffett (Getty)

By    |   Wednesday, 11 November 2015 07:11 AM

Forbes.com has an interesting take on Warren Buffett’s $2 million loss on his IBM investment. The “Oracle of Omaha” should cut his losses at $2 billion and re-invest the proceeds — perhaps in Microsoft.

Buffett's Berkshire Hathaway announced that it has lost $2 billion on its IBM investment.

That's 15% of the more than $13 billion worth of IBM's stock that Berkshire has purchased over the past four-plus years, CNNMoney reported.

Forbes offered “five good reasons” for him to do so:

IBM Is Drifting Without a Game Plan
“In October 2014, IBM abandoned its roadmap to earn EPS of $20 a share by 2015 (employees had long dubbed it Roadkill 2015),” Forbes reported. “Moreover, CEO Ginni Rometty has presided over 14 straight quarters of declining results since taking over at the beginning of 2012.”

IBM’s Products Lack Universal Appeal
“IBM brand does not have the power that Coke has created and maintained for all these years.”

Customers Lack an Addictive Need to Buy IBM’s Products

One word, really: Apple. “IBM was a leader in the IT industry. But is it still? If customers had an addictive need to buy IBM’s products, I would expect it to be a market leader in all its product lines.”

IBM Treads Water as Rivals Close In
“IBM used to have the best business sales force in the computer industry. It used to be said that nobody got fired for buying from IBM. But IBM faces serious competition in every market in which it participates — except perhaps for mainframe computers.”

Buffett Lacks Computer Industry Insight
Computers aren’t Dairy Queen and Cherry Cokes. “Buffett long ago admitted that he had no edge in investing in the computer industry.”

However, will Buffett once again have the last laugh all the way to the bank?

SeekingAlpha.com believes “this is a rare opportunity to buy the stock” of IBM, since Buffett has no plans to sell.

IBM “is going through a transition phase to become a cloud computing-oriented company from a hardware-focused company,” Seeking Alpha explained.

“IBM has tremendous growth opportunities in cloud computing, which is worrisome for its competitors like Intel, Oracle and Microsoft.”

Despite IBM stock's (NYSE:IBM) dismal performance to boost sales, Buffett is in no mood to sell his firm Berkshire Hathaway's 8.2% stake in IBM.

"IBM continues to be profitable and generate significant cash flows," Berkshire said in a regulatory filing. "We currently have no intention of disposing of our investment in IBM common stock. We expect that the fair value of our investment in IBM common stock will recover and ultimately exceed our cost."

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Forbes.com has an interesting take on Warren Buffett's $2 million loss on his IBM investment. The "Oracle of Omaha" should cut his losses at $2 billion and re-invest the proceeds - perhaps in Microsoft.
warren buffett, berkshire hathaway, IBM, invest
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2015-11-11
Wednesday, 11 November 2015 07:11 AM
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