Billionaire investing icon Warren Buffett apparently has taken a more than $500 million hit to his wallet because of IBM’s dismal earnings.
International Business Machines Corp (IBM) reported a continued sales slump, as weak hardware sales and a strong dollar brought revenue down for the 14th quarter in a row.
IBM's shares fell $7.22 Tuesday morning in premarket trading after a weak earnings report, “theoretically costing the Oracle of Omaha about $575 million,”
CNBC reported.
Buffett’s Berkshire Hathaway owned 79.57 million shares of IBM as of June 30, according to the most recently available filings, making it one of his largest investments, CNBC reported. Buffett is also IBM's largest shareholder, with almost 20 million more shares than the next-biggest investor.
Last October, IBM's sharp drop after earnings wiped just over $1 billion off Berkshire's books. This past July, another IBM weak quarter cost him more than $700 million the next day, CNBC reported.
IBM posted a bigger-than-expected drop in revenue and cut its full-year profit forecast, as a stronger U.S. dollar accentuated weakness in demand from China and emerging markets.
It was the 14th quarter in a row that IBM has posted a reduction in revenue, as the world's largest technology services company gets rid of low-margin businesses, but has so far failed to make up the shortfall with newer initiatives in the more lucrative area of cloud computing.
"This is another example of the massive headwinds that large-cap traditional tech stalwarts are seeing in this ever-changing environment, as more customers move to the cloud," FBR Capital Markets analyst Daniel Ives said.
China was particularly hard hit, with fewer big deals causing revenue from that country to fall 17 percent, IBM's chief financial officer said on a conference call with analysts. Sales in Brazil, Russia, India and China combined were down 30 percent.
Armonk, New York-based IBM, which gets more than half its business from overseas, said overall revenue from continuing operations was cut 9 percent by a strong U.S. dollar .DXY, which is up about 17 percent from a year ago against a basket of currencies.
The company's total revenue fell 13.9 percent to $19.28 billion in the quarter, below analysts' average forecast of $19.62 billion.
Martin Schroeter, IBM's CFO, pointed to weakness in its consulting and storage businesses for the revenue shortfall, after taking currency moves and discontinued business into account.
"I would characterize it as the consulting and systems integration business moving away from these large, packaged applications and the storage business moving to flash and to the cloud," Schroeter told
Reuters in an interview.
Flash is a speedy type of memory used in mobile phones and other types of electronic devices.
IBM lowered its full-year 2015 operating profit forecast to a range of $14.75 to $15.75 per share from $15.75 to $16.50. Analysts on average were expecting $15.68, according to Thomson Reuters I/B/E/S.
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