Warren Buffett Trashes IBM Again

By Douglas A. McIntyre Updated Jan 12, 6:18AM EST · Published Nov 15, 6:20AM EST

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Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) has released its third-quarter equity holdings. He once again sold a large portion of his stock in International Business Machines Corp. (NYSE: IBM), another stake through the heart of Wall Street’s confidence in the faltering big tech company’s turnaround. Buffett repeatedly defended his IBM investment in the past but has recently consistently sold the stock.

According to Berkshire’s 13-F for the third quarter, Buffett’s holdings in IBM dropped by a third to 17 million shares.

24/7 Wall St.’s Jon Ogg wrote:

What was missing here in the largest holdings from prior quarters was the investment in International Business Machines Corp. (NYSE: IBM). Buffett had already shown in prior reports that he sold off some of the stake in Big Blue, and the value of that stake at the end of 2016 was $13.5 billion. This stake has been taken even lower to 37.03 million shares at the end of the third quarter, versus 54.08 million shares at the end of the second quarter.

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IBM has started to look like the next General Electric Co. (NYSE: GE). It is bloated with too many divisions that underperform, and a long-time CEO in Ginni Rometty, who has run IBM since the start of 2012. The company has posted 22 consecutive quarters of revenue declines. The gross profit margins and lack of growth in some of its divisions make them candidate for sale or significant downsizing. Some analysts believe that Rometty’s job cuts and outsourcing jobs from the United States have not been nearly enough.

IBM’s stock performance in 2017 has been awful. Shares are down 13.2% to $144. Over the same period, the Dow Jones Industrial Average is 18.45% higher to 23,409. Over the past five years, IBM’s shares are off 22% while the Dow has risen 80%.

When IBM announced its third-quarter results, Rometty said this:

In the third quarter we achieved double-digit growth in our strategic imperatives, extended our enterprise cloud leadership, and expanded our cognitive solutions business. There was enthusiastic adoption of IBM’s new z Systems mainframe, which delivers breakthrough security capabilities to our clients.

Buffett did not believe her, and apparently very few other people did.

Buffett’s opinion is that IBM has no future, or at least none that is very bright.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.