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Warren Buffett loads up on shares of IBM

OMAHA, Neb. — Investor Warren Buffett says his company, Berkshire Hathaway, has bought about $10.7 billion worth of IBM stock this year, giving it a stake of more than 5 percent in the technology company.

Buffett revealed the investment during an interview Monday on CNBC.

Buffett has long refused to invest in high-tech companies because he has said it's too difficult to predict which technology businesses will prosper in the long run. But he said he recently realized his view of IBM was wrong based on what he read in the company's annual reports and what he learned by talking to information technology departments at Berkshire subsidiaries. He said he should have realized years sooner that hardware is no longer the heart of IBM's business.

"Now they're very much a services company, and they're very intertwined with their customers," Buffett said. And he said IBM's customers are reluctant to change once they start working with IBM.

So Berkshire has bought about 64 million shares since March, or about 5.5 percent of IBM. Buffett says he believes IBM has a sound plan for the future.

IBM joins several other American business icons in Berkshire's stock portfolio. Buffett's company already holds stakes in Coca-Cola, American Express and Wells Fargo, among others.

IBM officials declined to comment Monday on Buffett's investment.

International Business Machines, which marked its 100-year anniversary in June, has proved resilient even in a downturn because of hard decisions it made in the 1990s, when it tapped an outsider as CEO to help with a turnaround.

At the time, IBM was slipping with the rise of cheap microprocessors and rapid changes in the industry. Although it helped make the personal computer a mainstream product, it quickly found itself outmatched in a market it helped create. PCs also began to perform many of the functions of mainframe computers, throwing IBM's main moneymaking business into disarray.

The company decided then to focus on the high-margin areas of software and technology services and move away from computer hardware. That intensified with IBM's $3.5 billion purchase of PricewaterhouseCoopers' consulting business in 2002 and the sale of its PC business to Lenovo for $1.75 billion in 2005. Today, IBM is the world's biggest technology services provider.

The shift is important because it has allowed IBM to ride two recessions. When times are tough, businesses pay IBM to help them find ways to cut costs and handle technology chores that would be more expensive to perform in-house.

IBM's stock has more than doubled since the depth of the recession in 2008. IBM shares gained as much as $2.46 Monday to trade near its 52-week high of $190.53 before slipping to close at $187.35, down 3 cents.

Warren Buffett loads up on shares of IBM 11/14/11 [Last modified: Monday, November 14, 2011 9:27pm]
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