
Buffett Says Berkshire Has Bought About $10.7 Billion in IBM - mwbiz
http://www.businessweek.com/news/2011-11-14/buffett-says-berkshire-has-bought-about-10-7-billion-in-ibm.html
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mark_l_watson
IBM has made some very good decisions, in particular realizing that huge
amount of money that can be made in expert _solve_ _any_ _problem_ services
and sought to make infrastructure a cheap commodity so companies could spend
more on services (i.e., investment in open source). So smart, and something I
would never have been able to figure out without hind site.

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nolok
>hind site

hindsight

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mark_l_watson
+1 Thanks. My wife copy edits my book manuscripts, need to get her to do the
same for my HN posts :-)

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jvehent
Invest in companies that are actually _producing_ something valuable. That's
the way to restart the economy.

Can we all move on from the social media bubble and get back to real work now
?

~~~
Perceval
But IBM doesn't build products anymore. They're primarily a consultancy.

~~~
pork
On the contrary, they build specialized products for their clients; they just
don't build consumer products. They build very complicated, extremely
expensive products based on cutting edge research that they perform in their
own labs, which is why this investment is solid.

I heard an IBM guy give a talk at a research conference recently, about a 1U
rack system that processes 8 live feeds of traffic, automatically classifies
vehicle color and type, and optionally registration, so you can ask queries
like "show me all red sedan cars traveling north on monday the 8th". It was
part of their better cities initiative.

~~~
malkia
As an example, this reminds me a bit about P4 (Perforce www.perforce.com). It
seems to be not that well known as say git, or other versioning systems, but
in reality it's widely used in the game development, and last I've heard
google, Microsoft and other big companies do use it (or use some licensed
source code based version of it).

~~~
ori_b
Perforce is unpleasant to use, but it scales effectively to positively massive
codebases with large binary blobs and many developers.

~~~
malkia
Perforce is well deployed on variety of systems. Git is fine, but cygwin's
version can get broken due to fork() not always forking (no one to blame here,
the cygwin folks are doing an enourmous job to translate over).

P4 also comes with approachable UI (p4win (MFC), and the not so pleasant, but
then again better P4v (Qt)).

The command line is one of the easiest things ever p4 has did. For large
binary files it's very well done, there is good customization of how many
levels of file log to be kept.

But the best feature it's is changelists. The CL (heh, not common lisp)
becomes part of your language at work, such as - get this CL, or shelve this
CL, unshelve that one. It's very clear to a lot of people (coders, artists,
production) what it is, and how it works.

I'm still puzzled by "git stash" or push/pull here and there (granted I'm
n00b, and it would take me a lot of time to progress).

P4 is like good action game, GIT is like hard-core RPG where you need to level
all the time, and learn magic, collect artifacts (that is scripts, and
.gitignores).

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hello_moto
IBM is a little bit weird. While it's true that they don't build product,
they're still milking those old LotusNotes, FIM, WebSphere (enterprise
version) installation.

Those things will become more expensive to maintain through time.

The recent IBM offerings are all based on Open Source being re-packaged:

\- IBM packaged Hadoop

\- WebSphere Community Edition is based on Tomcat

\- IBM HTTP Server is based on Apache

By utilizing open source being pre-packaged and charging for support, they
basically can get rid of expensive Software R&D and at the same time probably
make an in-road to SMB: use the software that you've been using but with IBM
support behind it! (discussion regarding the quality of IBM support is left
for other time but let me say this straight up: Microsoft software support has
been far more superior in terms of speed and the quality of the response than
IBM lately).

Having said that, IBM is also becoming some sort of SaaS for government
agencies. In some places in North America, IBM machines are printing the local
ID card (and probably Driver's Licenses as well). So when a resident lose
their local ID card, they'll have to pay the Government certain amount of
money and IBM takes a percentage of that.

Maybe Buffett and his co. saw a big picture of IBM strategy to become more
aggressive in that market (SaaS for big enterprises) seeing that Big Data is
all the rage these days. That's a bigger lock-out that nobody can escape for
years and still charging money without having to upgrade or add more features
to compel people to upgrade.

~~~
AJ007
What I've noticed is Berkshire Hathaway public stock investments tend to fit
two criteria -

First, does it pay a dividend? Yep, IBM does.

Second, is it integrated into the overall economy? I think of it as if
imagining what would happen if the company just up and vanished over night. So
railroads, power companies, this would result in a lot of other companies
would have big problems.

Then of course there are all the other details like the companies finances,
executives, and so on that you hear about over and over again in any
literature about Berkshire Hathaway.

Consumer oriented companies dominate the news and books because all the inner
workings are like a soap opera to the public. But, you can learn just as much
from all of these other companies. Most certainly it hones your research
skills since the details aren't being delivered to you on a silver platter.

~~~
away
Has Warren Buffett made any mistakes in his big investmests thus far?

~~~
AJ007
"Berkshire Hathaway" itself, the original company, was a textile manufacturer.
Warren Buffet said this was a terrible business because what would be profit
margins would just have to be re-invested in the company to upgrade the
production capacity to keep up with competitors.

Solomon Brothers also comes to mind as one referred to by Warren as a
"mistake."

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bobbles
From what I undersand, Buffet has always avoided technology companies because
he believe he didn't understand them well enough in order to invest.

Someone at IBM must have changed his mind?

~~~
barry-cotter
IBM's business model is approximately

"We will solve your problems for piles and piles of money. Usually not
problems that require technical breakthroughs or research level computer
science knowledge, but ill-defined problems that involve many stakeholders,
much politics, and complex business logic."

They make their money as a professional services company (a model Buffett has
no trouble understanding) that uses technology.

That, at least, would be my take on it.

~~~
gaius
That is IBM Global Services, which is basically the same as Accenture, Cap
Gemini, Wipro etc, IT outsourcing/offshoring. It's about half of IBM, by
revenue.

~~~
noahc
Even so IBM's business model when they are not selling wetware involves
selling expensive black boxes that are maintained, installed, and serviced by
expensive wetware. Even though it makes up half of revenue, that doesn't mean
the other half is not directly related to driving business to the wetware
side.

I think the business model outlined above is correct in the global strategy
sense, even if you looking at a few pie graphs makes you think otherwise.

~~~
gaius
IBM GS is tech-agnostic; they don't just implement IBM mainframe solutions,
they'll take your money to do SAP, Oracle, whatever you want, same as any of
the other bodyshops.

~~~
noahc
Right, but doesn't that just strengthen my point?

If they are tech-agnostic then they aren't in the hardware/software business,
which was my original point. They are in the hardware/software business
because it helps them take your money for the wetware side.

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6sigma
FWIW, IBM is more expensive on a PE basis, trading at trailing PE of 14
compared to Microsoft's PE of 9.8.

~~~
nknight
Hint: Watching CNBC doesn't make you a good investor, and throwing around the
letters "PE" just makes you look like the worst kind of shallow, ignorant
investor.

No experienced investor bases stock purchasing decisions off P/E ratio alone
or even primarily, because the metric has absolutely no intrinsic meaning.

~~~
xyzzyz
Please, read the HN guidelines, especially the parts about being civil and
replying to arguments instead of calling names.

~~~
nknight
You may not realize it, but 6sigma just did the equivalent of walking into a
programming discussion and shouting "goto is evil!". It displays a disturbing
and dangerous disconnect from reality. As a rule, I don't try to sugar-coat my
responses to the willfully ignorant, but in the context, I don't see anything
uncivil about my reply.

~~~
nkurz
Your response to Hessenwolf is great, and it's clear you know what you are
talking about. I happily voted it up. But your reply to 6sigma is indeed
uncivil, and I did my part to downvote it into oblivion. Since you apparently
didn't intend to offend, I'll try to explain why people (me included) are
having a negative reaction to it.

Starting off with "Hint" is condescending. Don't do it unless you intend to
condescend, as this is uncivil. 6sigma offered a fact, qualified with "For
what it's worth". You read a specific meaning into that fact, and are
attacking him for the meaning that you have chosen to assign to his statement.
This is impolite. Ask for clarification before assuming intent. And try to
avoid insults like "worst kind of shallow, ignorant investor".

But please stick around and offer more solid comments like the one to
Hessenwolf!

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asto
That's one of the best shows of support Virginia Rommety could get!

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icki
I wonder how much of it has to do with their new 3d semiconductors [1]. These
things seem ideal for dedicated servers and the like.

[1]
[http://www.youtube.com/watch?feature=player_embedded&v=r...](http://www.youtube.com/watch?feature=player_embedded&v=rbj5vrXulD)

~~~
martinkallstrom
Very little or a lot, depending on your perspective. Long term investments
look at strong projections and long term development, not in a single
technology with high risk. But projects like the one you refer to is certainly
proof of a strong and competitive R&D capability, which is something to invest
in.

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pagehub
I am involved with IBM quite a bit as we are through to the final of their
Smartcamp competition.

I have been so impressed by the way they deal with small businesses, always
looking to form mutually beneficial partnerships to fill in gaps in their
service offering, giving small companies access to huge markets they would
normally have no chance of entering.

Really excited about their future, think the best is yet to come.

~~~
ma2rten
Like they did with microsoft?

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windexh8er
IBM is betting big on BigFix. I'm guessing this is a large component of that
buy.

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martinkallstrom
Even more interesting: what IT stocks did he _sell_ to put the money in IBM?

~~~
forensic
I thought Berkshire doesn't invest in IT?

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martinkallstrom
True (until now, I assume). But they must have liquefied some holdings, or did
they front the cash for a $10B stake? It tops most of their existing holdings
like $5B in Proctor & Gamble and $2B in Wal-Mart (which are some of the
largest holdings they have on hand).

~~~
jonknee
BRK has a mountain of cash, they did not need to sell off stocks to buy shares
of IBM.

[http://www.google.com/finance?q=NYSE:BRK.A&fstype=ii](http://www.google.com/finance?q=NYSE:BRK.A&fstype=ii)

(As of the last quarter they had nearly $35b in Cash & Equivalents.)

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marshallp
Might be something to do with watson. Maybe Buffet's privy to watson
applications before everyone else and is making a bet on it.

