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Buffett Goes Geek?

In a move that many Warren Buffett and Berkshire Hathaway followers could call… ‘strange’, his company has systematically invested close to $11B in, [gasp] a technology company named:  International Business Machines (IBM).

While on the surface this move seems somewhat academic, one has to know that:

A) Mr. Buffett has historically been adverse to ‘technology’ companies

B) Mr. Buffett bets big on management and cash flows

C) Mr. Buffett has hired 2 stellar partners that will help take his company in different directions

D) Technology and Services are, and will continually be, tightly integrated

I feel this is one of Mr. Buffett’s more salient investments since the ~$34 billion investment in Burlington Northern Railroad Santa Fe at
the end of 2009.

Why would I feel this?

  • As of this writing, his investment has already netted his company a 12% gain from what was paid.
  • This acquisition made the Omaha, Neb., conglomerate IBM’s second-biggest shareholder as of: Sept. 30, 2011.
  • IBM shares have surged 28% this year
  • Many analysts predict a $210 median stock price by the end of 2011
  • IBM has adroitly, over the years, moved away from a pure ‘technology’ company to a ‘services’ company utilizing their technologies

HP and Dell can still try to learn and emulate IBM, but the first to market lead in a competitive market like this is very hard to make up.

Kudos to both IBM and Mr. Buffett, I see $300/share by Q2 2012.