Megainvestor is known for avoid tech companies, but big blue's diverse business has won him over

Warren Buffett, 81, built his billions in fortune on a principle of only investing in firms he believed would sustain a same strong business model for 15 to 20 years into the future.  As you might guess, this means that Buffet is a notorious detractor on tech ventures -- particularly the internet startup.

I. Buffett Considers IBM a Safe Pic

In a 1998 talk he famously remarked, "I look for businesses in which I think I can predict what they’re going to look like in ten or 15 or 20 years… Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people are going to chew gum… I don’t think it will change whether people shave or how they shave."

But it looks like the world's third richest man has finally picked a horse in the technology stock race -- and no, it's not Apple, Inc. (AAPL).  Mr. Buffett eschewed the fruity giant that's had its share of ups and downs for a far older firm -- International Business Machines, Inc. (IBM).

Currently in its 100th year, the information technology, cloud computing, hardware, and software giant now counts Mr. Buffett as perhaps its biggest investor.  Mr. Buffett has sunk over a sixth of his Berkshire Hathaway, Inc. (BRK.A) fortune into IBM.  His $10.7B dive is worth a 5.4 percent stake.

Warren Buffett blue
Warren Buffett is seeing blue -- Big Blue that is. [Image Source: Mustafa Quraishi/AP/File]

He commented during an interview on CNBC's SquawkBox, "It’s a company that helps IT departments do their job better.  It is a big deal for a big company to change auditors, change law firms."

II. Examining the Heavyweights of the Tech Sector

Despite the interesting play, Berkshire Hathaway shares joined the market at large in a meander downwards on European fears.  IBM, though, bucked the market trend, holding almost steady at close.

IBM has risen 29 percent in market capitalization over the year to rest just behind Apple at the top of the U.S. technology market.  That makes it more valuable than Microsoft Corp. (MSFT), a firm whose operating system drives over a billion personal computers.

Apple made a net profit of $6.62B USD in its third calendar quarter of 2011 [source].  IBM quietly posted a $3.8B USD profit (GAAP) haul in its own recent results [source].  While IBM's profit may sound smaller, it doesn't have to rely upon the fickle consumer market as much as Apple, instead targeting primarily the business sector.

Microsoft still posts bigger profits than IBM -- it hauled in $5.74B USD in profit in its latest quarter [source].  But it's ever the subject of pessimism over whether it can maintain its dominant position amid what some say is a creative vacuum.  Microsoft gets little love from investors, least of all Mr. Buffett.

On the other hand, IBM is outperforming a perennial market darling who dominates web search, web advertising, and the smartphone markets -- Google, Inc. (GOOG).  Google pulled in a modest $2.73B in its latest quarter [source].

IBM is currently in the midst of a leadership change, with Samuel J. Palmisano -- the CEO for the last nine years -- stepping down and being replaced by Virginia "Ginni" Rometty.  Prior to her new role, Ms. Rometty served as IBM's Senior Vice President and Group Executive for Sales, Marketing, and Strategy.  She will be IBM's first female CEO in the company's century-long history.

Ginni Rometty
Ginni Rometty will be leading IBM into its next century as the company's first woman CEO.  Unlike many past IBM CEOs, she comes from a non-technical background.
[Source: Journalist Independent]

The company is a bit of a puzzle for casual observers to wrap their heads around given its multitude of seemingly disparate ventures and futurist projects.  But the company gained a great deal of attention earlier this year for its Watson supercomputer, which used its powerful AI and massive knowledgebase to crush mankind's most successful Jeopardy champions in a charity game.

Source: WSJ

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