Warren Buffett, who invested more than US$11 billion in International Business Machines Corp (IBM), said he is confident in the computer-service provider’s prospects after the stock slumped last week.
“They will have a record per-share earnings this year,” Buffett, 83, said on the Charlie Rose show, according to a transcript of the interview, which was scheduled to air late yesterday on PBS.
IBM is seeking to expand in more profitable markets like software and services to make up for the deterioration of its older hardware business.
The company reported its sixth straight quarter of declining sales last week, sending the stock to its lowest price in more than two years. It is the worst-performing of Buffett’s top investments at Berkshire Hathaway Inc, where he is chairman and chief executive officer.
Berkshire began accumulating a stake in Armonk, New York-based IBM in early 2011 after the stock rallied 74 percent from the end of 2008 to the end of 2010.
Buffett’s company had 68.1 million shares as of June 30, meaning it paid about US$171 apiece to build its stake. IBM dropped 8.7 percent this year through Tuesday to US$174.97.
Buffett said he does not focus on results of an individual quarter and that all businesses have struggles.
Even as IBM’s revenue slips, earnings continue to climb. The company last week reiterated a forecast for profit of US$20 a share in 2015, up from US$11.52 in 2010.
IBM has sold less profitable businesses, acquired high-margin software companies, lowered its tax rate and bought back shares to help meet the target.
Buffett wrote last year in a letter to shareholders that long-term investors like Omaha, Nebraska-based Berkshire should cheer for IBM shares to languish in the short term. A lower price means IBM can repurchase more of its stock, increasing Berkshire’s ownership stake in the company.
Investors comforted by short-term share increases “resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply,” Buffett wrote.
Meanwhile, Buffett said he does not think his son’s charity will suffer in the future when Howard Buffett becomes Berkshire Hathaway’s chairman because the role should not be time-consuming.
Warren Buffett discussed part of the succession plan for the Berkshire Hathaway conglomerate he leads on Tuesday during an interview on Bloomberg television.
Buffett said there will not be a problem because the board already knows who it would pick to be Berkshire’s next CEO and that internal candidate for the job will be terrific.
Buffett has no plans to retire.