Warren Buffett buys IBM stake with $10.7bn investment

[Iron]

http://www.bbc.co.uk/news/technology-15728306

That values IBM at about $200 billion.

IBM's 2010 profit was $15 billion (http://money.cnn.com/galleries/2011/for ... une/7.html)

Is it normal to value a company at over 10 times its annual profit?

Jeff

[Euler]

It depends how much you think it is going to grow.

[Iron]

In that case, this is an interesting investment, given that Mr Buffett has previously said he won't invest in technology companies, given that you can't predict how technology will develop in the future.

Also, whilst the IBM brand is strong, the global economic situation may mean that brand becomes less important to customers, if cost becomes more of an issue.

Jeff

It depends how much you think it is going to grow.

[Euler]

IBM is less of a technology stock than it used to be by far. An interesting investment though. It's got all the Buffett followers deep in analysis mode.

[superfrank]

yeah they're much more IT services these days which is a shame because it was a great company. they refused to bid for consultancy work at my old place because they knew the process was fixed - the IT director always awarded the contracts to the consultancy he used to work for!

i think Buffet is less interested in growth and more interested in wealth preservation and doesn't want to hold cash in this environment. same when he bought railroad infrastructure (he doesn't believe the deflation b0lux either).

[Will Sharpe]

As for the type of company IBM is nowadays let me remind you that when there was a ban on shorting financials in the US after the Lehman crash, IBM was put up on the not shortable list

[andyfuller]

Just saw that Buffet has increased his stake in Tesco to 5.08% as of 13th January 2012.