Warren Buffet invests $10.7bn into IBM / Microsoft loses out

Somehow, I missed the announcement last week that Warren Buffet has invested $10.7 billion in IBM since March. According to the BBC, the investment makes Buffet IBM’s second largest shareholder.

He now owns 5.4% of the business.

For me, the logic of the investment is underwhelming:

“It is a big deal for a big company to change auditors, change law firms, or change IT support,” he said.

“There’s a fair amount of presumption in many places that if you’re with IBM, you stay with them.”

via the BBC

The argument is almost that Big Blue is too big to fail and, given the recent turmoil in the banking sector, that’s a less compelling investment thesis than it was five years ago.

With Friends like this …

The big losers in this transaction are ironically Microsoft shareholders.

Buffet revealed that he would never take a similar stake in Microsoft due to his close personal friendship with Bill Gates. Given Microsoft’s recent trading history, there are probably several Microsoft shareholders who wish that he had different friends.

Full Disclosure: I work for an Axispoint Solutions Ltd, an IBM business partner. The opinions in this piece are my own.