Published On: Tue, Oct 21st, 2014

Warren Buffett Loses $1 Billion on Big Blue

Warren Buffett & Carlyle CEO David Rubenstein Discussion At DC Eco Club

IBM, often referred to as “Big Blue, ” perhaps implying it has been a blue chip stock, is a large holding in Warren Buffett’s Berkshire Hathaway. After a staggeringly disappointing quarter, the stock has dropped dramatically, and it is estimated that the Oracle of Omaha has lost $1 billion on Monday morning. According to CNBC, the stock fell $15.05 on Monday and Buffett owned 70 million shares of the company as of June 30th.

IBM also reported lackluster earnings in April, but Buffett insisted he didn’t have second thoughts about IBM and was buying more. IBM is Buffett’s third largest holding after Wells Fargo and Coca Cola.

IBM disappointed on almost every metric except for cloud revenue, which was up 80%. Earnings per share declined substantially, backlog dropped 7%, productivity decline, gross margins fell 49.2%. Hardware dropped 15%, power systems were down 12%, but security revenue rose 20%. There was talk on CNBC of possible layoffs for IBM.

This isn’t the first time a long-term Buffett hold has hit the skids. Buffett’s approach is value investing, which means buying shares of a good company and holding through thick and thin. IBM has seen better days, and maybe it will again.

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