Buffett's Berkshire Hathaway Cuts Stake in IBM by Third -- 4th Update

By Nicole FriedmanFeaturesDow Jones Newswires

Berkshire Hathaway Inc. sold about a third of its shares in International Business Machines Corp. this year, Berkshire Chairman Warren Buffett told CNBC.

Berkshire held about 81 million IBM shares at the end of last year, making it Big Blue's largest shareholder with a stake of 8.6%, according to FactSet. Berkshire sold 24 or 25 million shares, CNBC said, with Mr. Buffett telling the network he has "revalued it somewhat downward" because of strong competition.

Continue Reading Below

The report came ahead of Berkshire's widely attended annual meeting on Saturday in Omaha, Neb.

Berkshire sold the shares above $180 each, Mr. Buffett said. Berkshire's average purchase price for its IBM stake was roughly $170, according to the company's annual report. IBM shares, which ended trade Thursday at $159.05, hovered above $180 from late February to early March.

In morning trading Friday, shares of the Armonk, N.Y.-based IBM slid 2.5% to $155.12. An IBM representative didn't provide an immediate comment on the news.

Mr. Buffett told CNBC that IBM Chief Executive Ginni Rometty met with him "a few weeks ago" and asked if him about reports that he was selling IBM stock. Mr. Buffett said he confirmed the selling but didn't provide the rationale or the details.

Berkshire first bought IBM in 2011. Mr. Buffett had avoided technology stocks for years, saying he didn't understand them. After Berkshire's IBM stake was first revealed, Mr. Buffett told The Wall Street Journal that IBM "fits all my principles...it's something we expect to own indefinitely."

The divestiture is the latest blow to IBM, which said last month that its revenue fell for the 20th consecutive quarter in the first three months of the year. Ms. Rometty has been working to offset waning older businesses with younger ones like cloud computing, where Amazon.com Inc.'s Amazon Web Services dominates, and artificial intelligence, a stronghold of Alphabet Inc.'s Google division. Investors drove the stock up more than 20% in 2016, but shares have declined roughly 4% this year before Friday.

Mr. Buffett's willingness to change his mind about investments and admit his mistakes is "one of his greatest strengths," said Paul Lountzis, president of Lountzis Asset Management LLC, which owns Berkshire shares.

"If he really doesn't believe in it...I would have loved to see him sell it all," Mr. Lountzis told The Wall Street Journal after the CNBC article appeared.

Mr. Buffett likes to say that his biggest mistakes are those of omission. But he has had several notable investment reversals over the years. In his 2008 letter to shareholders, he said his purchase of ConocoPhillips shares when oil and gas prices were near a peak and his choice to buy two Irish banks were "unforced errors." Mr. Buffett also has called his 1965 purchase of Berkshire, originally a New England textiles company, a major mistake. Berkshire later closed its textiles business.

In his annual letter to shareholders released in February, Mr. Buffett said: "We have made no commitment that Berkshire will hold any of its marketable securities forever....We regard any marketable security as available for sale, however unlikely such a sale now seems."

As Berkshire has grown over the decades to a $410 billion company, it has shifted its focus from stock picking to buying entire businesses. The conglomerate owns insurers, utilities, retailers and a railroad, among other companies.

The IBM sale adds to Berkshire's growing cash pile. Berkshire held $86 billion in cash by year-end, and Mr. Buffett told CNBC that it now holds about $90 billion.

--Ted Greenwald contributed to this article.

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

May 05, 2017 10:18 ET (14:18 GMT)