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International Business Machines Corp. (IBM) Could Be Warren Buffett’s Biggest Mistake

Billionaire investor Warren Buffett lashed out at investors who have remained strong critics of International Business Machines Corp. (NYSE:IBM) by reiterating the company remains a key part of his investments despite grappling with huge disappointment in the recent past. During an interview with CNBC, Duquesne Capital Management, Stanley Druckenmiller, reiterated that Buffett might have gotten it wrong this time around especially if ongoing problems turn out to be secular and not cyclical.


Buffett reiterated his belief on International Business Machines Corp. (NYSE:IBM) business model despite the ongoing challenges on declining sales that continue to be a point of concern to the Street. His belief in the stock has already seen him increase stakes in the company to about 77 million shares something that Druckenmiller believes might come to haunt him, should the problems persist.

“Mr. Buffett and I have a different opinion on International Business Machines Corp. (NYSE:IBM). I certainly respect his opinion but I have my own. My guess is looking at the situation; he thinks IBM problem is cyclical. I think it is secular and if you think a company has a secular problem particularly with sales being lower than where they were six years ago when the economy was much worse. The last thing I should be doing is buying back stock,” said Mr. Druckenmiller.

IBM could come out of its woes according to Druckenmiller only if its problems turn out to be cyclical and not secular, in the long-term. Buffett on his part maintains International Business Machines Corp. (NYSE:IBM) has been doing exactly what they wanted, right from the start when they bought stakes. A surprising notion as revenues has been on a declining path at the back of persistent foreign exchange effects.

A decline in share price for International Business Machines Corp. (NYSE:IBM) is also not of concern for Buffett at the moment even as declining revenues continue to be a point of concern to a number of shareholders. A decline in share value has on the other hand allowed the company to reduce a substantial amount of its shares from the market.

International Business Machines Corp. (NYSE:IBM) could on the other hand find its footing in the market if it can pull an impressive transition to becoming a social mobile, cloud and data analytics company seen as notable areas that should guarantee growth going forward.

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