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May 5, 2017

IBM loses confidence of biggest investor as Warren Buffet sells stock

Will IBM be able to hold its ground against the fierce competition?

By Tom Ball

Investor Warren Buffet seems to have lost confidence in tech giant IBM, with his company Berkshire Hathaway selling off a third of its massive stake in Big Blue.

IBM’s focus on IT services and equipment that target companies seeking to run internal IT facilities has proven damaging for the company amid the rise of cloud computing. This new direction has led to the decline of IBM’s core business.

Speaking with CNBC, Mr Buffet said: “IBM is a big strong company, but they’ve got big strong competitors too.”

The pressure on IBM is being increased by competitors such as AWS, Google and Microsoft that are currently digging deep into the cloud.

“I don’t value IBM the same way that I did six years ago when I started buying. . . I’ve revalued it somewhat downward,” he said.

Berkshire Hathway has been the largest IBM shareholder, making clear the once great confidence Warren Buffet had in the company. Over the course of some years, 81 million shares were amassed, equating to a $13.5 billion stake in the business.

It could be argued that the continued show of confidence from the Berkshire Hathaway investment has sustained confidence levels in IBM more widely, until now.

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While the shift in technology toward cloud computing has been a considerable factor in the difficulties faced by IBM, it has also failed to energise its own ventures into cloud, artificial intelligence and data analytics. Slow progress with Watson has been a contributing factor for example.

READ MORE: Where’s the silver lining for IBM? Cloud & Watson fail to fend off dwindling revenue

IBM have made efforts to enter the cloud space, announcing earlier this intentions to sell quantum cloud computing to the masses, aiming to tackle the problems faced by traditional computers,  such as invisible data patterns. It would appear that this has not been enough to maintain full support.

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