IBM's earnings-forecast sinks Berkshire’s investment by $1 bn

Warren Buffett's investments were eroded after IBM made a surprise announcement yesterday that it was abandoning its 2015 earnings forecast, Omaha World Herald reported.

The announcement led to a fall in the value of IBM's stock, wiping out the billionaire investor's paper profit on the holding. Buffet first acquired a stake in the company three years ago spending $10.7 billion and had later bought more (See: Buffett invests $10.7 billion in IBM, builds 5.5-per cent stake).

According to Cliff Gallant, an analyst at Nomura Holdings Inc, Buffett usually tried to give himself a big margin of error. He added, Buffet must have believed that he was buying at a price where there was room for disappointment.

IBM had struggled to transform its business fast enough as more customers sought to store data and software on cloud-computing networks, rather than on site, which hit the demand for IBM's mainframes and servers.

Meanwhile, Buffett would lose over $1 billion on IBM shares, after the technology company posted disappointing third-quarter results and said it would transfer its semiconductor operations to Globalfoundries Inc (IBM to pay Globalfoundries $1.5 bn to take over its chip unit).

Buffett's Berkshire Hathaway is IBM's largest shareholder, with 70,173,978 shares as of the latest regulator filings, according FactSet said. With IBM's stock down $15.05, or 8.3 per cent, in pre-market trade, works out to a loss of $1,056,118,369 for Buffett. The company shares declined 0.1 per cent ahead of the open.