Berkshire Hathaway acquires 11.4% stake in HP • The Register

Warren Buffett’s Berkshire Hathaway has taken a double-digit stake in HP Inc.’s PC and printing stock, worth about $4.2 billion, a move that sent a spike the company’s share price by 10%.

The purchase, confirmed in an SEC filing by the investment vehicle on April 6, saw about 121 million HP shares pass to the new owner in what can be seen as a vote of confidence in residual value. from HP. This equates to an approximate 11.4% stake in the company.

“Berkshire Hathaway is one of the world’s most respected investors and we welcome him as an investor in HP,” said the world’s largest printer and second-largest PC brand.

HP joins Berkshire Hathaway’s portfolio investments, including Apple – which makes up about 47% of the portfolio – Bank of America, Coca-Cola, American Express and Kraft Heinz.

The investor had amassed a stake in IBM, a process that began in early 2011, but in 2015 Berkshire Hathaway warned he would have taken a $2 billion bath had he cashed in on the stock at that time. that time.

Buffett took over Apple in 2016, began offloading IBM in 2017, and retired completely in 2018.

The billionaire, notoriously opposed to tech stocks in general, also dumped a $2.1 billion investment in Oracle in 2019 – just months after buying the shares. “I don’t think, especially after my experience with IBM, I don’t think I understand exactly where the cloud is going,” he said.

HP won’t pose the same challenges to Buffett, whose personal wealth (at $117 billion last month) makes him one of the richest people on the planet. HP is not yet existentially challenged by the cloud and is in the midst of a recovery plan that is starting to show results.

It was HP’s relative underperformance in the stock market that was exploited by Xerox and activist investor Carl Icahn to aggressively pursue HP investors, offering up to $36.5 billion to buy the company in order to to create a giant in commercial printing, copiers and PCs. This triggered HP CEO Enrique Lores’ turnaround strategy.

The pandemic killed the hostile takeover of Xerox – that was the excuse Xerox used. Since then, HP has worked to simplify its operating model, downsize and have benefited over the past two-plus years from the work-from-home revolution as governments imposed lockdowns on their citizens.

HP may not have had the same buying power as cloud giants, or even rival Dell, and so may have missed out on chip allocation during the tight supply situation. Nevertheless, the PC has become the center of everyone’s universe since March 2020. And HP’s printing business has also benefited.

In the fiscal year ended October 31, 2021, HP posted revenue of $63.5 billion, up 12.1%, and net income of $6.5 billion from $2 billion. dollars the previous year. A very different trajectory than IBM on when Buffett owned it. ®