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Nati Harnik / AP

Billionaire investor Warren Buffett speaks in Omaha, Neb., Monday, Nov. 14, 2011.

By Martha C. White

Warren Buffett made waves when he revealed?Monday that he’s purchased some 64 million shares of IBM that give him a 5.5 percent stake in the company. “They’ve done an incredible job,” Buffett told CNBC, adding that he wished he’d started paying attention to the company five years ago.

Buffett isn’t a typical tech investor, but IBM’s not a typical tech company, either. Buffett’s $10.7 billion investment is as much a prediction about the economic recovery and the evolution of enterprise technology as it is a vote of confidence in the company itself.

“What I think he’s probably looking at is over 80 percent of total revenues and 90 percent of profits come from recurring revenue sources,” said Brian Marshall, senior managing director at ISI Group. He added that IBM does a good job redistributing this largesse back to shareholders in the form of dividends and stock buybacks. “In the most recent quarter, they returned $4.3 billion to shareholders,” Marshall said, pointing out that IBM’s 1.6 percent return is better than the current rate on seven-year U.S. Treasuries.

That’s impressive, but that’s not the only reason Buffett wanted to get his hands on the stock. He spoke in his CNBC interview about being impressed by the company’s road map for its future. Evercore Partners analyst Robert Cihra told CNBC on Monday that IBM is reaping the benefits today of its decision more than a decade ago to shift its focus from lower-margin businesses like hardware. Now, the $6 billion annually it spends on R&D targets solutions for businesses looking to?use technology to improve marketing and sales.

But Big Blue is bumping up against the limits of how big an old-school tech company can get. ISI’s Marshall called the size of IBM’s geographic footprint and its reach into emerging markets the company’s “secret sauce.” But he said?it will have a harder time generating big growth numbers in more mature markets like the U.S. “It’s only top-line single-digit growth recently,” he said.

Its edge is that IBM understands much better than other technology companies how computing is evolving and moving into spaces beyond its traditional IT-department turf, said R “Ray” Wang, principal analyst and CEO at Constellation Research. “We see IT department budgets dropping 5 percent yearly,” he said. “But more importantly, when we look at our spending data, tech spending is up 18 to 22 percent.”

Sales, marketing and other corporate operations are setting up cloud projects and investing in high-tech solutions for everything from integrating social media into interactive marketing to incorporating online and mobile sales channels into brick-and-mortar store inventory management.

Wang calls this movement the “consumerization of IT” and says it has big implications for IBM. He says events like IBM’s 2010 purchase of CoreMetrics are evidence that the company is leaving the server room and venturing into other departments.? “That’s what I think Buffett sees, is IBM is playing in both the business side of the house as well as the IT side of the house,” he said. By contrast, “Oracle and Microsoft have been focused just on IT.”

“They’re going after tough business problems,” Wang said. “They’re doing it at a higher level.”

Insight on why Warren Buffett, Berkshire Hathaway chairman/CEO has bought about $10.7 billion in IBM stock and 64 million shares of the company this year.

Source: http://bottomline.msnbc.msn.com/_news/2011/11/14/8801598-buffetts-big-blue-buy-is-a-bet-on-the-future-of-tech

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NEW YORK ? Compensation consulting firm Johnson Associates is forecasting a less generous bonus season for Wall Street this year.

The firm said Tuesday that its third-quarter compensation analysis shows year-end incentives, which can be cash or equity awards, will drop an average of 20 percent to 30 percent compared with 2010.

That means most Wall Street professionals will receive smaller bonuses.

“This year started with great promise for a banner year on Wall Street, but hopes for larger bonuses faded over the summer and continue to dim as we approach year end,” said Alan Johnson, managing director of Johnson Associates.

Bonuses last fell sharply in 2008, after the collapse of investment bank Lehman Brothers triggered the financial crisis. Incentives rebounded the past two years, however, as the market recovered.

But this year, the combination of the lack of an economic recovery, plus heightened regulation and uncertain markets has prompted most financial services firms to reduce the size of bonuses, Johnson said.

The firm anticipates fixed-income traders will see the biggest drop, with bonuses expected to fall up to 45 percent, while incentive pay for equities traders and senior management will drop up to 30 percent.

Johnson Associates also projects investment bankers’ bonuses will tumble 20 percent, while incentive payouts elsewhere in the financial services industry will be flat.

For 2012, Johnson expects parts of the financial services sector will post a modest recovery. Assuming there isn’t major economic weakness and a a large bank or nation doesn’t collapse, investment and commercial bankers could see bonuses jump 15 percent or more next year, Johnson said.

He also anticipates financial services firms will continue to cut staff in the U.S., while adding employees in emerging markets.

The firm’s analysis is based on monitoring the financial services industry, public data from eight of the nation’s largest investment and commercial banks, and 10 of the largest asset management firms.

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/ap/20111108/ap_on_bi_ge/us_wall_street_bonuses_outlook

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WEDNESDAY, Nov. 9 (HealthDay News) — Some older adults may turn to alcohol or cigarettes as a way to cope with financial stress, particularly men and people with less education, a new study suggests.

In the study, researchers surveyed 2,300 older Americans periodically between 1992 and 2006, and found that 16 percent reported growing financial strain over that time, 3 percent reported increases in heavy drinking (more than 30 drinks a month), and 1 percent said they’d started smoking more.

The youngest of the study participants were age 65 when the study began.

Older men who faced increasing financial stress were 30 percent more likely to become heavy drinkers than those who remained financially stable. This increased risk was similar for older adults with lower levels of education compared to those with more education.

Older women and seniors with higher levels of education tended to reduce their drinking when they encountered financial struggles, according to the study published in the November issue of the Journal of Studies on Alcohol and Drugs.

The findings don’t actually show that financial problems were the reason for changes in smoking and drinking habits, but it is known that some people use alcohol and tobacco as a way of coping with stress, noted lead researcher Benjamin A. Shaw of the State University of New York at Albany.

“When you have a stressor that’s not very controllable, people may focus on something to help control their emotional response to the stressor,” he said in a journal news release.

Financial woes may be particularly stressful for older adults, Shaw added.

“They are out of the workforce, and they might feel like they have less time to recover or generally have less control over their financial situation,” he explained.

More information

The American Psychological Association outlines ways to manage your stress in tough economic times.

Source: http://us.rd.yahoo.com/dailynews/rss/seniors/*http%3A//news.yahoo.com/s/hsn/20111110/hl_hsn/moneywoesmaydrivesomeseniorstosmokedrinkmore

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