Value Investor Seth Klarman’s New Moves: American International Group Inc (AIG), Microsoft Corporation (MSFT)

Acquiring Sun Microsystems propelled Oracle to the forefront with respect to database software. But the full integration has taken longer than expected, and it could take a number of years before Sun starts providing EPS growth. The integration will likely continue to require a large portion of working capital, and also pull Oracle away from its core software-only business model.

Oracle is also seeing pressure in its general hardware business, with revenues down 18% year over year for the first half of fiscal 2013. Part of its troubles in hardware also stem from the fact that competition is robust in the market, with Oracle now competing with the likes of IBM and HP, who are looking to expand beyond their own troubled industries.

News Corp (NASDAQ:NWSA), another Klarman selloff, appears to be in “fair value” range, trading at 18 times earnings, in line with its major media peers. Management has also revised 2013 operating income projections, lowering expected growth from the low double digits to mid-single digits, on the back of lower than expected performance from SKY Italia and Fox. SKY had a second quarter fiscal 2013 operating loss of $20 million, compared to the $6 million from the same quarter last year.

Despite the impending spin off of its publishing unit, there will still be fundamental issues to address that involve a downtrend in advertising spending, which is the company’s main revenue stream. The fundamental shift from advertising dollars being spent on print and TV to internet is expected to continue, another key headwind for the company.

Don’t be fooled

Seth Klarman is an impressive value investor, and it appears his big theme for this year is that major tech companies will continue to struggle as PC demand declines further. Although I can agree with the Oracle and HP sell offs, I still believe there is value to be had in investing in Microsoft Corporation (NASDAQ:MSFT). Also, Klarman dumped News Corp, a good decision, and he invested heavily in American International Group Inc (NYSE:AIG). The insurer should prove to continue its growth as it refocuses on core insurance operations.

The article Value Investor Seth Klarman’s New Moves originally appeared on Fool.com and is written by Marshall Hargrave.

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