Apple ousts AT&T to make Dow Jones’ 30-firm index
07 Mar 2015
Apple Inc, the technology powerhouse and creator of the IPhone and IPad, will join the prestigious Dow Jones industrial average as of 19 March. It will replace telecom firm AT&T, which had been part of the iconic index since 1916.
Thea long-anticipated change adds a global branding phenomenon and technology-industry standard-bearer to the 119-year-old blue-chip index. The change in the Dow is considered sensible by analysts.
The Dow still has telecom representation with Verizon Communications, and Apple is the current top dog – it is already the most highly-valued company in the world, not to mention one of the most culturally cool and technologically 'sexy'.
In the first reshuffling among the Dow's 30 companies since 2013, AT&T was removed because the Dow was too telecom-heavy.
"This is reflective of the times," an analyst with Gartner said after the news was announced on Friday. "The tech sector is clearly driving the bulk of the activity in the American economy right now, so Apple joining the Dow makes sense because it reflects what's going on in the country."
Created at the turn of the last century by journalist and entrepreneur Charles Dow, the nation's oldest US stock average originally served as a reliable snapshot of the American economy, tracking the financial health of 30 large publicly traded companies. For that reason, the Dow offered a comforting familiarity for small investors, even while professional money managers have generally favoured the much larger and more representative S&P 500 for guidance.
Apple's entrance, combined with AT&T's exit, reflects not only the iPhone maker's dominant position in the US economy, but speaks volumes about how communications and technology have evolved over the past several decades.
While Apple's inclusion in the index is hardly an earthshaking development for most Americans, "this is good news for the Dow, which doesn't have a history of keeping up with the times particularly well", another analyst said.
But several of those commenting on the news have pointed out the irony of the Dow adding giants of yesteryear like Microsoft and Santa Clara-based Intel, only to have them later retreat from their heights; some have even wondered if Apple's inclusion in the Dow might now jinx its recent success, and the Dow's steep drop Friday suddenly seemed downright eerie.
Analysts say that even with the addition of the Cupertino powerhouse, which in January reported the largest quarterly profit on record, the change is unlikely to trigger a dramatic shift in American investments, largely because there's far less money tracking the Dow than the S&P 500.
The shift in Dow components was partly due to a need to rejig the index for a pending 4-for-1 stock split by Visa. Unlike other major indexes, which have hundreds of component companies and are weighted by each company's market value, the Dow has just 30 members and is price-weighted. The stock-split by Visa, classified as an information-technology firm, would have sharply reduced the index's technology weighting if it weren't for adding Apple.
Apple, whose shares closed Friday relatively flat at $126.60, is by no means the only tech firm on Dow, which in addition to Intel and Microsoft also includes San Jose-based Cisco Systems and IBM.
Palo Alto giant Hewlett-Packard was dropped from the index in its last change, a six-company shake-up in 2013 that included Visa's addition to the list.
