Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: Apple | Dow Jones | AT&T | index

Apple to Replace AT&T in Dow Jones Industrial Average

Apple to Replace AT&T in Dow Jones Industrial Average
(Marek Szandurski/Dreamstime.com)

Friday, 06 March 2015 09:34 AM EST

Apple Inc., the largest U.S. company by market value, will join the storied Dow Jones industrial average, replacing AT&T Inc., in a change that reflects the dominant position of iPhone maker in the U.S. economy and society.

The decision to nudge aside AT&T, which has been part of the Dow for the better part of a century, is a recognition of the way in which communications and technology have evolved over the last several decades.

"This is a sign of the times, and it might get everyone to look at the Dow more than they have been," said Richard Sichel, who oversees $2 billion as chief investment officer at Philadelphia Trust Co.

"It would be difficult to pick any 30 companies that would cover the entire economy, especially compared with the S&P 500, but it does give the Dow more credibility."

The action, by S&P Dow Jones Indices, had been widely expected since Apple split its shares seven-for-one in June 2014.

After the split, many investors felt it was only a matter of time before the iPad maker would be added to the 30-stock average, since its high stock price had previously made it unsuitable for the price-weighted index.

The Dow industrials is the oldest U.S. stock average, first been published in 1896. Its compact size — just 30 names — and its mission to reflect the U.S. economy mean it has a familiarity for retail investors that other indexes that cover a greater portion of the market's value do not.

Even though professional managers generally benchmark against the S&P 500, additions and removals from the Dow are still seen as a big event. It was last altered in September 2013 when Goldman Sachs Group Inc., Visa Inc. and Nike Inc. were added.

Apple, which has a market capitalization of $736 billion, didn't respond to requests for comment.

AT&T declined to comment on its removal from the average. The company, which has a market value of $176.5 billion, has spent most of the last 100 years in the Dow. Its deletion from the index leaves Verizon as the sole telecommunications company in the average.

AT&T was added in 1916, the year after the first-ever transcontinental telephone call. It was removed in 2004. After SBC Communications renamed itself AT&T following a 2005 merger, it was reinstated.

"It was a new way of life: telephones, back then 100 years ago, these talking machines," said Howard Silverblatt, chief index analyst at S&P Dow Jones Indices.

In a twist of fate, Apple owes some of its success to its partnership with AT&T over the iPhone, the device that propelled Apple's dominance. The iPhone first hit the market in 2007 with AT&T as its exclusive carrier, a deal that continued for more than three years.

Since the iPhone's introduction, Apple's annual revenue has risen more than sevenfold, from $24.6 billion in 2007 to $182.8 billion most recently. AT&T has not seen the same kind of growth - revenue in 2014 was $132.4 billion, up 11 percent from $118.9 billion in 2007.

"There's irony in that they are replacing AT&T, which helped them lift off to begin with," said Neil Azous, founder of Stamford, Connecticut-based advisory firm Rareview Macro.

Despite Apple's size, it would as of Thursday's close only have a 4.66 percent weighting in the Dow because of its price, the index company said in a statement. Apple will join the average after the close of trading on March 18.

Shares of Apple rose 1.3 percent to $128.07 on Friday, while those of AT&T fell 1.6 percent to $33.43.

Had Apple had replaced any one of the 30 Dow components except Visa after its June 2014 split, a Reuters analysis recently showed, the index would have been higher. Visa is the only Dow component that would have helped the Dow more during that time, in part because of its high stock price.

Kevin Landis, chief investment officer of Firsthand Capital Management, a Silicon Valley-based technology-investing specialist with $300 million in assets under management, said he hopes that this is not a sign that Apple is past its prime.

"The Dow Jones is such a backwards-looking list, I cringed when Intel and Microsoft were added," Landis said. "I'm cringing today. Let's hope Apple can defy the forces of history."

Intel and Microsoft joined the average in November 1999, and their performance was weak for years following.

© 2023 Thomson/Reuters. All rights reserved.

Apple Inc., the nation's largest company by market value, will join the Dow Jones Industrial Average on March 18, replacing AT&T Inc., S&P Dow Jones Indices said.
Apple, Dow Jones, AT&T, index
Friday, 06 March 2015 09:34 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved