Apple to join Dow blue-chip index, replacing AT&T

IPhone and iPad maker Apple is already the world's largest listed company. Now it will be part of America's oldest and most storied equity index.

The California tech giant will be added to the elite blue-chip Dow Jones Industrial Average on March 19, replacing venerable telecom company AT&T, the index announced Friday.

With a market capitalization of $730 billion, more than $300 billion above number-two company Google and four times that of AT&T, Apple was a natural fit for the 30-member Dow, S&P Dow Jones Indices said.

They said Apple would ensure adequate representation for the information-technology sector on the Dow, which for decades served as a guideline for conservative, value-focused investors and an indicator of the health of US industry.

"As the largest corporation in the world and a leader in technology, Apple is the clear choice for the Dow Jones Industrial Average, the most recognized stock market measure," said David Blitzer, managing director of the index committee at S&P Dow Jones Indices.

The index dropped AT&T after concluding the Dow was "over-weighted" in telecommunications, Blitzer said.

The addition of Apple marks another key landmark in the evolution of the 119-year-old Dow and the latest confirmation of the company as an enduring power in the US corporate landscape.

Originally consisting of General Electric and 11 other "smokestack" companies, the Dow index has progressively diversified to include other sectors, such as retail and telecommunications.

Over the years, the comings and goings of the index have marked the shifting fates of companies and the economy.

The first of the modern technology companies to join was International Business Machines, or IBM, in 1932. The index added Microsoft and Intel in 1999 and Oracle in 2009.

AT&T, whose history dates back to the invention of the telephone itself by Alexander Graham Bell, first joined the Dow index in 1939 as American Telephone & Telegraph.

AT&T was run as a monopoly for years before being broken up by Justice Department antitrust regulators in the early 1980s, but has survived on the Dow under various guises through today.

- Little real impact -

Art Hogan, chief market strategist at Wunderlich Securities, said there is little "functional" impact by adding Apple because few investment funds are based on the Dow compared with other leading indexes.

When companies are added to or removed from the S&P 500 or the Russell 2000 small-cap index, significant share volumes trade hands because many index funds are based off of those indices, Hogan said.

But adding Apple makes the most recognized stock index more reflective of the real economy, Hogan said.

"To a majority of people who don't do this for a living, the Dow is the market," he said.

Apple's history dates to 1976 when Steve Jobs, a college dropout, working with two friends, launched a personal computing business from Los Altos, California.

The company soared in the 1980s and early 1990s with the Macintosh, which offered consumers pictures and graphics to make word-processing and other key computer functions easy to use.

After a rough patch following Jobs' departure in 1985, Apple hit its stride again in the late 1990s and has been riding the momentum of a string of hit consumer electronic products like the iPod, the iMac computer and the iPhone ever since.

Jobs died in 2011 and was replaced by Tim Cook as chief executive.

After facing initial skepticism, Cook has won plaudits for successful efforts to build up the iPhone business in China and for marshalling new gadgets that have kept consumers happy and competitors on their toes.

Apple is expected to launch the Apple Watch, a "smartwatch", on Monday in San Francisco.

In afternoon trade, Apple shares rose 0.4 percent to $126.89, while AT&T fell 1.5 percent to $33.51.

The Dow itself was down 1.43 percent to 17,876.43, pressed by rising expectations of higher interest rates.

That left it 2.3 percent below the all-time record for the benchmark set on March 2.