Why AT&T Inc. (NYSE:T)’s Removal From Dow Isn’t A Big Issue

Telecom giant AT&T Inc. (NYSE:T) is being replaced by Apple Inc. (NASDAQ:AAPL) at the Dow Jones Industrial Average, an index that features 30 companies. According to experts, the removal of AT&T from the index won’t make any significant difference to the company. Verizon Communications Inc (NYSE:VZ) has been retained in the Dow average as the only telecom industry representative there.

Do analyst foresee a double-top for T?

The reason nixing of AT&T Inc. (NYSE:T) from Dow is not likely to have any serious impact on the company is that most investors track S&P 500, because of its larger resource pool. Therefore, much is not expected to change in terms of investor confidence in AT&T following the Dow development. Additionally, analysts don’t expect adverse movement in the price of AT&T stock following its ejection from Dow.

Perfect balance

With AT&T and Verizon in Dow, the avearge seemed to have too high representation in the telecom industry. That also becomes clearer when you consider that the S&P, with 500 companies, telecom industry is only 2.3%. That means that Dow needed to let go of one telecom name to strike a perfect representation balance. However, it is unclear why Dow chose Verizon over AT&T for retention in the index.

The addition of Apple to Dow will bring the number of technology companies in the index to five. The other technology names in the oldest U.S. index include Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC), which joined the average in 1999. The performance of these two tech plummeted in the years that followed their inclusion in the Dow average.

Record performance

Apple joins Dow at a time when the company just emerged from a widely successful quarter. The company sold about 74.5 million iPhone units in the December and earned more than $18 billion in profits, a record quarterly figure for any publicly traded company.

Interesting development

The interesting development in the removal of AT&T Inc. (NYSE:T) to pave way for Apple is that AT&T contributed significantly to the current success of Apple. In 2007 when iPhones came to market, AT was the sole carrier of the smartphones in a deal that continued for over three years and brought in billions of revenue dollars to Apple.

AT&T Inc. (NYSE:T) is currently trading at $32.90 after losing 1.35%.

 

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David Barry

David Barry

Barry is a senior journalist at Us Markets Daily. He reports, shoots and edits many of his own stories by himself.