H-P's (HPQ) Dow 30 Listing is in Jeopardy With Shake-Up
Tweet
Share
E-mail
Get Alerts HPQ Hot Sheet
Join SI Premium – FREE
With news that Hewlett-Packard (NYSE: HPQ) is evaluating options for its Personal Systems Group, which contributes 32 percent of revenue and 30 percent of profit, the stock's Dow Jones Industrial Average listing could be in serious jeopardy.
Officials from Dow Jones Indexes, the company responsible for the make-up of the world's most watched index, told StreetInsider.com that a change of a company's structure in a major way could in fact be a reason for removal. However, officials said it's still too early to evaluate H-P's inclusion in the index.
"Should a company change the composition of its lines of business in a substantial way, it will be reevaluated in terms of how well it represents its particular industry,” said John Prestbo, Editor and Executive Director of Dow Jones Indexes. “In the Dow's history there have been component companies that changed their stripes and subsequently were removed," he continued.
With H-P’s move to exit PCs and push into software, it appears H-P is trying to emulate IBM (NYSE: IBM) which is already a Dow 30 component. In addition, software giant Microsoft (Nasdaq: MSFT) is also a Dow component. With IBM, Microsoft and a transformed H-P all in the Dow, it could easily be argued that software is over-represented in the average and one should be removed.
H-P’s stock performance is also a black eye. The stock is the second worst performing Dow component this year at a negative 44 percent. Only Bank of America (NYSE: BAC) is worst at 47 percent. HP's market cap is also in the lower echelon of Dow components at $49 billion.
So the question now turns to who would replace HP in the Dow 30 if it were to be removed? There may be no better company to replace HP in the Dow than Apple (Nasdaq: AAPL), the hands-down leader in computing, mobile and everything else it touches.
While Apple clearly should make its debut in the Dow 30, Dow Jones Indexes officials aren't talking. "As to which company might be a replacement in such a situation, we will undertake that consideration when and if the time comes," Prestbo told us.
Officials from Dow Jones Indexes, the company responsible for the make-up of the world's most watched index, told StreetInsider.com that a change of a company's structure in a major way could in fact be a reason for removal. However, officials said it's still too early to evaluate H-P's inclusion in the index.
"Should a company change the composition of its lines of business in a substantial way, it will be reevaluated in terms of how well it represents its particular industry,” said John Prestbo, Editor and Executive Director of Dow Jones Indexes. “In the Dow's history there have been component companies that changed their stripes and subsequently were removed," he continued.
With H-P’s move to exit PCs and push into software, it appears H-P is trying to emulate IBM (NYSE: IBM) which is already a Dow 30 component. In addition, software giant Microsoft (Nasdaq: MSFT) is also a Dow component. With IBM, Microsoft and a transformed H-P all in the Dow, it could easily be argued that software is over-represented in the average and one should be removed.
H-P’s stock performance is also a black eye. The stock is the second worst performing Dow component this year at a negative 44 percent. Only Bank of America (NYSE: BAC) is worst at 47 percent. HP's market cap is also in the lower echelon of Dow components at $49 billion.
So the question now turns to who would replace HP in the Dow 30 if it were to be removed? There may be no better company to replace HP in the Dow than Apple (Nasdaq: AAPL), the hands-down leader in computing, mobile and everything else it touches.
While Apple clearly should make its debut in the Dow 30, Dow Jones Indexes officials aren't talking. "As to which company might be a replacement in such a situation, we will undertake that consideration when and if the time comes," Prestbo told us.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- BofA Securities Starts Mobility Global (MBGL) at Neutral
- Royal Caribbean completes $1.25B senior unsecured notes offering
- BofA says momentum style supported by earnings revisions
Create E-mail Alert Related Categories
Corporate News, Insiders' Blog, Rumors, Trader TalkSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
