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New York - Apple, the largest US company by market value, will join the Dow Jones industrial average, replacing AT&T, in a change that reflects the dominant position of the iPhone maker in the US consumer economy.
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 how communications and technology have evolved.
It's also a marker of Apple's transformation, from a struggling company with a small, fervent following two decades ago, into the nation's predominant consumer tech company.
"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 $2bn as chief investment officer at Philadelphia Trust. "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 of 2014.
Familiarity
AT&T declined to comment on its removal from the average, of which it has been a member for most of the last 100 years. The stock was added to the Dow in 1916, the year after the first-ever transcontinental telephone call. It was removed in 2004, but 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, index analyst at S&P Dow Jones Indices. "Back then, AT&T was it, end of story."
After Apple's stock split, many investors felt it was only a matter of time before the company, whose high stock price had previously made it unsuitable for the price-weighted index, would join it.
The Dow industrials is the oldest US stock average, first published in 1896. Its compact size - just 30 names - and its mission to reflect the US economy means that many retail investors are more familiar with it than other indexes covering a broader cross-section of the market.
Even though professional managers generally benchmark against the S&P 500, additions and removals from the Dow are still a big event on Wall Street. It was last altered in September 2013 when Goldman Sachs Group, Visa and Nike were added.
Apple did not respond to requests for comment. The company has a market capitalisation of $737bn, making it twice the size of the second-largest Dow component, Exxon Mobil.
Shares of Apple rose 0.15% to $126.60 on Friday, while those of AT&T fell 1.5% to $33.48.
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 $24.6bn in 2007 to $182.8bn most recently. AT&T saw 11% revenue growth over the same period to $132.4bn in 2014.
"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.
