AT&T; BREAKUP II : Does This Mean It’ll Be the Dow 32?

Among the sanctified roles AT&T; Corp. plays is that of component of the Dow Jones industrial average, in which it is the sole representative of the communications industry.

The plan to break up the company threatens to make the Dow 30 the Dow 32.

If the disaggregation of AT&T; is treated as any old spinoff and initial offering of two subsidiaries, the stewards of the Dow average--the editors of the Wall Street Journal--will be on familiar ground.

The Dow has generally accommodated spinoffs by changing the divisor used to calculate the value of the index. When stock is distributed in a spinoff, the divisor is changed to account for the reduced market value of the component company.

But if AT&T;’s divisor is lowered, it may give ammunition to critics who argue that the Dow doesn’t accurately reflect today’s economy. It would mean that, as the communications sector expands to become an ever more prominent part of the nation’s economy and daily life, it would shrink as a portion of the stock market’s most widely watched benchmark, generally in favor of old-line heavy-industrial companies.