Dow Jones swaps Travelers, Cisco for Citigroup, GM
After General Motors Corp. entered Chapter 11 on Monday, Dow Jones & Co. announced the carmaker would be exiting the Dow Jones industrial average, giving way to Cisco Systems Inc., the top supplier of computer networking gear.
Some might have preferred to see the more-glamorous tech giants Google Inc. or Apple Inc. join the index. But the choice of Cisco at least shows that Dow Jones was on the same new-economy page -- and was listening to investors’ ideas.
In the blogosphere, speculation about a replacement for GM had been a hot topic for months. Google and Apple might have seemed to be likely candidates to join Hewlett-Packard Co., IBM Corp., Intel Corp. and Microsoft Corp. in the Dow’s tech subgroup, but both had one big strike against them: their high share prices.
Because the Dow is a price-weighted index, the costliest shares have the greatest effect on the Dow’s day-to-day movements. Google, at $426 a share, was just far too pricey to include, said John Prestbo, head of Dow Jones Indexes.
“We don’t want one company being outsized” in its influence, he said.
Even Apple, about $139 a share, would have been by far the highest-priced stock in the index. IBM is currently the costliest, at about $108. Cisco, which rose $1 to $19.50 on Monday, didn’t present a price issue.
As for the stock-replacement ideas circulating on the Web, Prestbo said Dow Jones took them seriously.
But the second new Dow stock announced Monday -- insurance giant Travelers Cos., which will replace the now partly government-owned Citigroup Inc. -- wasn’t high on a lot of lists. Many thought Goldman Sachs Group Inc. or Wells Fargo & Co. might replace Citi.
Prestbo, however, said Dow Jones wanted an insurer to make up for the loss of American International Group Inc., which was booted last fall after its government rescue.
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