HP to be dropped from Dow: report

Alcoa, Hewlett Packard and Bank of America will be dropped from the Dow Jones Industrial Average. Goldman Sachs, Visa and Nike will replace them.
Written by Andrew Nusca, Contributor
HP's stock has underperformed the broader Dow Jones Industrial Average in recent years, putting it at risk. (Chart courtesy Google)

Aluminum producer Alcoa, tech stalwart Hewlett Packard and Bank of America will be dropped from the Dow Jones Industrial Average, according to an Associated Press news alert published this morning.

In their place, investment banking firm Goldman Sachs, global payments provider Visa and athletic apparel maker Nike will be added. The changes will take affect after the close of trading on Friday, September 20.

The Dow Jones Industrial Average is a major U.S. stock market index and among the most closely watched benchmark indices in the country. It aims to properly represent the major areas of the U.S. economy at a given moment in time, and debuted in 1896 with just 12 companies spanning cotton, sugar, oil, tobacco, gas, leather and other interests.

Over the years, technology companies such as AT&T (telecom), Cisco Systems (networking), General Electric (industry), HP (computing), Intel (processors), IBM (information services), Microsoft (computing) and Verizon (telecom) made their way onto the list.

The decision by S&P Dow Jones Indices LLC, the company that oversees the index, to drop Palo Alto, Calif.-based HP demonstrates the company's recent and relative weakness.

Indeed, the changes "were prompted by the low stock price of the three companies slated for removal and the Index Committee's desire to diversify the sector and industry group representation of the index," according to an official statement made available shortly after the news hit the wire.

Though HP's stock price has doubled since this time a year ago, to $22.36, it has underperformed the broader stock market, putting it at risk to be dropped. The company appointed former eBay chief executive Meg Whitman as president and CEO in Sept. 2011.

The last time S&P Dow Jones made such a sweeping change to the index was in 2004, when it replaced AT&T, Eastman Kodak and International Paper with AIG, Pfizer and Verizon. In June 2009, in the depths of a global recession, the company replaced General Motors with Cisco.

S&P Dow Jones said the moves won't have any effect on the level of the index, which closed yesterday evening at 15,063.12.

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