Wall Street and IT: Dow Jones Kicks HP to the Curb

Wall Street and IT: Dow Jones Kicks HP to the Curb

Perhaps the most significant news this past week got lost in all this other noise: The Dow Jones Industrial Average dumped Hewlett-Packard. And that's bad news for the IT industry.

This week in IT was all about Wall Street and business. Michael Dell was finally able to move forward to take his company private, Twitter tweeted it finally officially filed for an IPO with the Security and Exchange Commission, and Apple (AAPL) released the next versions of its iPhone to less-than-enthusiastic investor response.

All of these happenings are big and each certainly will have enormous impact on the technology industry and the channel. But perhaps the most significant news this past week got lost in all this other noise: The Dow Jones Industrial Average dumped Hewlett-Packard (HPQ). Whatever bloom was left is officially off the rose.

In a six-stock juggle, the Dow dropped its 3 lowest stocks—HP, Alcoa and Bank of America. They were replaced with Nike, Visa and Goldman Sachs Group. It was the biggest shakeup in the Dow in 20 years. The 30-stock group, which is managed by an index committee, said it was looking to diversify the group. Really? When I think of Nike, Goldman Sachs and Visa, diversity isn’t exactly the word that comes to mind.

Regardless, this is tremendous sign of the lack of confidence the investment community has in HP, and it’s no one’s fault but the company’s board of directors. HP was a Dow mainstay for the past 15 years.

Now, I’ve read many financial experts who've said the Dow giving HP das boot isn’t that much of a big deal. But I disagree. It is significant and for many reasons. Being part of the technology industry for the past 20 years, I’ve seen my share of flash in the pans, hyped IPOs and unsustainable business models that investors fell in love with, albeit for a short time. Anyone remember RazorFish's modus operandi?

Companies such as HP, Intel (INTC), IBM (IBM), Motorola and then Microsoft (MSFT) and Oracle (ORCL) added legitimacy to the industry. It showed the world that these are real businesses, and the days of operating out of a garage were way in the past.

Being part of the select Dow stocks carries cachè. It is like a Nasdaq stock moving up to the New York Stock Exchange. There’s legitimacy, confidence and recognition associated with it. Any Dow-listed company is more likely to be part of investment portfolios and therefore more upside value opportunity and more trading volume. Not surprisingly, HP’s stock dipped further after the news, but it doesn’t have much more room to drop since it’s already in the low $20 a share range.

This move by the Dow comes less than a month after HP announced an executive reorg devised to “accelerate its turnaround,” in the company’s own words. Bill Veghte, HP's chief operating officer, is now executive vice president and general manager of the HP Enterprise Group and its cloud solutions. HP created a new role for Dave Donatelli who will focus on identifying early-stage technologies. Plus, the company combined its Marketing and Communications organizations under Chief Communications Officer Henry Gomez.


The Dow just showed its reaction to these moves and obviously it is not good.

Knock 'em alive!

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