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Dow Dumps 3 Venerable Firms

Three longtime components of the Dow Jones industrial average — AT&T Corp., International Paper and Eastman Kodak — will be removed from the index of the top 30 industrial stocks, Dow Jones & Co. announced Thursday.

They will be replaced by financial services company American International Group Inc., Baby Bell Verizon Communications and pharmaceuticals maker Pfizer Inc. The change will take place at the start of trading April 8.

"Our main focus in this particular group of changes was not who do we kick out or replace. It was to recognize the trend of the growth of the financial or healthcare sectors," said John Prestbo, editor of Dow Jones Indexes and markets editor of The Wall Street Journal. "When it came to selecting companies to leave the Dow to make room for the new ones, we took recognition of another trend, and that is basic materials stocks have become less important, less weighty in the market."

Although composed of just 30 companies, Prestbo defended the Dow Jones industrial index as an accurate barometer of the markets, noting that it has closely tracked with the much broader Standard & Poor's 500, which sees far more use among financial and equities analysts.

"It's simply the best known stock index in the world,'' he said. ``People who talk about the market in terms of what's happening today, or over the past five years or whatever, speak the language of the Dow.''

The Journal's top editors evaluate and select the components of the Dow, with the goal of creating an accurate reflection of the current market.

Verizon joins another Baby Bell, SBC Communications Inc., which was added to the index in 1999. It also replaces its former parent, AT&T, which had been a consistent Dow component since 1939. International Paper had been included in the index since 1956, while Kodak had been part of the Dow since 1930.

Kodak spokesman Gerard Meuchner downplayed the company's removal from the Dow, even though the struggling film and imaging company has been one of the index's worst-performing stocks.

"Membership in any index has no bearing on our ability to manage the company for profitable growth," Meuchner said.

AT&T Corp. released a statement saying that while the company and the telecommunications industry have suffered from soft demand in recent years, the company remains "a bellwether of the U.S. economy." The statement did not directly address the company's removal from the Dow.

International Paper did not immediately return calls seeking comment.

The 30-stock index last changed on Nov. 1, 1999, when four of the 30 stocks were replaced. At that time, two Nasdaq-traded stocks, Microsoft Corp. and Intel Corp., became the first Dow components not listed with the New York Stock Exchange.

The Dow Jones industrial average was created by Charles H. Dow as a 12-stock index in 1896 and has become the primary barometer of the U.S. stock markets.