Apple Inc. (AAPL)’s weighting in the Nasdaq-100 Index was cut as the technology-heavy equity gauge had its first major reshuffle since 1998 to better reflect companies’ market value. The maker of the iPhone fell in pre- market trading.
Apple’s representation will be reduced to 12.33 percent of the index on May 2, from 20.49 percent, Nasdaq OMX Group Inc. (NDAQ) said in a slide show on its website today, after previous rules caused its proportion in the gauge to grow disproportionately. The weightings of Microsoft Corp. (MSFT) and Cisco Systems Inc. (CSCO) will more than double.
Apple’s weighting in the Nasdaq gauge is currently more than six times that of the second-biggest constituent, Redmond, Washington-based Microsoft, while its market value is only 46 percent bigger, according to data compiled by Bloomberg. Rules that adjusted members relative to their respective position in the index caused stocks to move out “of alignment in relation to their actual market capitalizations,” the presentation said.
“This would probably affect international funds, given that Apple is such a big company globally,” said Tim Schroeders, a Melbourne-based money manager at Pengana Capital Ltd., which manages about $1 billion. “Passive funds in particular will be forced to re-weight into those stocks that have had increases in weightings, and in the short term we will see some selling pressure on Apple.”
Apple, which is based in Cupertino, California, dropped 3.1 percent to $330.50 at 6:37 a.m. in pre-market New York trading. Futures on the Nasdaq-100 expiring in June slid 0.8 percent.
Apple has become the world’s most valuable technology company as consumers snap up gadgets including the iPhone and the iPad tablet computer. While analysts estimate the company can keep posting sales growth of more than 50 percent in the next two years, founder Steve Jobs’s medical leave since January as he battles a rare form of cancer has raised concern future products may lack the edge of previous offers.
The market capitalization of Apple has jumped to $332 billion from $2.1 billion in 1998, according to Bloomberg data. Alan Hely, a spokesman for Apple in London, declined to comment when contacted by Bloomberg News today.
The changes will make the Nasdaq-100 a more attractive measure of U.S. equities, according to Jacques Porta, who helps oversee about $400 million in stocks at Ofi Patrimoine in Paris.
“It’s no good to have your fund benchmarked to an index where so much is concentrated” in one stock, he said. “You cannot manage risk if there is no diversification, especially if volatility increases.”
The weighting for Microsoft, which has a market value of $214.7 billion, will be increased to 8.32 percent, the Nasdaq slides showed. Cisco, the San Jose, California-based supplier of data networking products, will be boosted to 3.66 percent from 1.56 percent.
Microsoft shares climbed 2.3 percent to $26.15 in early New York trading. Cisco advanced 1.1 percent to $17.24.
Oracle Corp. (ORCL)’s representation in the Nasdaq-100 will be lifted to 6.68 percent from 3.32 percent, while Intel Corp. (INTC) will be raised to 4.2 percent from 1.75 percent, the presentation said. Intel gained 0.7 percent to $19.63 in pre-market trading while Oracle and was little changed in Europe.
In total, 82 of the 100 index securities will drop in weight, the presentation said.