The Dow Upgrades Itself, and the Smartphone Era Begins

On this day in economic and business history ...

Technology and pharmaceuticals gained a permanent foothold in the Dow Jones Industrial Average (DJINDICES: ^DJI  ) on June 29, 1979. The index added IBM (NYSE: IBM  ) and Merck (NYSE: MRK  ) that day, replacing floundering automaker Chrysler and food-products company Esmark for only its second component swap in the previous 20 years -- still the slowest rate of changes in Dow history.

The addition of IBM was actually the start of its second Dow membership period, as it had been a component from 1932 to 1939. However, IBM's 1979 addition marked the first time that a specialized digital technology company held a place on the Dow -- IBM was not a computer maker (no one was) in the '30s, and neither longtime components AT&T nor General Electric had dedicated mainframe computer divisions, although both tried to enter the market. Merck's addition marked the first time any drugmaker had ever been a part of America's most-watched market index. It has since been joined by two other drugmakers, and one health insurer.

IBM's exclusion had been previously justified on account of the outsized effect its triple-digit share prices might have on the price-weighted index, but the computer maker enacted a 4-for-1 split earlier in 1979. The Dow missed out on some rather staggering gains during the years it excluded IBM, as the company's 22,000% gain over those four decades would have doubled the Dow's real value by 1979. The tech beachhead IBM opened on the Dow has since been stormed by four other technology stocks.

Building a leader
Home Depot (NYSE: HD  ) was founded on June 29, 1978. A year later, the ambitious young retailer opened its first two superstores. Within six years, Home Depot was a public company, and its trajectory continued to rise to the present day. To read more about Home Depot's history, click the link earlier in this paragraph.

The new computing craze
Apple's (NASDAQ: AAPL  ) flagship device finally reached consumers' hands on June 29, 2007, six months after Steve Jobs introduced it to the world. Crowds pressed up against the doors of Apple retail stores across the United States, rabidly awaiting the opportunity to own one of the first iPhones. The $599 smartphone sold briskly on its first day, and within two days, more than 270,000 people went home with new iPhones.

Despite the early hype, there were plenty of critics. Microsoft CEO Steve Ballmer burst out laughing when asked about the device's market potential, calling it "the most expensive phone in the world." Bloomberg writer Matthew Lynn also knocked the "luxury bauble," and other tech writers heaped scorn on the iPhone's unusual configuration in a phone era dominated by glorified PDAs with articulated keyboards. No one can criticize Apple now. Even if you don't like the iPhone, you can't argue with an industry-leading 320 million-plus unit sales across all models, accomplished in just the first six years since its introduction.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.


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