Nasdaq-100 Index ditches dot-com shares

In its annual shuffling of the Nasdaq-100 Index, the stock exchange traded in 13 Internet-related companies for a more diversified mix of companies, many of which are of the health or biotech species. The Nasdaq-100 consists of the top companies on the index in terms of market capitalization.

The 13 companies booted from the index are Ariba, BroadVision, CMGI, CNET Networks (publisher of News.com), 3Com, Inktomi, Level 3 Communications, McLeodUSA, Metromedia Fiber Network, Novell, Palm, Parametric Technology and RealNetworks.

The moves reflect the rough year gone by for dot-com, telecommunications and business-to-business stocks.

The Nasdaq announces its new lineup in December each year. The changes will be effective come market open Dec. 24.

Of the 13 companies added to the list, eight were in the category of medicine or the life sciences: ImClone Systems, Sepracor, Invitrogen, Express Scripts, Cephalon, ICOS, Cytyc and Protein Design Labs.

The other five were tech companies: Charter Communications, CDW Computer Centers, Symantec, Integrated Device Technology and Synopsys.

"Unlike other major financial indices, the Nasdaq-100 is not a beauty contest," said John L. Jacobs, president and chief executive officer of Nasdaq Financial Products Services. "Companies once dropped from the index may rejoin it if their performance warrants," he added. Synopsys and Symantec are both rejoining the index.

The Nasdaq-100 Index has outperformed every other major stock index in the United States for the 10-year period beginning December 1991. Shares in the select 100 trade as part of the Nasdaq-100 Index Tracking Stock, the most actively exchange-traded fund, which goes by the ticker "QQQ" on the American Stock Exchange.

Although the Nasdaq-100 selection process shows what's in on Wall Street, it doesn't necessarily spark big stock price fluctuations, analysts said.

The companies that get added "tend to post moderate gains," said Friedman, Billings, Ramsey analyst David Hilal. The companies that get kicked off the index have gone down only an average of 1.5 percent on the day of the re-ranking announcement and the day of removal since 1999, according to Hilal.

"It's essentially a 'some go up, some go down' scenario," said Hilal in a research note about the removal of Ariba and Broadvision from the Nasdaq 100. Though their departure may result in reduced trading volume, "this does not necessarily mean negative pressure will fall on Ariba or Broadvision," he said.