UK Information Technology companies will be grouped together as a separate sector on the FTSE index today, but experts say the move could be damaging to some smaller organisations.
IT stocks will be given their own industry classification, which will also be broken into two sectors, software and computer services and hardware. Each of these will be made up of three subsectors each.
According to Anthony Millar, an analyst with the Richard Holway company, the FTSE has made a "real mess" over the way some companies have been categorised.
"There's a new Internet sub sector," he said. "This is totally premature and could be detrimental to some of the companies included."
For example, Millar explained that one company - Dialog - has been listed in this sector, but its Internet business only makes up around two to three per cent of its revenues. Dialog is believed to have lobbied hard to be included in the Internet sector however, in the hopes it will boost its share price.
Small software and services company Gresham Computing is also listed as an Internet company, despite also only making a small percentage of its revenue from the Internet.
"Suppose Dialog has a bad quarter," said Millar, "Investors will bail out and a lot of the companies in the sector, most of which are very small, will suffer as a consequence. It's unfair and unjustified."
He also added that reseller companies such as Computacenter, Morse and Computerland are listed by FTSE as services companies while Anite, Total and Science Systems, which are all service companies are listed as software product companies.
"FTSE had its heart in the right place when it did this, but there are too many anomalies. We'd like it fixed," Millar said, "My biggest criticism is that there was little or no consultation with the companies involved or the industry at large."
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