S&P 500 changing of guard can be big boost for new firms

CHICAGO — Whether intentional or not, the decision makers at Standard & Poor’s bestow a certain relevancy on companies newly admitted to the S&P 500 — and send just the opposite message about companies that are ousted from the benchmark index.

Late Thursday, F5 Networks Inc., Netflix Inc. and Newfield Exploration Co. were named to the S&P 500, effective Dec. 17. Each company had been a component of the S&P mid-cap 400.

Meanwhile, three familiar names — New York Times Co., Office Depot and Eastman Kodak — will be removed from the S&P 500.

Also, cable operator Cablevision Systems Corp. will join the index, replacing King Pharmaceuticals Inc., which is being acquired by Pfizer Inc.

To keep the index up to date, a Standard and Poor’s committee meets regularly to make sure the S&P 500 is still made up of leading companies in leading industries. Among other criteria, companies in the index must have a market capitalization of at least $5 billion, four straight quarters of positive as-reported earnings and adequate liquidity.

As it has done before, Netflix, with a market cap of more than $10.1 billion, has set a standard — this time for home delivery of online content to the television.

The company has seen its stock climb more than 200 percent in the past 12 months, lifted by the increasing popularity of its video streaming product. Having added 4.6 million subscribers this year, Netflix, which has been primarily known for its pioneering online DVD rental-by-mail service, expects to have more customers watch movies or TV episodes via streaming than on DVD in the current quarter.

Its leadership in streaming is all the more impressive given its competition, which includes Apple Inc.’s Apple TV and the video-on-demand offerings of cable and telephone companies. Late last month, Netflix unveiled a streaming-only subscription option, setting up a higher-margin service that excludes the costs of shipping discs. For $7.99 a month, subscribers can watch more than 20,000 titles streamed from Netflix to their TVs and computers, without renting any DVDs.

This week, Netflix signed a deal with Walt Disney Co.’s Disney-ABC Television Group that will make hundreds of episodes from ABC, Disney Channel and ABC Family available for streaming no later than 15 days after the initial telecast.

But perhaps nothing says more about Netflix than the fact that, by the time once-fierce rival Blockbuster Inc. filed for bankruptcy in September, Netflix had long ceased to consider the video chain its main competition.

On the other hand, New York Times Co., with a market cap of $1.37 billion, has seen its stock drop 62 percent in the past five years, buffeted by an industrywide decline in print-advertising revenue as consumers got more news and information from the Internet. A severe economic downturn that began in the fall of 2008 exacerbated the problem.