Written By Are you wondering why tech giants like Apple and Microsoft are making headlines lately? Well, it’s because they are departing from the Global Industry Classification Standard (GICS), a system that categorizes companies based on their primary business activity. This decision could be a game-changer for these industry leaders as they navigate through unprecedented times during the pandemic. In this blog post, we will explore why this departure from GICS is significant and how it could impact these tech titans in the long run. So fasten your seatbelts and get ready to dive into an exciting world of change!
What is GICS?
The Global Industry Classification Standard (GICS) is a system for classifying industries. It was developed by MSCI and Standard & Poor’s (S&P) in 1999, and is used by market participants to identify global industry sector opportunities and risks.
The GICS system comprises 10 sectors, 24 industry groups, 69 industries and 154 sub-industries. The sectors are broad groupings of industries based on common characteristics, such as the type of product or service produced or the geographic region served. The industry groups are narrower groupings of related industries within a sector. The industries are even narrower groupings of companies that operate in the same space with similar business models. The sub-industries are the most specific level of classification, representing unique company types within an industry.
The decision by S&P Dow Jones Indices to move Apple and Microsoft out of the information technology sector and into the newly created communications services sector is a departure from the GICS system. This change could have a big impact on how these companies are viewed by investors, as well as their place in the tech landscape more broadly.
What are the benefits of leaving GICS?
The move away from the GICS system could be a game-changer for tech giants like Apple and Microsoft. Here are some of the potential benefits:
1. More accurate share prices. The GICS system doesn’t always accurately reflect the true value of a company’s shares. This can lead to investors over- or under-valuing a stock, which can impact on share price movements.
2. Greater flexibility in how companies are classified. The GICS system is quite rigid, and this can result in companies being inaccurately placed into categories. This can make it difficult for investors to compare apples with apples when making investment decisions.
3. Increased transparency. The GICS system relies on publicly-available information, which isn’t always accurate or up-to-date. Moving away from this system could mean that companies are required to provide more timely and accurate information to investors.
4. Improved investor communication. The current GICS system doesn’t always provide enough detail for investors to make informed decisions about stocks. Moving away from GICS could mean that companies provide more detailed information to investors about their businesses and strategies.
5. Better alignment with other global classification systems. At present, the GICS system isn’t aligned with other major global classification systems, such as those used by MSCI and S&P Dow Jones Indices. This can create confusion for international investors and make it difficult to compare stocks across different markets
How will this departure from GICS affect Apple and Microsoft?
The Global Industry Classification Standard (GICS) is a system used by investment firms to classify stocks. It is developed and maintained by Standard & Poor’s, a financial services company. The GICS system has four levels of classification: sectors, industries, sub-industries, and companies.
Apple and Microsoft are both classified as part of the information technology sector. However, Microsoft is also classified as part of the software industry, while Apple is not. This is because Apple produces hardware, while Microsoft produces software.
The departure from GICS will affect how Apple and Microsoft are classified. They will no longer be part of the same sector. Instead, they will be part of different sectors: Apple will be in the consumer goods sector and Microsoft will be in the business services sector. This could have a big impact on how these companies are seen by investors and could affect their stock prices.
What other companies are leaving GICS?
In recent years, a number of large companies have announced their intention to leave the Global Industry Classification Standard (GICS) system. This system is used to classify companies by industry, and has been in place for over 20 years.
Apple was one of the first major companies to announce its departure from GICS, stating that it would instead be classified as a consumer discretionary company. This was followed by Microsoft, which announced that it would be moving to the communication services sector.
Other companies that have since announced their intention to leave GICS include Facebook, Alphabet (Google’s parent company), and Starbucks.
The departure of these companies from GICS could potentially be a game-changer for the technology industry. For example, Apple and Microsoft are now both considered to be leaders in the consumer discretionary space, which is a much larger and more competitive sector than the technology sector.
It will be interesting to see how other technology companies respond to this shift in the landscape. Some may follow suit and leave GICS, while others may choose to stay put. Either way, this is sure to shake up the status quo in the tech world.
Conclusion
In conclusion, the decision to depart from GICS is a bold move for tech giants like Apple and Microsoft. Investors now have access to more detailed information about the performance of specific technology-related businesses, allowing them to make more informed decisions when investing. Moreover, this also provides an opportunity for companies in this industry to maximize their returns as they can focus on areas that are performing well while avoiding those that may be struggling. Ultimately, these changes have the potential to revolutionize the way we approach investments in technology-related companies and could lead to even greater success down the road.
