The reclassified IT economic group made its debut on the UK Stock Exchange on 1 April amid criticism from analysts and confusion among many of the industry players involved.
Industry analyst Richard Holway described the reclassification process as 'totally illogical and 'potentially damaging to investors'. He was particularly concerned by the stocks classified as internet firms by the FTSE advisory panel.
He said: 'The internet section contains two large companies that have very little to do with the internet, as well as four-minute firms that have a lot to do with it. It is a dangerous subdivision, particularly if there are any investors putting in cash on the basis that they are the top six internet companies.'
Holway added: 'The internet will become one of the most important areas, but until companies start deriving meaningful revenue from the Web, I can't see a need for a separate classification.'
He also criticised FTSE's classification of Ilion as a computer hardware vendor, while Azlan has been dubbed a computer services company. Anite Group, Total Systems and Science Systems should also be rated as computer services companies, not software companies, Holway said.
Telecoms equipment and semiconductors are the other two sub-sector classifications.
Holway said he had been inundated with correspondence from the chief executives of many of the FTSE-listed companies, claiming they were confused about how the classification process worked and where their business was to be placed.
A representative for FTSE International admitted that no companies were consulted as part of the classification process. 'Given that in the UK there are more than 2,000 IT companies, it would have been a bit tricky. But we held discussions with IT analysts and representatives of the CSSA.'
He added that the classification panel, which comprised investment companies and stock market advisers, had determined the sectors that each organisation belonged to by where they sourced their profits.
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