Baltimore Technologies was in the spotlight for all the wrong reasons again yesterday as it emerged that the company was to be demoted from the FTSE 250 index next week. In a periodic review of the index, Baltimore will relinquish its position to Woolworths following the British retailer's demerger from parent Kingfisher.

The development has not come as a surprise to Baltimore observers, who have been expecting the company's ailing share price and declining market capitalisation to have an impact on its index position for some time. Being replaced by Woolworths was, said one analyst yesterday, a classic case of the old economy winning out over the new after all.

The demotion news comes at the end of a long week for the internet security firm, which announced a radical restructuring and salvage programme on Wednesday.

Analysts agree that Baltimore would be advised to view the timing of the latest move as a technical coincidence rather than a targeted blow at a difficult time.

According to Mr Daud Khan of Merrill Lynch in London, the demotion should not be interpreted as reaction to the restructuring plans, and is unlikely to deter Baltimore from its new path.

"The index is created from companies of a certain size so it's falling out because of its share-price performance over a period of time and its total market cap," said Mr Khan.

According to Mr Khan, the biggest effect of the development is likely to be a decline in Baltimore's liquidity as funds that track the FTSE 250 pull out of the stock. However, the company will now become part of the FTSE 350 index and will attract the attention of small-cap fund managers .

This "pull-out" effect was apparent yesterday as Baltimore sustained an early fall in London, but the stock recovered later in the day to close at 24p sterling up 3.37 per cent on the day.

Trading was light, however, as the London market prepared for a holiday weekend.

A Baltimore Technologies spokesperson declined to comment on the demotion yesterday.