* Q3 profit of 66 cents/share vs expectations of 62
* Stock up 4.4 pct around midday
* Revenue up 23 pct to $506 mln vs expectations of $502.6
By John McCrank
Oct 23 Transatlantic exchange operator Nasdaq
OMX Group on Wednesday reported a higher third-quarter
profit that beat expectations as recent acquisitions helped
The company earned 66 cents per share, topping the consensus
of analysts by 4 cents, according to Thomson Reuters I/B/E/S.
Nasdaq's shares were up 4.4 percent at $35.06 around midday.
The results came despite what Nasdaq Chief Executive Robert
Greifeld said was a very difficult environment.
"The transaction business is still going through difficult
times, our customers are not thriving, and we just feel like we
have to navigate around headwinds," he said in an interview.
Nasdaq has been diversifying away from its traditional stock
transaction business for years, even before volumes plunged
during the global economic crisis, and into businesses that
provide a steadier income flow.
The New York-based company closed a $390 million deal to buy
Thomson Reuters Corp's investor relations, public
relations and multimedia services units in the second quarter.
It closed a $750 million deal to buy eSpeed, the electronic
Treasuries-trading platform, from BGC Partners Inc, in
June. Nasdaq said the acquisitions were adding to earnings and
integration was ahead of plan.
In the latest quarter, 73 percent of Nasdaq's revenue came
from businesses that do not depend on transactions. Cash
equities made up just 9 percent of total revenue.
Revenue at Nasdaq's technology solutions segment, which
includes the new IR, PR, and multimedia businesses, increased by
$58 million from a year earlier to $131 million. Information
Services revenue rose by $19 million to $118 million, with
market data revenue rising by $16 million to $100 million.
SCALE IMPORTANT FOR STOCKS
Greifeld said he would still consider buying the European
stock exchange unit of NYSE Euronext if it came on the
market, following NYSE's proposed sale to derivatives market and
clearing house operator IntercontinentalExchange Inc.
The processing power of Nasdaq's European data center would
be able to handle every European equity trade today without
spending a nickel, so there would be a fundamental driver behind
potentially combining with Euronext, Greifeld said on a
conference call with analysts.
ICE and NYSE plan to spin off Euronext, likely at some point
next year, and European officials have privately expressed
concerns about the exchange group once again falling into
Nasdaq has reached out to regulators and politicians in
Europe to try to allay their concerns, Greifeld said in the
"We've been there and we're definitely held up as a good
role model," he said, referring to Nasdaq's 2006 acquisition of
Nordic and Baltic exchange operator OMX.
Nasdaq paid down $98 million in debt in the last quarter and
expects to return to its long-term leverage target in the first
half of 2014, which would give it more flexibility in
deal-making, or to resume its share buy-back program, which it
put on hold after the recent acquisitions.
The company's rivals have also been busy diversifying and
adding scale. Aside from the more than $10 billion ICE-NYSE
deal, BATS Global Markets and Direct Edge, which together
currently have more market share than Nasdaq, announce plans to
Greifeld said he sees opportunities to boost Nasdaq's market
share in the wake of the BATS-Direct Edge merger, as customers
may not appreciate the merged exchanges plans to make more money
off of their combined market data offerings.
"We're obviously talking to those folks," he said.
Net income attributable to Nasdaq in the quarter was $113
million, up from $89 million a year earlier. Revenue rose 23
percent to $506 million, versus expectations of $502.6 million.
Operating expenses rose to $304 million from $242 million,
mainly due to deal costs.
Nasdaq narrowed its core expense forecast for 2013 to a
range of $1.075 billion to $1.090 billion, from $1.070 billion
to $1.1 billion previously.