Nasdaq Stock Market
on Thursday posted a higher year-over-year profit, as the electronic exchange benefited from a volatile stock market in the last three months of the year.
Fourth quarter 2007 net income was $79 million, an increase of $16 million over the $63 million reported for 2006. This came to 52 cents per diluted share vs. 43 cents in the fourth quarter of 2006.
Excluding a pre-tax gain of $18.2 million related to foreign currency option contracts and $1.7 million in charges tied to the extinguishment of debt and workforce reduction, Nasdaq earned $69.1 million, or 46 cents per diluted share. That compares to a non-GAAP profit of $32.5 million, or 23 cents per diluted share a year ago. Thomson Financial Services mean analyst estimate for the fourth quarter was 47 cents per share.
Net income for the fourth quarter fell sharply, however, from the $365 million earned in the third quarter, when results included gains associated with the exchange's sale of its share of the London Stock Exchange which increased diluted earnings.
Volatile conditions in the market were a boon to Nasdaq. Total volume on Nasdaq increased to 123 billion shares in the fourth quarter of 2007, up 45.9% from 84 billion shares in the fourth quarter of 2006.
"Our fourth quarter results cap off a truly defining year for Nasdaq,'' said President and CEO Bob Greifeld.
Shares were down 5.9% to $42 in premarket trading.
The electronic trading company has had a busy year with the proposed acquisition of the Philadelphia Stock Exchange, the third largest options market in the U.S. and the nation's oldest stock exchange. Nasdaq also received approvals to go forward with plans to combine with Nordic exchange OMX and invest in the Dubai International Financial Exchange. Nasdaq expects to complete this transaction in the first quarter of 2008.
While Nasdaq decided against providing any guidance to the numbers in 2008, Goldman Sachs analyst Daniel Harris wrote, "Downside risks include lower volumes or matched market share and an inability to close the OMX deal. Upside risks include higher-than-estimated market share, acceleration in new business initiatives, or higher volumes."
Nasdaq's acquisitions and investments mirror a larger wave of consolidation among exchanges. Last week,
, operator of the Chicago Mercantile Exchange, entered into an exclusive negotiating period with
, which runs the New York Mercantile Exchange.
, operator of the
New York Stock Exchange
, also recently agreed to acquire its smaller rival, the American Stock Exchange.