On Wednesday, Nasdaq OMX Group released better than expected results for the second quarter with an 81 percent increase in quarterly profit. This, together with the news that management are pushing ahead with the integration of recent acquisitions, no doubt contributed to the 16.9 percent rise in Nasdaq share prices.
Nasdaq’s purchase of the Nordic stock exchange OMX earlier this year, as well as options venue Philadelphia Stock Exchange in July have given it access to diverse asset classes and markets, which is starting to pay off handsomely. Initially, Nasdaq was aiming for a $100 million savings from its OMX takeover, by the end of 2009, but it is now anticipated that this goal will be reached by the first quarter of 2009. Moreover, cost cutting measures have already been implemented at the Philadelphia Stock Exchange and a savings of $50 million is expected by the end of this year.
In addition to the acquisitions already concluded this year, Nasdaq OMX has entered into deals to buy the Boston Stock Exchange, as well as Oslo-based power exchange NordPool’s subsidiaries, NordPool Clearing and NordPool Consulting. CEO of Nasdaq OMX Group, Robert Greifeld, disclosed that all the initiatives the group is undertaking are directed at increasing its scale and efficiency, which in turn will drive profits.
Nasdaq sales in the second quarter of 2007 were reported at $558.2 million, whereas sales in the second quarter of 2008 were $821.5 million, reflecting an increase of 47.2 percent. Earnings rose by 81.1 percent, from $56.1 million (39 cents per share) to $101.6 million (48 cents per share). Market services sales showed an impressive 42.4 percent growth, from $497.4 million to $694.1 million.
Although Nasdaq still relies heavily on the highly competitive U.S. equity market, analysts agree that its diversity has enabled it to perform well in spite of the recent volatility of markets in the U.S. and other parts of the world. Greifeld reiterated that Nasdaq OMX Group will not be pursuing any additional merger and acquisition activity until their recent and announced acquisitions are fully integrated and delivering efficiently.
With the slowing down of growth in core trading volumes and increasing competition from new trading platforms, investors will be watching Nasdaq OMX Group’s third and fourth quarter results for 2008 with great interest.
