Nasdaq profit beats expectations, helped by deals

Reuters

* Q3 profit of 66 cents/share vs expectations of 62cents/share

* Stock up 4.4 pct around midday

* Revenue up 23 pct to $506 mln vs expectations of $502.6mln

By John McCrank

Oct 23 (Reuters) - Transatlantic exchange operator NasdaqOMX Group on Wednesday reported a higher third-quarterprofit that beat expectations as recent acquisitions helpedboost revenues.

The company earned 66 cents per share, topping the consensusof 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 RobertGreifeld said was a very difficult environment.

"The transaction business is still going through difficulttimes, our customers are not thriving, and we just feel like wehave to navigate around headwinds," he said in an interview.

Nasdaq has been diversifying away from its traditional stocktransaction business for years, even before volumes plungedduring the global economic crisis, and into businesses thatprovide a steadier income flow.

The New York-based company closed a $390 million deal to buyThomson Reuters Corp's investor relations, publicrelations and multimedia services units in the second quarter.It closed a $750 million deal to buy eSpeed, the electronicTreasuries-trading platform, from BGC Partners Inc, inJune. Nasdaq said the acquisitions were adding to earnings andintegration was ahead of plan.

In the latest quarter, 73 percent of Nasdaq's revenue camefrom businesses that do not depend on transactions. Cashequities made up just 9 percent of total revenue.

Revenue at Nasdaq's technology solutions segment, whichincludes the new IR, PR, and multimedia businesses, increased by$58 million from a year earlier to $131 million. InformationServices revenue rose by $19 million to $118 million, withmarket data revenue rising by $16 million to $100 million.

SCALE IMPORTANT FOR STOCKS

Greifeld said he would still consider buying the Europeanstock exchange unit of NYSE Euronext if it came on themarket, following NYSE's proposed sale to derivatives market andclearing house operator IntercontinentalExchange Inc.

The processing power of Nasdaq's European data center wouldbe able to handle every European equity trade today withoutspending a nickel, so there would be a fundamental driver behindpotentially combining with Euronext, Greifeld said on aconference call with analysts.

ICE and NYSE plan to spin off Euronext, likely at some pointnext year, and European officials have privately expressedconcerns about the exchange group once again falling intoforeign hands.

Nasdaq has reached out to regulators and politicians inEurope to try to allay their concerns, Greifeld said in theinterview.

"We've been there and we're definitely held up as a goodrole model," he said, referring to Nasdaq's 2006 acquisition ofNordic and Baltic exchange operator OMX.

Nasdaq paid down $98 million in debt in the last quarter andexpects to return to its long-term leverage target in the firsthalf of 2014, which would give it more flexibility indeal-making, or to resume its share buy-back program, which itput on hold after the recent acquisitions.

The company's rivals have also been busy diversifying andadding scale. Aside from the more than $10 billion ICE-NYSEdeal, BATS Global Markets and Direct Edge, which togethercurrently have more market share than Nasdaq, announce plans tomerge.

Greifeld said he sees opportunities to boost Nasdaq's marketshare in the wake of the BATS-Direct Edge merger, as customersmay not appreciate the merged exchanges plans to make more moneyoff of their combined market data offerings.

"We're obviously talking to those folks," he said.

Net income attributable to Nasdaq in the quarter was $113million, up from $89 million a year earlier. Revenue rose 23percent 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 arange of $1.075 billion to $1.090 billion, from $1.070 billionto $1.1 billion previously.

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