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Nasdaq Modifies Business Structure

Zacks Equity Research

Yesterday, Nasdaq OMX Group Inc. (NDAQ) announced the merger of its Global Data Products and Global Index businesses to form a new reporting segment – Global Information Services. The change will be implemented retrospectively from the beginning of the year.

Both the merging businesses involve data distribution and the delivery of innovative products aimed at offering transparency and insight into the market. Thus, combining these should enable Nasdaq capitalize on the companies’ strengths more efficiently.

The combined business is expected to improve the speed and cost efficiency of delivering data and indices, using Nasdaq’s recent technology investments and enhancements. It is also likely to enhance the company’s customer focus as well as boost the power of its technology, product innovation and distribution channels. Nasdaq will utilize its strategic proficiency and product development skills to expand the new segment further.

Currently, Global Data Products has a client base of 2.5 million financial professionals and individual investors, spanning 83 countries, in its historical and real-time market data distribution business. Nasdaq expects the new business segment to generate almost 20% of the total annual revenues of the company.

The securities exchange aims to become a global leader in providing information to the financial services industry. However, over the recent years increased competition has led to a decline in the company’s market share.

The failure of NYSE Euronext Inc.’s (NYX) takeover bid in 2011 and the recent agreement by IntercontinentalExchange Inc. (ICE) to buyout NYSE Euronext further threatens to diminish the exchange’s size, competitiveness and global footprint. Thus, Nasdaq needs to boost its competitive strength through both organic and inorganic growth. The streamlining of operations to enhance efficiency is therefore a prudent step in our opinion.

The new segment will be managed by Nasdaq’s Executive Vice President, John L. Jacobs, who earlier handled the Global Index Group and also served as the Chief Marketing Officer (CMO) of the holding company. Consequently, the position of CMO as well as Senior Vice President will be awarded to Jeremy Skule, who was previously the Senior Vice President of Global Marketing and Communications.

Nasdaq currently carries a Zacks Rank #3 (Hold). Another securities exchange worth consideration is CBOE Holdings, Inc. (CBOE), which carries a Zacks Rank #2 (Buy).

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