Merger helps Nasdaq OMX post $121.4m net income

New York : Nasdaq OMX Group has posted a sharp rise in first-quarter earnings on higher trading volumes, and said it has started to reap the benefits of Nasdaq's acquisition of Nordic exchange OMX in February.

While Nasdaq OMX's net income surged to $121.4 million from $18.3 million in the 2007 first quarter, the results fell short of Wall Street expectations and the year-ago figures didn't include the OMX. The company's stock fell 1.2 per cent.

Christopher Allen, a Banc of America securities analyst, said he had expected the stock sell-off because of a tougher trading environment so far this quarter, the stock's recent strength and lower-than-expected US market service revenues.

He wrote in a research note that while Nasdaq OMX might be inexpensive, stocks with lower price-to-earnings ratios such as Deutsche Boerse may offer better value.

Excluding certain one-time gains and merger-related expenses, earnings were 48 cents per share, a penny below analysts' average forecast, according to Reuters Estimates.

The year-ago results reflect only Nasdaq's performance, while the latest figures include the Nordic exchange starting February 27, when the acquisition was completed.

Expansion

The OMX acquisition is a component of Nasdaq's plan to expand overseas and trade in new asset classes, in much the same way the NYSE Euronext merger has helped that bourse.

"While only two months into Nasdaq OMX, we are operating as one global company," chief executive Robert Greifeld said on a conference call.

The combined company's first major project is a pan-European market following the enactment last year of European Union's Markets in Financial Instruments Directive, which is liberalising the securities markets there. Nasdaq OMX expects the market to open in September 2008.

Nasdaq OMX has also purchased Norwegian power exchange NordPool to give it a foothold in the carbon trading market. It said it expects that deal to close during the third quarter.

The exchange revised upward its forecast for technology-related savings from the OMX deal to between $25 million and $35 million a year, from a previous estimate of $20 million to $30 million.

Greifeld said he expects the takeover of the Philadelphia exchange to close in June, and give Nasdaq OMX a strong position in the US options market. In March, Nasdaq OMX launched a US options market for 90 kinds of contracts.

Nasdaq OMX gained 48 listings in the quarter, 10 of them from initial public offerings. In April, Nasdaq lured software maker CA away from the New York Stock Exchange.

Revenue rose 29.5 per cent to $918.2 million, above analysts' forecast of $861.6 million. For revenue and certain other figures, the combined exchange calculated pro forma year-ago figures as if it had already been a single entity.