Nasdaq Drops Most Since April as Profit Trails Estimates

Nasdaq OMX Group Inc., the operator of the second-largest U.S. stock exchange, fell the most in almost four months after quarterly profit declined on costs associated with acquisitions.

Nasdaq slid 3 percent to $32.81, the biggest drop since April 2. Earnings excluding some items slipped to 62 cents a share in the three months ended June 30 from 64 cents in the year-earlier period, the New York-based company said in a statement today. That compares with the 63-cent average estimate of 15 analysts compiled by Bloomberg.

Chief Executive Officer Robert Greifeld is diversifying the business to offset a global decline in stock trading. In the last few months, the exchange has bought the eSpeed platform for trading U.S. Treasury bonds, the shareholder-relations unit of Thomson Reuters Corp. and a 25 percent stake in The Order Machine, a Dutch alternative trading system focused on options. Nasdaq also has a program called GIFT to fund projects such as a new derivatives market in London.

The exchange had “unique variances in our cost structure, including financing costs of approximately $2.5 million associated with pre-funding the eSpeed acquisition nearly a month prior to closing, and our organic investments,’” Lee Shavel, chief financial officer of Nasdaq, said in the statement. “Several launches of GIFT initiatives added an additional $5 million to our expenses versus the prior year. The earnings impact from GIFT initiatives is expected to moderate over time.”

Cost Guidance

Operating costs rose to $292 million in the second quarter from $252 million a year earlier, the exchange said. The company projected annual core operating expenses, excluding acquisitions, of $925 million to $940 million. That compares with a previous forecast of $910 million to $930 million.

In April, Nasdaq said it will buy eSpeed, an electronic platform for trading U.S. Treasury bonds, in a move that raised concern about its credit rating. Shares of the second-biggest operator of U.S. equity exchanges fell 13 percent to $27.91 on April 2 after Nasdaq agreed to acquire the company from BGC Partners Inc. for as much as $1.23 billion. The stock has since rebounded 21 percent to $33.84.

“Our strategy is focused on becoming an entrenched provider of corporate, trading, technology and information products and services,” Greifeld said in the statement. “Essential to that strategy has been the expansion of the depth and breadth of asset classes, products and markets we offer as well as extending our presence in adjacent businesses that are relevant.”

NYSE Purchase

Nasdaq OMX’s biggest rival, NYSE Euronext, agreed in December to be bought by futures bourse IntercontinentalExchange Inc. for $8 billion in a move that underscored the growing importance of derivatives in the face of shrinking volume worldwide.

Sales from Nasdaq’s market-services division fell to $190 million in the second quarter from $199 million a year ago. The unit includes cash equities, where volume is declining, derivatives and access and broker services.

The information-services division received $108 million during the quarter, up from $106 million, the exchange said. The unit covers market data and index licensing.

The technology-solutions unit generated $95 million of revenue in the quarter, compared with $67 million a year ago.

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