NASDAQ Ups 2010 Expense Forecast – Analyst Blog

NASDAQ OMX Group Inc. (NDAQ) has provided its operating expense guidance for 2010 and revenue outlook for the longer term, according to Reuters.

 

NASDAQ expects total operating expenses to increase to a range of $882 million−$898 million for 2010, compared to the July expectation of $870 million−$885 million. The expense forecast has surged due to the incremental run rate in expenses of $12 million to $13 million from the acquisition of SMARTS Group, a provider of surveillance technology.

 

Concurrently, NASDAQ expects revenues to grow with the expansion in clearing and technology businesses over the longer term. NASDAQ forecasts the technology-based annual revenues to reach $200 million by 2014. The company also foresees significant opportunities in the Asia-Pacific region, with the expectation to earn 51% of 2012 technology revenues from this region. The company also plans to double its clearing-related revenues by 2014.

 

Further, NASDAQ also entered into an agreement with GFI Group Inc. (GFIG) to offer electronic trading and clearing of continental U.S. power and natural gas. The strategic agreement will enhance its global presence in energy clearing business and expand the clearing options for energy traders in the U.S.

 

In addition, NASDAQ completed its remaining $300 million of the planned $400 million authorized share buyback as of September 1.

 

Besides, on September 20, NASDAQ also received the approval from the U.S. Securities and Exchange Commission to launch a new stock exchange known as NASDAQ OMX PSX on October 8. The exchange will encourage participants to display more shares at a price level and will also provide a different trading model that emphasizes on size and liquidity.

 

We believe that NASDAQ has been focusing on its market technology with the inclusion of options, commodities, clearing houses and global deals in its core stock and data business. With the acquisition of SMARTS Group, NASDAQ will be able to diversify its commercial technology business and enter the broker surveillance and compliance market.

 

Further we believe that NASDAQ’s diversified business mix, cost, revenue and technology synergies appear to benefit from improving economic conditions. Furthermore, an improved outlook for equity investments and the number of recession-proven private companies seeking capital are also adding to the new listings and initial public offering (IPO) pipeline.

 

Besides, management aims to return value to shareholders through stock repurchases. However, the ongoing headwinds related to volume and pricing continue to limit the stock’s upside. We believe that NASDAQ’s operations will gain momentum once the global economy stabilizes and rebounds to its historical highs.