Nasdaq, Inc.
Feb 13, 2007

NASDAQ Announces Fourth Quarter 2006 Results; Operating Income Up 105.1 Percent From Prior Year

NEW YORK, Feb 13, 2007 (PrimeNewswire via COMTEX News Network) -- The Nasdaq Stock Market, Inc. ("NASDAQ(r)") (Nasdaq:NDAQ) today reported fourth quarter 2006 net income of $63.0 million, or $0.43 per diluted share, an increase of $45.9 million from $17.1 million, or $0.15 per diluted share, in the fourth quarter of 2005, and an increase of $32.8 million from $30.2 million, or $0.22 per diluted share, in the third quarter of 2006.

Net income for the full year 2006 was $127.9 million, or $0.95 per diluted share, versus net income of $61.7 million, or $0.57 per diluted share, for the full year 2005. Included in fourth quarter 2006 net income is a $29.4 million gain, net of tax, on foreign currency option contracts purchased to hedge the foreign exchange exposure on the acquisition bid for the London Stock Exchange. This gain had the impact of increasing diluted earnings per share by $0.19 in the quarter.

Operating income was $68.1 million for the fourth quarter of 2006, an increase of $34.9 million, or 105.1% when compared to $33.2 million for the fourth quarter of 2005, and up slightly from $67.9 million for the third quarter 2006. Operating income for the full year was $214.1 million, an increase of 88.3% when compared to $113.7 million for the full year 2005.

Gross margin, representing total revenues less cost of revenues, was $183.1 million in the fourth quarter of 2006, an increase of 32.1% from $138.6 million in the year-ago period, and up 7.0% from $171.2 million reported in the third quarter of 2006. Gross margin for the full year 2006 was $687.4 million, an increase of 30.7% from $526.0 million in 2005.

"Our strong financial results point to the success that we achieved in 2006," commented NASDAQ's Chief Executive Officer, Robert Greifeld. "During the year we began operations as a national securities exchange, completed the migration of Nasdaq-listed stocks to a single trading platform, increased our share of U.S. equity trading and initial public offerings, and continued to increase the value proposition for listing on NASDAQ by offering more products and services."

Mr. Greifeld concluded, "We enter 2007 with a stronger core business that will support our new growth initiatives to increase revenue and profitability. We plan to achieve this by gaining market share and through new initiatives such as our planned options exchange and Portal market."

Recent Highlights


 * Achieved new market share highs in trading NYSE- and Amex-listed
   stocks.  Matched market share for NYSE-listed stocks increased in
   December 2006 to 14.2%, up from 5.5% in December 2005.  Matched
   market share for AMEX-listed stocks increased to 24.6% in December
   2006, up from 19.7% in December 2005.

 * Completed the migration to our single book platform for Nasdaq-
   listed securities, providing market participants with a deeper
   liquidity pool, improved system performance and greater order
   interaction.

 * Continued success in obtaining switches from other markets, with
   94 companies transferring their listing to NASDAQ during the year.

 * Redeemed the Series D preferred stock that had been issued to
   NASD.  NASD no longer maintains voting control over NASDAQ.

 * Fully integrated the newly acquired press release newswire service,
   PrimeNewswire(SM).

Charges Associated with NASDAQ's Cost Reduction Program and INET Integration

Included in total expenses for the fourth quarter 2006 are pre-tax charges of $4.6 million relating to NASDAQ's continuing efforts to reduce operating expenses and improve the efficiency of its operations, as well as to integrate INET. These charges include:

* Technology Review - NASDAQ recorded expenses of $3.3 million in the quarter associated with its technology review, in which it previously changed the estimated useful life of some assets as it migrates to lower cost operating platforms and processes.

* Workforce Reductions - NASDAQ recorded charges of $1.3 million in the quarter for severance and outplacement costs.

NASDAQ's Chief Financial Officer, David Warren, commented: "During the year we continued to demonstrate our ability to effectively integrate acquisitions while driving innovation and growth in our core businesses. The fourth quarter 2006 represents an impressive string of nine consecutive quarters of sequential top-line growth for NASDAQ. Operating margins also improved, with operating income for 2006 increasing by 88.3% when compared to the prior year. This consistent record of performance improvement highlights our ability to compete effectively in a rapidly changing marketplace."

Q4 Financial Review

Total Revenues and Gross Margin - Gross margin increased 32.1% in the fourth quarter to $183.1 million, up from $138.6 million in the year-ago quarter, and up 7.0% from $171.2 million reported in the third quarter of 2006.

Market Services

Market Services gross margin increased to $116.0 million, or 46.3%, from prior year, and increased 4.2% from prior quarter.


                                Three Months Ended    % Variance from
                             ------------------------  --------------
                             Dec 31   Sept 30  Dec 31   Prior   Prior
                              2006     2006     2005   Quarter   Year
                             ------   ------   ------  -------   ----
                                   (in millions)
 NASDAQ Market Center
  Execution and trade
   reporting revenues        $322.1   $286.7   $150.3    12.3%     NM
  Access services revenues     16.5     15.6     19.3     5.8%  (14.5)%
  Tape fee revenue sharing     (5.7)    (5.4)    (3.5)    5.6%   62.9%
  NASDAQ General Revenue
   Sharing Program                -        -     (0.1)     NM      NM
                             ------   ------   ------
   Total NASDAQ Market Center
   revenues                   332.9    296.9    166.0    12.1%     NM
 Cost of revenues
  Liquidity rebates          (153.8)  (153.2)   (86.1)    0.4%   78.6%
  Brokerage, clearance and
   exchange fees             (110.4)   (78.5)   (34.8)   40.6%     NM
                             ------   ------   ------
   Total cost of revenues    (264.2)  (231.7)  (120.9)   14.0%     NM
                             ------   ------   ------
   Gross margin from NASDAQ
    Market Center              68.7     65.2     45.1     5.4%   52.3%

 NASDAQ Market Services
  Subscriptions
   Proprietary revenues        19.2     18.0      7.0     6.7%     NM
   Non-proprietary revenues    31.3     29.5     40.1     6.1%  (21.9)%
   NASDAQ Revenue Sharing
    Programs                   (2.3)    (2.0)    (1.2)   15.0%   91.7%
   UTP Plan revenue sharing    (8.8)    (6.9)   (18.8)   27.5%  (53.2)%
                             ------   ------   ------
   Total NASDAQ Market
    Services Subscription
    revenues                   39.4     38.6     27.1     2.1%   45.4%
                             ------   ------   ------
   Other Market Services
    revenues                    7.9      7.5      7.1     5.3%   11.3%
                             ------   ------   ------
 Gross Margin from
  Market Services            $116.0   $111.3   $ 79.3     4.2%   46.3%
                             ======   ======   ======

 NM - Not meaningful.  Denotes variances equal to or greater than 100%

 * NASDAQ Market Center gross margin increased from the year-ago
   quarter primarily because of INET results, increases in average
   daily trading volume, and increases in trade execution market share
   for NYSE- and AMEX-listed equities. INET is included in NASDAQ
   results as of the date of closing, December 8, 2005. Access
   services revenue declined from the year-ago quarter due to the
   retirement of legacy products in December 2005. Increases from
   prior quarter are primarily related to higher trading volume and
   new fees for inbound orders. Beginning October 1, 2006 the SEC
   permitted exchanges to charge for inbound orders that remove
   liquidity via the Intermarket Trading System (ITS). Access services
   increases from prior quarter are due to higher customer demand.

 * Market Services Subscriptions revenues increased from the year-ago
   quarter as less data revenue was shared under the UTP Plan.
   NASDAQ's UTP market share increased primarily due to the INET
   acquisition which resulted in INET trades being reported to NASDAQ.
   Also, effective February 7, 2006, NASDAQ was no longer required to
   share NQDS revenue, thereby reducing the amount of revenue shared
   with UTP Plan participants. This change is also the primary driver
   for the growth in proprietary revenues and the decline in
   non-proprietary revenues when compared to the year-ago quarter.
   Increases from prior quarter are primarily due to higher Total View
   and Level 1 subscriber populations, offset somewhat by higher UTP
   Plan revenue sharing due to declines in market share of
   Nasdaq-listed securities.

Issuer Services

During the quarter Issuer Services revenues increased 13.0% to $67.0 million from the prior year quarter and increased 12.0% from prior quarter.


                                Three Months Ended    % Variance from
                             ------------------------  --------------
                             Dec 31   Sept 30  Dec 31   Prior   Prior
                              2006     2006     2005   Quarter   Year
                             ------   ------   ------  -------   ----
                                   (in millions)
 Corporate Client Group

  Annual renewal fees         $27.9    $27.3    $27.8    2.2%     0.4%
  Listing of additional
   shares fees                  9.5      9.4      9.1    1.1%     4.4%
  Initial listing fees          5.3      5.6      6.8   (5.4)%  (22.1)%
  Corporate Client services    13.1     10.4      6.3   26.0%      NM
                             ------   ------   ------
   Total Corporate Client
    Group revenues             55.8     52.7     50.0    5.9%    11.6%
                             ------   ------   ------

 NASDAQ Financial Products
  Licensing revenues            9.5      6.0      8.2   58.3%    15.9%
  Other revenues                1.7      1.1      1.1   54.5%    54.5%
                             ------   ------   ------
   Total NASDAQ Financial
    Products revenues          11.2      7.1      9.3   57.7%    20.4%
                             ------   ------   ------
 Total Issuer Services
  revenues                    $67.0    $59.8    $59.3   12.0%    13.0%
                             ======   ======   ======

 NM - Not meaningful.  Denotes variances equal to or greater than 100%

 * Corporate Client Group revenues increases from prior year and
   prior quarter are driven primarily by revenues generated from
   recent acquisitions, which are included in the Corporate Client
   services line.

 * NASDAQ Financial Products licensing revenues increased from the
   prior year and prior quarter due to the collection of licensing
   revenue for options on ETFs that track NASDAQ indexes. As
   previously reported, the recent outcome of two court cases has
   impacted NASDAQ's ability to collect licensing revenue for options
   traded on NASDAQ ETFs. However a portion of the licensing revenue
   was recognized during the fourth quarter of 2006.

Total Expenses

Total expenses increased 9.1% to $115.0 million from $105.4 million in the year-ago quarter and increased 11.3% from $103.3 million in the prior quarter. Fourth quarter 2006 expenses increased from last year primarily due to the recent acquisitions of INET, Shareholder.com, and PrimeNewswire. Expenses increased from third quarter 2006 primarily due to the integration of PrimeNewswire, higher marketing and advertising spending, and higher professional services costs, offset somewhat by lower depreciation expenses.

Gain on Foreign Currency Option Contracts

Included in non-operating income in the fourth quarter 2006 is an unrealized pre-tax gain of $48.4 million ($29.4 million net of tax) on foreign currency option contracts purchased to hedge the foreign exchange exposure on the acquisition bid for The London Stock Exchange. This gain had the effect of increasing diluted earnings per share by $0.19 in the quarter and $0.20 for the year. In conjunction with the lapse of our final offer for The London Stock Exchange, NASDAQ traded out of these foreign exchange contracts. Due to the improving exchange rate of the dollar whencompared to the pound sterling, NASDAQ will be recording a pre-tax loss of approximately $7.8 million on these foreign currency option contracts in first quarter 2007 results. The cumulative realized pre-tax gain on the foreign currency option contracts is approximately $40.6 million.

Dividend Income

Included in non-operating income in the fourth quarter and full year 2006 is dividend income of $7.0 million and $16.2 million, respectively, representing ordinary dividends declared by the London Stock Exchange during 2006.

Earnings Per Share

As stated above, fourth quarter earnings per diluted share was $0.43 versus $0.15 per diluted share in the year-ago quarter and $0.22 in the third quarter of 2006. NASDAQ's weighted average shares outstanding used to calculate diluted earnings per share was 152.1 million in the quarter versus 122.5 million in the year-ago quarter and 150.8 million in the third quarter 2006. The outstanding share count increased from the year-ago quarter primarily due to the issuance of approximately 26.5 million shares in equity offerings in the first and second quarters of 2006.

NASDAQ(r) is the largest electronic equity securities market in the United States. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to category-defining companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology industries. For more information about NASDAQ, visit the NASDAQ Web site at www.nasdaq.com or the NASDAQ Newsroom(SM) at www.nasdaqnews.com.

Cautionary Note Regarding Forward-Looking Statements

The matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include projections about our future financial results, as well as the implementation dates and benefits of certain strategic initiatives. The Nasdaq Stock Market, Inc. cautions that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements include projections which have not been reviewed by independent auditors of NASDAQ. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ's control. These factors include, but are not limited to, NASDAQ's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in NASDAQ's annual report on Form 10-K, quarterly reports on Form 10-Q, and periodic reports filed with the U.S. Securities and Exchange Commission. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NASDAQ that the projections will prove to be correct. We undertake no obligation to release any revisions to any forward-looking statements.


                     The Nasdaq Stock Market, Inc.
              Condensed Consolidated Statements of Income
       (in millions, except per share amounts and other drivers)

                           Three Months Ended
                               (Unaudited)              Year Ended
                      ----------------------------  ------------------
                      Dec. 31,  Sept. 30, Dec. 31,  Dec. 31,  Dec. 31,
                        2006      2006      2005      2006      2005
                      --------  --------  --------  --------  --------
                                                   (Unaudited)
 Revenues
 Market Services      $  380.2  $  343.0  $  200.2  $1,408.3  $  653.6
 Issuer Services          67.0      59.8      59.3     249.0     226.1
 Other                     0.1       0.1         -       0.5       0.2
                      --------  --------  --------  --------  --------
   Total revenues        447.3     402.9     259.5   1,657.8     879.9
 Cost of revenues
 Liquidity rebates      (153.8)   (153.2)    (86.1)   (644.9)   (255.5)
 Brokerage, clearance
  and exchange fees     (110.4)    (78.5)    (34.8)   (325.5)    (98.4)
                      --------  --------  --------  --------  --------
   Total cost of
    revenues            (264.2)   (231.7)   (120.9)   (970.4)   (353.9)
                      --------  --------  --------  --------  --------
 Gross margin            183.1     171.2     138.6     687.4     526.0
                      --------  --------  --------  --------  --------

 Expenses
 Compensation and
  benefits                51.2      47.5      41.7     195.7     152.1
 Marketing and
  advertising              8.2       3.5       4.2      20.5       9.0
 Depreciation and
  amortization            10.6      14.3      20.2      70.9      67.0
 Professional and
  contract services        9.0       6.8       7.7      32.0      29.1
 Computer operations and
  data communications     11.8       9.5      14.9      41.5      62.4
 Provision for bad debts   0.7      (2.2)      3.0       0.5       3.0
 Occupancy                 8.5       9.5       7.1      34.1      28.4
 General, administrative
  and other                7.0       5.8      (3.9)     44.3      19.5
                      --------  --------  --------  --------  --------
   Total direct
    expenses             107.0      94.7      94.9     439.5     370.5
 Support costs from
  related parties, net     8.0       8.6      10.5      33.8      41.8
                      --------  --------  --------  --------  --------
   Total expenses        115.0     103.3     105.4     473.3     412.3
                      --------  --------  --------  --------  --------
 Operating income         68.1      67.9      33.2     214.1     113.7
 Interest income           6.3       7.6       4.2      24.6      12.7
 Interest expense        (24.6)    (25.7)     (8.1)    (91.1)    (20.3)
 Dividend income           7.0         -         -      16.2         -
 Gain on foreign
  currency option
  contracts               48.4         -         -      48.4         -
 Minority interest         0.3       0.1       0.1       0.9       0.2
                      --------  --------  --------  --------  --------
 Income before income
  taxes                  105.5      49.9      29.4     213.1     106.3
 Income tax provision     42.5      19.7      12.3      85.2      44.6
                      --------  --------  --------  --------  --------
 Net income           $   63.0  $   30.2  $   17.1  $  127.9  $   61.7
                      ========  ========  ========  ========  ========

 Net income applicable
  to common stockholders:
   Net income         $   63.0  $   30.2  $   17.1  $  127.9  $   61.7
   Preferred stock:
    Dividends declared       -         -      (0.7)     (0.4)     (3.2)
    Accretion of
     preferred
     stock                   -         -      (0.3)     (0.3)     (3.4)
                      --------  --------  --------  --------  --------
 Net income applicable
  to common
  stockholders        $   63.0  $   30.2  $   16.1  $  127.2  $   55.1
                      ========  ========  ========  ========  ========
 Basic and diluted
  earnings per share:
   Basic              $   0.56  $   0.27  $   0.20  $   1.22  $   0.68
                      ========  ========  ========  ========  ========
   Diluted            $   0.43  $   0.22  $   0.15  $   0.95  $   0.57
                      ========  ========  ========  ========  ========
 Weighted-average common
  shares outstanding
  for earnings per share:
   Basic                 112.1     111.7      82.5     104.3      80.5
   Diluted               152.1     150.8     122.5     144.2     111.9

 Other Drivers
 -------------
 Average daily share
  volume in NASDAQ
  securities
  (in millions)          1,930     1,852     1,768     2,011     1,799

 Matched market share in
  NASDAQ securities (a)   46.5%     48.7%     32.9%     48.5%     28.1%

 Total market share in
  NASDAQ securities (b)   74.0%     76.6%     61.5%     77.2%     57.0%

 Matched market share in
  NYSE securities (a)     13.9%     12.1%      5.7%     10.4%      4.2%

 Total market share in
  NYSE securities (b)     30.6%     27.5%     19.9%     25.8%     17.6%

 Total market share in
  AMEX securities (b)     48.0%     47.7%     45.3%     46.4%     32.4%

 Initial public offerings   51        20        35       137       126
 Secondary offerings        62        32        77       214       222
 Number of listed
  companies (c)          3,193     3,206     3,208     3,193     3,208

 (a) Transactions executed on NASDAQ's systems.
 (b) Transactions executed on NASDAQ's systems and internal trades
     reported to NASDAQ.
 (c) Beginning September 30, 2006 number of listed companies also
     includes separately listed ETFs.



                     The Nasdaq Stock Market, Inc.
                 Condensed Consolidated Balance Sheets
                             (in millions)
                                                      December 31,
                                                 ---------------------
                                                   2006         2005
                                                 --------     --------
                                               (Unaudited)
 Assets
 Current assets:
      Cash and cash equivalents                  $  322.0     $  165.2
      Available-for-sale investments,
       at fair value                              1,628.2        179.4
      Receivables, net                              233.3        207.6
      Deferred tax assets                            11.1         10.0
      Other current assets                          118.0         34.8
                                                 --------     --------
 Total current assets                             2,312.6        597.0
 Property and equipment:
      Land, buildings and improvements                  -         60.9
      Data processing equipment and software        114.9        180.0
      Furniture, equipment and
       leasehold improvements                       109.5        115.6
                                                 --------     --------
                                                    224.4        356.5
      Less accumulated depreciation
        and amortization                           (159.1)      (233.9)
                                                 --------     --------
 Total property and equipment, net                   65.3        122.6
 Non-current deferred tax assets                     97.0        133.3
 Goodwill                                         1,028.7        961.9
 Intangible assets, net                             199.6        215.5
 Other assets                                        13.3         16.5
                                                 --------     --------
 Total assets                                    $3,716.5     $2,046.8
                                                 ========     ========

 Liabilities and stockholders' equity
 Current liabilities:
      Accounts payable and accrued expenses      $  170.7     $  118.9
      Accrued personnel costs                        55.6         55.3
      Deferred revenue                               56.4         53.6
      Other accrued liabilities                      72.1         59.7
      Deferred tax liabilities                       95.0          2.1
      Current portion of debt obligations            10.7          7.5
      Payables to related parties                       -         28.2
                                                 --------     --------
 Total current liabilities                          460.5        325.3
 Debt obligations                                 1,493.0      1,184.9
 Non-current deferred tax liabilities               115.8         95.2
 Non-current deferred revenue                        90.6         92.0
 Other liabilities                                   99.1         95.4
                                                 --------     --------
 Total liabilities                                2,259.0      1,792.8

 Minority interest                                    0.1          1.0

 Stockholders' equity
 Common stock                                         1.3          1.3
 Preferred stock, Series D and Series C at
  December 31, 2005                                     -         95.0
 Additional paid-in capital                       1,046.6        383.7
 Common stock in treasury, at cost                 (239.7)      (613.4)
 Accumulated other comprehensive income (loss)      136.2         (1.3)
 Deferred stock compensation                            -         (4.9)
 Common stock issuable                                  -          6.8
 Retained earnings                                  513.0        385.8
                                                 --------     --------
 Total stockholders' equity                       1,457.4        253.0
                                                 --------     --------
 Total liabilities, minority interest
  and stockholders' equity                       $3,716.5     $2,046.8
                                                 ========     ========

NDAQF

This news release was distributed by PrimeNewswire, www.primenewswire.com

SOURCE: The Nasdaq Stock Market, Inc.

NASDAQ
          Media:
            Bethany Sherman
            212.401.8714
          Investor:
            Vincent Palmiere
            212.401.8742

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