Nasdaq Announces Fourth Quarter and Full Year 2003 Results

New York, N.Y.—The Nasdaq Stock Market, Inc. ("NASDAQ"; OTCBB: NDAQ), today reported results for the fourth quarter and full year 2003. Net loss was $21.0 million for the fourth quarter ended December 31, 2003 versus net income of $0.3 million for the fourth quarter of 2002. Net loss applicable to common shareholders for the fourth quarter 2003 was $23.5 million, or $(0.30) per common share versus a net loss applicable to common shareholders of $2.1 million, or $(0.03) per common share, for the fourth quarter of 2002.⁽¹⁾ For the full year 2003, net loss was $105.5 million versus net income of $43.1 million for the full year 2002. Net loss applicable to common shareholders for the full year 2003 was $113.8 million, or $(1.45) per common share, versus net income applicable to common shareholders of $33.4 million, or $0.40 per common share, for the year 2002.⁽¹⁾ Following the transfer of NASDAQ's interest in Nasdaq Europe and the sale of IndigoMarkets, results from these subsidiaries have been reclassified as discontinued operations. The remainder of this discussion reflects results from continuing operations.

Total revenue in fourth quarter 2003 decreased 23.5% to $138.0 million from $180.3 million a year ago, but decreased only 2.7% sequentially. Net loss was $10.8 million, or $(0.17) per common share for the fourth quarter of 2003, versus net income of $6.2 million, or $0.05 per common share, for the fourth quarter of 2002. Included in fourth quarter results are pre-tax expenses of $28.4 million associated with NASDAQ's strategic review initiated in the second quarter 2003, which includes the elimination of non-core product lines, initiatives and severance. Excluding this impact, net income was $5.9 million for the period calculated on a Non-GAAP basis, or $0.04 per common share.

Total revenue in 2003 decreased 25.1% to $589.8 million from $787.2 million in 2002. Net loss was $45.2 million, or $(0.68) per common share for the year ending 2003, versus net income of $65.0 million, or $0.66 per common share, for the year ending of 2002. Included in the year results are pre-tax expenses totaling $97.9 million associated with NASDAQ's strategic review initiated in the second quarter 2003, which includes the elimination of non-core product lines, initiatives and severance. Excluding this impact, net income was $19.0 million for the period calculated on a Non-GAAP basis, or $0.14 per common share.

NASDAQ's Chief Executive Officer, Robert Greifeld, commented, "Over the past nine months, we took dramatic and decisive steps that sharpened our strategic direction, assembled a talented, cohesive team to execute our refocused plan, and moved toward establishing a low-cost operating platform. We are already seeing the benefits of this effort. Our fourth quarter financial performance began to stabilize relative to prior quarters."

Mr. Greifeld concluded, "In 2004, we will strive to maintain this positive momentum and achieve consistent improvements in all areas of our business. We are focused on two key objectives: increasing NASDAQ's share of trading in domestic equity markets; and increasing the number of companies listed on NASDAQ. To achieve this, we are enhancing the functionality of our trading systems and taking steps to achieve price leadership. Additionally, our new dual listing capability advertises NASDAQ's performance to issuers, which we have further supported by refocusing our sales force and enhancing our suite of services offered to issuers. NASDAQ is the premier equity marketplace, offering a cost-effective trading platform open to multiple participants that provides investors security and protection. Our entire organization is energized and focused on this mission."

Significant Events in the Fourth Quarter

• Completed the strategic review begun in June 2003, which dramatically reduced the company's operating cost structure by exiting non-core businesses, streamlining the organization and significantly reducing the company's cost base.
• Created 3-tiered pricing structure for first quarter 2004 implementation geared toward drawing increased liquidity to NASDAQ's trading platform.

• Transaction Services revenue decreased 32.0% to $53.6 million from $78.8 million in the year-ago quarter as execution services, trade reporting and access revenue were affected by continued competitive pressure and lower market share. Similarly, fourth quarter revenue decreased slightly from $54.3 million in the prior quarter.
• Market Information Services revenue decreased 33.5% to $32.5 million from $48.9 million in the year-ago quarter primarily due to an increase in UTP plan revenue sharing. Fourth quarter revenue decreased 8.2% from $35.4 million in the prior quarter due to higher UTP plan revenue sharing and a TotalView product price decrease.
• Corporate Client Group revenue decreased 2.3% to $42.8 million from $43.8 million in the year-ago quarter due to a decrease in annual renewal fee revenue resulting from a lower number of listed companies. Initial listing fees and fees associated with the listing of additional shares are amortized over six-year and four-year periods, respectively, in accordance with SEC Staff Accounting Bulletin 101.
• Financial Products revenue increased $0.3 million to $7.6 million from $7.3 million in the year-ago quarter due primarily to an increase in the size of the QQQ Trust Fund.

Total expenses decreased 12.2% to $150.7 million from $171.6 million in the year-ago quarter and decreased 2.6% from $154.7 million from the prior quarter. Included in total expenses are charges of $28.4 million relating to costs associated with NASDAQ's aforementioned strategic review, including: