What caused the significant drop in revenue in the third quarter of 2003?

The significant drop in revenue was primarily due to a combination of factors including increased competition in the trading arena, a decline in market share for Transaction Services, and a decrease in the number of trader log-ons to Nasdaq systems. Market Information Services revenue also declined due to cost-saving initiatives among market participants and consolidations.

What is the impact of the strategic review on Nasdaq's financial performance?

The strategic review has led to substantial charges, particularly in the third quarter of 2003, totaling $49.3 million. These charges are related to the elimination of non-core product lines and initiatives, including the wind-down of Nasdaq Europe and Nasdaq Deutschland. While these actions are intended to position Nasdaq for improved profitability, they have significantly increased expenses and contributed to the net loss in the current quarter.

What is the outlook for Nasdaq's revenue and profitability?

The company's prospects for future revenue growth depend on an improving economic environment offsetting ongoing competitive pressures in the trading arena. The strategic review and associated cost-saving measures are expected to continue impacting expenses. Management believes existing liquidity and cash flow from operations will be sufficient to meet future requirements, but the competitive landscape and revenue trends present ongoing challenges.

How has the company's debt situation changed?

Nasdaq successfully redeemed $150 million in Senior Notes during the quarter. This was financed using available cash. The company believes its current liquidity position and cash generation are sufficient.

NDAQ 10-Q Quarterly Report Q3 FY2003 — Revenue, Net Income, EPS

Summary

The Nasdaq Stock Market, Inc. reported a net loss of $38.0 million, or $0.52 per share, for the third quarter of 2003, a significant decline from a net income of $12.7 million, or $0.13 per share, in the same period of 2002. This downturn was largely driven by a substantial increase in total expenses, which rose to $190.3 million from $173.4 million year-over-year, primarily due to a $49.3 million charge related to the elimination of non-core product lines and initiatives as part of a strategic review. Total revenues also saw a considerable decrease, falling by 27.1% to $144.8 million from $198.8 million in the prior year's quarter, with significant drops in Transaction Services and Market Information Services revenue. Despite the quarterly loss, the company's financial position remains stable, with total assets of $909.8 million and total liabilities of $727.5 million as of September 30, 2003. The company also announced a successful redemption of $150 million in Senior Notes, financed by available cash. Investors should note the ongoing strategic review, which has led to significant restructuring charges and is expected to continue impacting expenses in the near future. The decline in transaction volumes and increased competition are key challenges affecting revenue growth.

Key Highlights

1Reported a net loss of $38.0 million for Q3 2003, a reversal from a $12.7 million profit in Q3 2002.
2Total revenues decreased significantly by 27.1% to $144.8 million in Q3 2003 compared to $198.8 million in Q3 2002.
3A substantial charge of $49.3 million related to a strategic review and elimination of non-core business lines significantly impacted expenses, which rose to $190.3 million.
4Transaction Services revenue declined by 41.6% to $54.4 million, and Market Information Services revenue fell by 27.6% to $36.0 million, reflecting competitive pressures and market changes.
5The company successfully redeemed $150 million in Senior Notes during the quarter.
6Year-to-date (nine months) revenue decreased to $462.1 million from $615.3 million in the prior year, contributing to a year-to-date net loss of $84.5 million.
7Headcount was reduced to 1,029 by the end of September 2003 from 1,155 at the end of June 2003 as part of cost-saving measures.

NASDAQ, INC. Quarterly Report for Q3 Ended Sep 30, 2003

Summary

Key Highlights

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