The Nasdaq Stock Market has reported a 55% decline in net income for the second quarter due partly to a $10.3 million charge against its investment in the depressed Japanese equity markets and a failed technology trading platform for Nasdaq Japan.
Net income for the quarter was $8.8 million as compared to $19.6 million in the second quarter of 2001, a decrease of 55.1%. Net income excluding the adjustments was $19.1 million, essentially flat with the prior year.
Citing prolonged difficulties in the Japanese economic environment, Nasdaq CEO Hardwick Simmons says: "Our investment in Nasdaq Japan will not return value in the foreseeable future. We believe that the impairment we are taking captures Nasdaq's full exposure to the investment."
Included in the $15.2 million pre-tax ($10.3 million after-tax) charge was a $4.9 million write-down of the development costs related to a developmental trading platform originally designed for Nasdaq Japan and later, the Bulletin Board Exchange in the United States.
Nasdaq's revenue also declined in the second quarter reflecting difficult equity market conditions, continued moderation in Nasdaq trading volume and selected responses by Nasdaq to increased competition. Revenue for the quarter was $205.3 million versus $221.3 million in the second quarter of 2001, a decrease of 7.2%. Underlying this performance during the quarter was a 6.2% decline in average daily share volume in Nasdaq traded securities to an average of 1.8 billion shares per day.
Looking ahead, Simmons sought consolation from the Exchange's investment in the new trading platform SuperMontage, which began testing last month, and its recently announced joint venture in Germany.
He says: "The full implementation of SuperMontage in the United States and Nasdaq's expansion in Europe, based on SuperMontage's functionality, will provide all Nasdaq investors opportunities for greater transparency, liquidity and, speed; ultimately leading to better executions."