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NYSE Euronext Quarterly Profit Rises on Trading Surge

Trans-Atlantic exchange operator NYSE Euronext's quarterly profit more than tripled, but its shares slid over 9 percent on what one analyst said was concern about high costs.

The parent of the New York Stock Exchange said quarterly profit rose to $156 million, or 59 cents per share, from $45 million, or 29 cents per share, in the year-earlier period, which was prior to the Big Board's merger with Euronext in
April 2007.

Excluding merger expenses and other one-time items, and assuming the NYSE-Euronext merger occurred at the start of the year-earlier period, earnings were 66 cents per share, up from 47 cents a year earlier, but a penny short of the average Wall
Street forecast as compiled Reuters Estimates.

Compensation costs nearly doubled to $210 million in the quarter and there were steep increases in the cost of marketing, professional services and systems and
communications.

In addition, NYSE Euronext said it now expects to obtain $275 million in cost savings resulting from the merger later than initially expected.

Integration will now take until the end of 2010, compared with an initial target of the 2010 first quarter, the company said.

NYSE Euronext had projected cost savings and higher revenue as a result of the merger, but said the expected integration schedule had fallen behind by three quarters.

"With revenue broadly in line with expectations, the higher than modeled expenses were offset by other income, which we don't consider a high quality quarter," Keefe, Bruyette & Woods analyst Niamh Alexander said in a report.

Still, revenue rose to $1.18 billion from $659 million, beating analysts' average forecast of $1.025 billion and NYSE Chief Executive Duncan Niederauer said on a conference call with investors volume was strong in January.

Stock exchanges have seen trading activity rise as market volatility has risen in recent months. Rival stock market Nasdaq also reported last week that robust trading volume boosted its rise in profits for the fourth quarter.

NYSE Euronext shares fell 9.1 percent in early trading to $75.18, making it one of the top decliners among financial stocks.

Looking Ahead

The international exchange operator will continue to pursue expansion, Niederauer told investors, which could come through organic growth, joint ventures, or acquisitions.

Since the merger of the New York Stock Exchange and Euronext, the company has announced several smaller acquisitions, including that of the American Stock Exchange for $260 million. It also opened an office in China last year, hoping to attract fast-growing companies looking for new places to tap capital.

NYSE Euronext said new issues listing on its exchanges raised a total of $80 billion in 2007. IPO activity by non-U.S. companies on the NYSE was at its strongest level since 2002, with 42 new listings, including 20 from China.

NYSE Euronext is comprised of six cash equities exchanges in five countries, and six derivatives exchanges in six countries.