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November 24, 1998

INTUIT LOVES TAXES BUT LOVES THE INTERNET MORE

By CBR Staff Writer

At least somebody in the US is looking forward to the impending tax-return season. Intuit Inc, the company behind the Quicken range of personal finance applications, is currently experiencing the usual dip in sales as it passes through its off season. But chief executive Bill Harris is excited about the prospects for the first three months of next year; that’s when the tax returns start rolling in. He is predicting that one in every five returns across the whole of the US will be prepared using Intuit software. Based in Mountain View, California, Intuit has reported first quarter net losses of $49.2m, compared to losses last time of $12.8m, while revenues rose by 17% to $112.0m. But Intuit traditionally brings in more than twice its first quarter revenues in the second quarter through to the end of January, with this year’s crop of tax-related products due to be ready in December. The current losses also include $23m of charges, substantially due to the $400m acquisition in June 1998 of Lacerte Software Corp, a Dallas-based developer of professional tax preparation software, which has a similarly skewed income profile. Excluding these charges, Intuit’s pro forma losses were $26.8m, roughly in line with analysts’ estimates. Intuit said its leading personal finance package, Quicken, and its small business accounting package, QuickBooks, both increased market share in the quarter to 80% and 84% respectively. But the company’s focus now encompasses much more than just its traditional packaged software markets. The big news is the internet. Intuit’s broad ranging financial web site, Quicken.com, reputedly saw 107 million page views in October, compared to just 20 million this time last year. As well as offering the standard fare of stock quotes and financial news, the site has added a growing business selling mortgage and insurance policies on-line. Intuit is also integrating the site with its shrink wrapped software packages, offering services such as on-line payroll for QuickBooks. Scott Cook, Intuit’s chairman, said there were now two ways of looking at the company: either as a healthy software outfit with a huge internet upside; or as an internet company with a profitable revenue stream from its established software products. The latter may be an exaggeration given that only 10% of Intuit’s revenues come from Quicken.com (including software and advertising sales) but it shows how the company is now positioning itself. Chief financial officer, Greg Santora, said Intuit was also looking to the internet as a means of lowering distribution costs and meeting the company’s stated aim of pushing up operating profits by a point each year. On the quarterly conference call, the management team repeatedly brought the conversation back to Quicken.com, and the word internet must have been mentioned over one hundred times, perhaps in the hope that internet stock frenzy would find its way into Intuit’s own share price.

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