Intuit Shares Plunge
After Profit Warning
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
Shares in Intuit Inc. fell sharply Friday after the software maker reduced its earnings
forecast because of weak sales.
The Mountain View, Calif., maker of QuickBooks and TurboTax said after the close of
regular trading Thursday that it expects third-quarter pro forma earnings, which
exclude acquisition costs and investment gains or losses, of $1 to $1.03 a share on
revenue between $630 million to $660 million. Wall Street was expecting earnings of
$1.08 a share on revenue of $692 million.
For fiscal 2003, the company is now targeting pro forma earnings of $1.30 to $1.35 a
share and revenue between $1.65 billion to $1.69 billion. Intuit previously predicted pro
forma earnings of $1.38 to $1.43 a share on revenue between $1.71 billion to $1.77
billion for the fiscal year.
Management blamed the shortfall on a sluggish economy. "This is not an issue with just
one of our businesses -- all our businesses have been affected," said Chief Executive
Steve Bennett.
In 4 p.m. trading Friday, Intuit shares were down $12.17, or 24%, to $38.72 on the
Nasdaq Stock Market.
The earnings letdown and harsh market reaction represented a dramatic change of pace
for a company that has thrived even as much of the Silicon Valley suffered. Through
Thursday's close, Intuit's stock had surged by 19% since the end of 2001.
"Now, we are learning the company isn't immune from this economic climate either,"
said analyst Glen Greene of ThinkEquity Partners.
The warning was especially surprising s given the expected back-heavy tax season with
late filers. Prudential Financial analyst Bryan Keane said he believes the warning is an
indication that the Internal Revenue Service's Web site, which offers free preparation
and filing services, is taking market share away from Intuit.
Mr. Keane added he believes more states will get involved with Web sites that offer free
tax filing and preparation. Twenty states have online policies similar to the IRS, he said
in a research note. With the growing number of free resources for tax preparation,
there is a long-term revenue risk from customers who are less likely to buy Intuit's
QuickBooks software, he said.
Mr. Keane also said Intuit faces difficult year-over-year comparisons. The company
posted 12% growth in 2002, and Mr. Keane expects sales this year to be flatter.
Even with the slowdown, Intuit believes its sales in its fiscal year will wind up with a healthy gain. Projected revenue is expected to range
from $1.65 billion to $1.69 billion, up by a projected 25% to 29% from last year. Just last month, though, Intuit had raised hopes for annual
revenue of nearly $1.8 billion, a growth rate of about 35%.
Merrill Lynch & Co. analyst Gregory Smith said the warning was a surprise, but it doesn't alter his long-term opinion on the company. He still
believes Intuit can show 25% earnings growth over the next few years and maintains his buy rating on the company.
Intuit is becoming more vulnerable to economic fluctuations as it develops more expensive software aimed at the small-business market.
Consumer spending also has been tapering off in recent months.
Over the past three months, Intuit has been fending off customer complaints about a new antipiracy feature on its industry-leading TurboTax
software. The feature includes restrictions on printing tax forms and a security software program that critics say is secretly installed on the
hard drive.
The new features have spurred calls for a consumer boycott of TurboTax and marketing attacks by rival H&R Block Inc., but Intuit says the
backlash hasn't hurt sales. In its warning, the company emphasized that TurboTax's market share has remained steady at 68%.
With the last-minute tax-filing rush still ahead, Intuit said TurboTax sales could still surge before the April 15 deadline. |
