why are you all whining? the price is up 50% in the last 6 months!
Is Intuit's euphoria
a Web phenomenon?Surge in stock linked to Internet investment, analyst saysBy Barton Crockett
MSNBCNEW YORK, March 9 - Intuit Inc. may not be most people's idea of a hot Internet stock. But increasingly it's looking like one as investors bid up the tax and personal-finance software maker on a wave of Internet euphoria.ÿ ÿ ÿ ÿ ÿ <Picture>
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ÿ ÿ ÿ ÿOVER THE PAST six months Intuit's stock has more than doubled to a recent trading range near $45. And analysts say a big driver has been Intuit's massive investments in new Internet businesses, and the expectation that by next year, Web revenues will constitute some 5 percent of Intuit's total sales.
ÿ ÿ ÿ ÿ"The excitement of this stock is the Internet," says Bill Burnham, a stock analyst at Minneapolis-based investment bank Piper Jaffray. Burnham follows Intuit as part of a specialization in online commerce.
ÿ ÿ ÿ ÿIt's the story of a long-term play that's caused a near-term stock spike. Intuit began nearly two years ago preaching a new business model - that it could create a hot new Internet business to compliment, and perhaps eventually surpass, its core consumer and small-company software business. Internet enthusiasm has pushed Intuit sharply higher.
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by Microsoft Investor
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ÿ ÿ ÿ ÿTo be sure, the software business is strong. Intuit controls more than 80 percent of the markets for personal finance software, personal tax software and small business accounting software, according to tallies by market researcher PC Data. Bill Harris is Intuit's executive vice president responsible for the Consumer Finance and Tax Preparation Software divisions.
<Picture: IMAGE: William Harris>ÿ ÿ ÿ ÿBut growth in the personal finance/tax software category has been constrained by market saturation and stiff competition from Microsoft Corp. and H&R Block. Microsoft, which is a partner with NBC in MSNBC, is offering cut-rate pricing on its Money package, the primary rival for Intuit's Quicken personal finance software. Meanwhile, H&R Block has been aggressively pushing its Kiplinger's TaxCut package as an alternative to Intuit's market-leading TurboTax. Furthermore, Microsoft is expected to introduce a rival tax product next year, Burnham says.
ÿ ÿ ÿ ÿNonetheless, Burnham says he expects sales of Intuit's QuickBooks small business accounting software and related products to grow more than 20 percent this year. <Picture: Barnes and Noble books>
ÿ ÿ ÿ ÿAnd the company is flush with about $500 million of cash and marketable securities, according to Bill Harris, Intuit executive vice president.
ÿ ÿ ÿ ÿIntuit is using its horde to ride the Internet wave. In June, for instance, Intuit spent $40 million to buy 19 percent of Web navigation company Excite Inc. As part of the deal, content and services from Intuit's Quicken.com site are featured on Excite's navigation sites.
ÿ ÿ ÿ ÿIntuit followed that deal in December with an agreement to operate a co-branded financial news and information Web site with Time Warner Inc.'s CNNfn financial news service.
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ÿ ÿ ÿ ÿAnd last month Intuit announced a three-year, $30 million marketing deal with America Online to make Intuit the featured financial information provider on America Online's Web site, and the preferred provider of tax, insurance and mortgage services on AOL's proprietary online service.
ÿ ÿ ÿ ÿAll of this follows a seeming retreat from online services, when, in January 1997, Intuit sold its online bill payment processing subsidiary to Checkfree Corp. in a deal valued at about $268 million. <Picture>
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Will a "real" company like Intuit ever make most of its money virtually - on a Web site?
Yes
No
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ÿ ÿ ÿ ÿBut if the Checkfree deal was a retreat, it sure was a profitable one. Intuit booked a $181 million profit on sale of its bill processing unit, according to Burnham. And the deal left Intuit with a 20 percent stake in Checkfree that has since appreciated more than 45 percent as Checkfree cemented its lead as a dominant processor in a nascent market.
ÿ ÿ ÿ ÿFurthermore, Intuit's Excite stake has more than quadrupled in value as Excite's stock has surged to a recent trading range above $53.
ÿ ÿ ÿ ÿAll of which makes for nice paper profits. But Intuit's Harris says the plan is for Intuit to hang onto its Checkfree and Excite stock to cement strategic partnerships. The real payout? Creating a profitable new Web business.
ÿ ÿ ÿ ÿIntuit has been diligently working over the past two years to recast its Web site as a financial hub, offering stock quotes, personal finance information, online tax preparation, and, in perhaps its most distinctive feature, a broad selection of insurance and mortgage products for sale.
ÿ ÿ ÿ ÿIntuit aims to collect advertising fees and commission payments from financial companies. And while the commission payments are just beginning, the ad banners already are making this a notable business.
ÿ ÿ ÿ ÿBurnham says that Intuit's Web business should constitute 4.8 percent of Intuit's total sales of $579 million for the fiscal year ending in July. He says that almost all of the revenues so far are coming from ad sales. But commission payments should ramp up as Intuit expands its range of products for sale.
ÿ ÿ ÿ ÿFor instance, a revamped mortgage sales service due out later this month should deliver fully vetted mortgage applications to a half-dozen leading mortgage lenders. That should let Intuit collect sales commissions of more than $200 per transaction, up from the $20 or so it collects currently for referrals, Harris says. Quicken gives Intuit an asset of more than 9 million active users, up from 8 million last year, which is a key driver in the success of many of Intuit's new businesses: QuickBooksr, the Quicken Financial PlannerTM and Intuit's new on-line businesses.
<Picture: IMAGE: Quicken>ÿ ÿ ÿ ÿBy this summer, Intuit also expects to offer auto insurance for sale in most states from multiple carriers, up from the one state and one carrier currently offered.
ÿ ÿ ÿ ÿThe Excite deal is turning out to be a key to growth, and Harris says that Excite traffic has nearly doubled page views on Quicken.com, which totaled 44 million in January. That month Quicken.com was visited by about 4 percent of all Web surfers, making it one of the top finance sites, according to Media Metrix data.
ÿ ÿ ÿ ÿFurthermore, Intuit is counting on a big surge in traffic from America Online. Harris says traffic from AOL is expected to be large enough in the first two years of the deal to generate enough extra advertising and commission fees for Intuit to break-even on its marketing payments to the top consumer online service. The AOL deal should be profitable for Intuit in year three, he adds. Scott D. Cook, co-founder and chairman of Intuit.
<Picture: IMAGE: Scott Cook>ÿ ÿ ÿ ÿOverall, Harris says he expects the Web businesses, which are costing Intuit millions of dollars per year to develop, to be profitable within three years.
ÿ ÿ ÿ ÿThe Internet businesses "are not representing a large amount of revenue today," he says.
ÿ ÿ ÿ ÿBut they have "some big potential growth in the future."
ÿ ÿ ÿ ÿFor his part, Burnham doesn't disagree. He just thinks Intuit's stock, at more than 50 times expected 1998 earnings, may have risen too high, given the uncertainties of Internet commerce.
ÿ ÿ ÿ ÿ"Intuit's a solid company with great management and good products," he says.
ÿ ÿ ÿ ÿ"The question is, how soon are you willing to pay for the Internet business. Clearly some people are willing to pay for it sooner rather than later." |
