For those who didn't see the Intuit CEO interview on CNBC:
CNBC- SQUAWK BOX
INTUIT CEO BILL HARRIS
NOVEMBER 25, 1998
ABSTRACT: Harris assures investors fiscal first quarter losses were seasonal and in line with expectations. Harris declines to comment on rumors that Intuit is in talks to acquire Quote.com. Harris gives an overview of current online bill paying and what he hopes for the future.
Mark: It's not tax time yet, but a company called Intuit is already doing some number crunching. Late yesterday, the maker of Turbotax and Quicken personal financial software posted results for its fiscal first quarter, reporting a loss of 45 cents a share on revenue of $112 million. And although Intuit makes most of its money closer to tax time, the loss was bigger than year-ago levels. But Intuit is not just waiting for the taxman to come. The company is expanding into cyberspace. Shares of Intuit closed down more than four points yesterday to 59 7/8. The 52-week range is 27 to 67 15/16. Joining us to tell us more about his business, Bill Harris, CEO at Intuit. Good morning, Mr. Harris.
Thanks very much for getting me up so early the West Coast.
Mark: We'll try to keep you awake now.
Let me mention, you were just talking about Eric Schmidt, he lives in the same town I do, I was at his house recently, he says he watches "Squawk Box " religiously.
Mark: I hope that when you drove past his house, you honked your horn to wake him up. Let's talk first of all about your earnings. As we pointed out, you have a seasonal, it's odd to think of a software company that way, but you have a strong seasonal component and the loss was bigger than we are accustomed to seeing. Can you explain it and why we should not worry about this?
Sure. The loss in the first quarter was exactly as predicted. In fact, we were a penny ahead of First Call consensus. So it was completely in line with our expectations and external expectations. We've got a company that is very seasonal, but because of course it's a tax business or predominantly in the season a tax business, but it is not volatile. In other words, one of the things that worries people about seasonal companies sometimes is that they are often fad-driven; apparel, toys, et cetera. There is nothing less faddish than doing your taxes. It is seasonal but not unpredictable.
Mark: We spoke earlier about your company before you were up, probably. We drew a parallel to H&R Block.
Right.
Mark: But do the new initiatives that you are engaged in here, they must in some way help to dampen that seasonality. Mortgage.com, I'm sorry, Quicken, mortgage is not seasonal, other initiatives are not seasonal. You appear to be heading down a path of dampening that effect.
Perhaps to some extent. But almost all financial activity because of the psychology of consumers, small businesses, ends up being relatively seasonal. There's more financial work, more financial decision making done in the fall and winter than in the rest of the year. Additionally as fast as we're growing the rest of our businesses, we're growing our tax business just as fast, including taking the tax business from the desktop to the Internet. We expect that we will continue to be a seasonal company for a long time.
Mark: Let's talk about the future. Where are you taking this company? Article Dow Jones, dateline a few days ago, about a week ago, November 19th, has not been denied so I assume it's true. "Financial software maker Intuit in talks to acquire Quote.com, sources said Thursday." You have an active financial site out on the Web. The question I would like to you address is, that is a very crowded arena in cyberspace because an awful lot, I think financial activity, investing information is the first or second activity on the Web. How do you distinguish yourself in that arena? How do you thrive against an enormous amount of competition? What can you bring to that arena that isn't already there?
First, let me just say for the record that we do not comment. We never comment on rumors of the nature that you just mentioned. But let me talk about our strategy. Our strategy is to be the premier provider of financial functionality on the Web, just as we are today on the desktop. How do we differentiate ourselves? We're deeper, broader and better than just about anybody else in a whole host of financial categories spanning banking, bill payment, bill presentment, mortgage, insurance, payroll, small business accounting, taxation. All of these things are things that then can be brought together, because what in the end the customer wants is an integrated view of their electronic finances.
Mark: Rick?
Rick: As I looked at your company I found it very difficult to value the company. You have a tremendous amount of good will amortization, so that while we're all talking about the losses you're reporting, you're actually earning cash money every year. You have a Internet business that's losing money, that I don't know if it's making or losing money but that is causing losses or diluting your earnings. You have a core shrink-wrapped software business that I would assume is barely profitable. Do you break this thing up down the road and spin out your Internet operations to get the value there?
I think we don't break up this company. The strength of this company is in the ability to integrate across areas of financial functionality, across markets and across desktop to Internet. That's the key competitive strength is the sum of the parts, not the parts individually. Let me mention quickly on the goodwill amortization. When we make acquisitions, we acquire on a purchase basis rather than a pooling of interest basis. And therefore, we've got large non-cash charges. Almost every analyst that follows us looks through those charges because they are essentially non-cash accounting issues rather than reflecting the real operating results and power of the company.
Mark: We need to get a commercial break in, pay some bills. If you would be kind enough to stand by.
And you might want to use Quicken to pay those bills.
Mark: I don't know what the bookkeeping here at GE, CNBC uses. We'll be back with more with Bill Harris after this message.
Mark: Talking to Bill Harris, CEO of Intuit at Stanford University on the West Coast. Mr. Harris, let me run a hypothetical scenario by you. I'd like to get your comment on whether it's realistic and how I think it might play out. Some day in the future we'll be able to log on and hear the message, "You've got bills," instead of just mail. We'll be able to pay those, get the bills in our electronic mail, pay them electronically. Getting the bills is a mailman's function. I can see how an AOL might benefit from playing a role there. Paying the bills is obviously a bank function. I can see how banks might play a role. The banks might try to grab that bill presentment or delivery. How do you see that working? It seems to me there are a lot of big players there that might stomp all over you in the long run. Tell me how you look at it and what you might do to deal with it?
Two questions. First is, the scenario. Second is then the competitive landscape. The scenario that you paint is actually real. It's real today. You can use Quicken today and get bills electronically, pay them electronically and store that information with the rest of your accounting records electronically with one click of a button. That's real today in Quicken 99 and the limitation is that there are a relatively small number of billers that are up today but there are many more that are coming over the next series of months. So that scenario is not something in the future, it's something today. Then the question is, okay, how is that service, which is going to be hugely valuable to almost every American, how is that service going to be delivered? And we will take it directly to our customers who use Quicken, Quick Books, et cetera but will also and have built the facilities to allow AOL, Yahoo!, Excite, Wells Fargo, and the various financial institutions to deliver the same functionality. Essentially we're enabling many players in this arena to do exactly what you just mentioned.
Rick: Doesn't Check Free also enable them?
Check Free does, we're a close partner with Check Free. Essentially Check Free works on backend transaction processing, we work on front-end customer interfaces.
Mark: Fascinating, fascinating, can't wait to see this unfold. Mr. Harris, we'll have you back sometime in the future and see if it develops the way the dreamers like you, and I mean that in a positive way, think it will.
Thank you.
Mark: Thanks to Bill Harris, CEO at Intuit. He joined us from Stanford University in California.
|
