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Intuit is now a dog. They were always Wall Street's "darling" because they made the most popular financial software around -- Quicken. Now the financial software market is softening and the Internet is soon to take over. This is a company with no real plans for the future, and already has 75% of the personal finance software market with Quicken. The highest sales it ever had were <$600M, and they are now on the decline. The market cap is somehow $1.6B, don't ask me how or why. They are currently trading at a 166 p/e ratio, not good for 20% (if that) growth? It has of course had the big run-up recently with the American Express takeover rumor, which has since fizzled. The market has bought on the rumor and will now sell on the news. In February I expect this stock to be at new 52-week lows, probably in the $18-$24 range. I realize that it is hard to get a good percentage gain out of shorting a stock with a stock price as big as Intuit's, but hey guys, this is a sure thing in my eyes. There is nothing to keep up the stock price. The difference between the old price of $27 and the current price of $35 is short-term market inefficiency. The difference between the old price of $27 and a price in the $18-$24 range is medium-term market inefficiency. Use this to your advantage. Microsoft is more aggressive on the Internet and soon Intuit will wish it were already dead because it doesn't have the manpower or know-how to succeed on the Information Superhighway. Read this article everyone. I especially like the "barrell of a gun" remark. It sent goosebumps down my spine! ********************************************************************** Intuit Inc seen avoiding merger By Kourosh Karimkhany PALO ALTO, Calif., Nov 12 (Reuter) - Jilted once, financial software company Intuit Inc appears unlikely to return to the merger altar any time soon. Buyout speculation has swirled around Intuit since May 1995, when Microsoft Corp dumped its plans to buy the maker of popular personal finance software like Quicken and TurboTax. Last week, Intuit shares surged again on speculation American Express Co was about to make an offer. However, many industry analysts believe such a deal is not in Intuit's future, adding the best way for Intuit to grow is to attract as many partners as it can to set up online banking services. "My personal belief is that Intuit is best able to maximize its value on its own," said David Farina, an analyst at William Blair. Intuit's key asset is Quicken, a program that helps computer users track checkbook balances, check stock portfolios, pay bills, plan monthly budgets and lay out retirement plans. The company depends on partnerships with dozens of banks and brokerages to provide online links between customers' personal computers and their accounts. Intuit would turn off most of its partners if it were acquired by a big financial partner, Scott Cook, Intuit's chairman, insists. "We would never become a captive of one financial institution or a small group of financial institutions," Cook told a group of investors in Florida on Friday. Still, some analysts questioned whether Intuit has the marketing and financial muscle to compete on its own against Microsoft for long. Microsoft, the world's biggest personal computer software company, is spending a big chunk of its $2 billion research and development budget on financial software and online banking services provided through the Internet. Although Intuit still controls 70 percent of the market for personal financial software, MICROSOFT IS GAINING. Intuit also needs capital to expand into new area, such as giving online investment advice, said Karen Epper, an analyst at Forrester Research, a market researcher. Such forays will likely hurt profits, she said. "They might get dinged on their stock price, but this area is more in line with the consumer marketing business model they have," Epper said. It could be years, however, before Intuit's push into new areas could pay off, Epper said. Intuit said in September it expects lower revenue growth in the current fiscal year ending July 1997. The company blamed a slow market for consumer software. Some of the shortfall is because of one-time suitor Microsoft, analysts said. In October 1994, Microsoft stunned Wall Street by offering to buy Intuit for more than $1 billion, the biggest acquisition attempt in the software industry at the time. Microsoft was willing to pay that huge sum to turn Quicken into a gateway for online banking services, an industry that's expected to rival brick-and-mortar retail banking in revenue in the next ten years. Microsoft backed out of the deal in May 1995, however, when the Justice Department said it would sue Microsoft on antitrust grounds if it pursued the transaction. Since then, Microsoft has spent hundreds of millions beefing up its rival Microsoft Money financial management program. The company also set up a division to sell networking and Internet software to banks. To counter Microsoft's redoubled efforts, Intuit set up a business to process online transactions -- such as bill payments and account transfers -- between banks and depositors. Some investors saw the unit, Intuit Services Corp., as a promising source of revenue. In September, however, Intuit sold the unit to rival Checkfree Corp., partly because it did not have the expertise to handle huge volumes of transactions. Banks also were reluctant to have Intuit sit between them and their depositors, Epper said. Most banks preferred to reach their customers through the Internet instead of Intuit's proprietary network. "Intuit is staring down the barrel of a gun, and that gun is the Internet, which is making financial management easier," Epper said. It could be a while before Intuit outlines a new strategy for growing its business, analysts said. Meanwhile, there may be more bouts of wishful thinking about an acquisition. | ||||||||||||||
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