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Whether it's to pay your income taxes, track your finances, or pay your bills online, odds are you use an Intuit (Nasdaq: INTU ) product. The company offers a range of products and services for nonfinancial individuals, professional accountants, small businesses, and small- to medium-sized banks and credit unions. Trading since 1993, the company paid its first dividend last month, a move that boosted the stock 8%.
But while you may trust Intuit to handle your finances, should you trust it in your portfolio?
State of flux
You used to have to go to your local office supply store or bookstore to buy an Intuit software package. Now, the company is making the transition from software-based, desktop products to online and mobile devices, focusing on streamlining and integrating its products across platforms. These "connected services" made the company $2.4 billion in FY 2011, or more than 60% of the company's revenue. Within connected services, software-as-a-service offerings by themselves produced about $1.5 billion, or nearly 40% of total revenue. That's a good sign, signifying the company's awareness that technology, and its customers' needs, are changing.
Head in the clouds
A service outage in March caused an uproar, and in June 2010, an outage was so severe the company took to Twitter to provide regular updates. But Intuit is hardly the first to encounter cloud-based service disruptions. Sony (NYSE: SNE ) admitted in April that its recent PlayStation outage had been caused by hackers. Last month alone, Apple (Nasdaq: AAPL ) ran into glitches when launching iCloud, and Research In Motion (Nasdaq: RIMM ) left millions of its BlackBerry users stranded without messaging and Internet services. Microsoft (Nasdaq: MSFT ) and Google (Nasdaq: GOOG ) have also both had service outages which left email and document-storage users scrambling.
Feet on the ground
In its 10K, the company identified large banks as competition to its small-business services, since large banks can offer an array of services to their small-banking customers as well as hosting their business checking accounts. To meet that challenge directly, Intuit partnered with Bank of America (NYSE: BAC ) to offer integrated Intuit payroll services to Bank of America's 4 million small-business customers, providing guaranteed error-free paycheck and payroll taxes, and support staff to address any issues. This is a key partnership, and offers a strong model going forward.
Intuit is also aggressively pursuing an online presence, with generally favorable results. Mint.com, the company's free personal finance aggregator, just announced a new iPad app that analysts say is better than the website. I've been using the iPhone app for a while now, and like most of the 115,000 people who reviewed it on iTunes, am pleased with its features and general usability. Mint's Facebook page is humming with frequent posts and active and engaged users. The Intuit, Quicken and QuickBooks pages are catering to significantly smaller groups. Moreover, Intuit seems to be one of the few companies to use Twitter effectively, both for promotion and support.
Where the buck stops
During the March outages, CEO Brad Smith was front and center, issuing an apology that explained the cause of the disruption and outlining the steps the company was taking to remedy it. He also assured customers that none of their personal information had been compromised. Smith's note hit the right tone, addressed all concerns, and was a great example of how a crisis could be managed. It didn't stop customers from getting angry at the outage, but it didn't add any fuel to the fire.
The post ran alongside customer service numbers for each product. If that sounds like a small thing, think of the last time you've had to go down the rabbit hole to find a real, live customer service rep.
Fool co-founder Tom Gardner likes to say that when evaluating a company, he starts with the people. I agree, and have stayed away from stocks that looked good on paper but have leadership I wouldn't trust with my loved ones. One of the things that strikes me about Intuit is how much of its leadership has come up through the ranks. From the CEO, who spent five years learning the company before taking its helm, to the company's many vice presidents, this is a company that doesn't hand out titles with holiday bonuses. Most of the company's senior leadership has been promoted from within, and only after proving their worth. The company's founder, Scott Cook, is still the chairman of the executive committee, which is a good sign for continuity of institutional knowledge. Another good sign? Most of the executive team holds more than token stock in the company.
The Foolish bottom line
Intuit is cyclical in nature, with traditionally strong second and third quarters, and slower first and fourth. For investors who can look at the big picture and want to invest long-term, Intuit is a great bet. CAPS players are bullish on this stock, and so am I; I've given it a thumbs-up. I believe you can trust Intuit's stellar management to keep this company a portfolio winner going forward.
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