Intuit This: You're Fired

Riddle me this. If your business aims to develop new "value-added services for ... desktop products and innovative online offerings ... [focusing] on both traditional and new markets across the globe, while embracing social networking and mobile technology trends," what's your first step to reach that goal?

Answer: Fire 7% of your employees
Unless you were reading from the teacher's manual, I'm betting you didn't see that answer coming. Neither, I suspect, did the 575 employees of tax and accounting software firm Intuit (Nasdaq: INTU), which last week announced it will begin handing out pink slips to its employees.

The firm's layoffs are expected to cost it about $22 million in severance and related restructuring costs, which will come off the top of this quarter's earnings. At the per-share level, that will shave off about $0.04 in profits, reducing this year's guidance to somewhere between $1.38 to $1.40 (revenue guidance remains intact at $3.05 billion to $3.06 billion for the year.)

Spinners aren't winners
Now, Intuit is spinning this news as a "realignment" (more on that in a moment), so it declined to mention that while laying off 7% of its workforce will cost $22 million now, it could easily save that much in reduced payroll costs every year going forward. Of course, the only reason to mention that is if you're looking to cut costs. Which Intuit isn't.

Right
Never mind that Jackson Hewitt (NYSE: JTX) is struggling and may be tempted to cut prices to steal market share. Never mind, too, that H&R Block (NYSE: HRB) appears to be stealing market share. Intuit's not worried 'bout the economy. No, not one little bit. Rather, it's seeking to evolve into a 21st century business service firm, to "Invest in [a] Connected Services Strategy."

What's that?
Honestly, I'm not quite sure what Intuit means when it says it's "embracing social networking and mobile technology trends." Could we soon be able to:

  • Go to a special TurboTax page on News Corp's (NYSE: NWS) MySpace, and invite friends to do our tax returns? (Gee, thanks!)
  • Watch instructional videos for QuickBooks on Google's (Nasdaq: GOOG) YouTube?
  • Or even "text" our tax returns from our cellphones (with Verizon (NYSE: VZ) and AT&T (NYSE: T) taking a cut of the refund?)

Honestly, I'm at a loss as to what "social networking" and "mobile technology" has to do with payroll and tax returns. What I do know is that Intuit now has 575 fewer workers around to help it figure this out.

Can Intuit do it? Get clues from yesterday's news:

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Fool contributor Rich Smith owns shares of Jackson Hewitt. Jackson Hewitt is a Motley Fool Hidden Gems PayDirt selection and a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation.Why do we tell you this? Because The Motley Fool has a disclosure policy.

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Comments from our Foolish Readers

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  • On June 30, 2008, at 4:29 PM, valu3buff wrote: Report this Comment

    Thanks for this article. I posted about this on the boards, but no one bit.

    I'm cutting the cord on this one and going to find myself a business that knows what it's business is.

    Thanks,

    valu3buff

  • On June 30, 2008, at 9:37 PM, radicalaccountin wrote: Report this Comment

    QuickBooks online version is getting more popular, but it needs improvement. And yes, we will go to remote data entry, don't you think?

    As to social networking, they've been developing forums for years. I find the discussions very helpful. Maybe they now have a critical mass of people.

    I wish they would focus on the Mac version. That's where my client base is growing.

    Are they downsizing, or moving overseas?

    God bless you if you've made money on this stock.I own 1 (now 2) shares for the report.

  • On July 01, 2008, at 12:35 PM, jasonrc wrote: Report this Comment

    Quickbooks online is getting more popular? Check Intuit's latest fact sheet. In the last two quarters customer adds for Quickbooks online have declined by 60% and 70%.

    The rate of growth for the Quickbooks business has been decreasing for the last five quarters. That was preceeded by six consecutive quarters in which the customer add rate on the entry level Quickbooks versions (Basic and Pro) was declining. And now we have Simple Start being offered free, and making up 10% of total QB customer adds last quarter. This business is not well.

  • On July 01, 2008, at 12:54 PM, venbacca wrote: Report this Comment

    great article! my husband was one of the 575 that was respectfully laid off! We are exstressing around our expecting our first child in four months, so we are house trying to find him a new job, and if we need to file for bankruptcy. I love Intuit right now,

  • On July 01, 2008, at 8:01 PM, outsourceit wrote: Report this Comment

    We were outsourced in our division. We saw it coming but figured we had another year max. We were told to direct the customers to the web to "teach them to fish" so we'd be freed up for the more important calls. Yeah right. "people prefer the web" --umm no , companies like intuit would prefer to take the customers money and tell them their answer is "out there somewhere" or charge them $79 a month to speak to someone in India when they were paying$49 to speak to an american. The drop in incoming calls was replaced with web-based callback requests so there were now more outgoing calls. We had no available time , all off-phone activities were routinely cancelled. We had record profits and they axed us. In case you are wondering why gas is near $4 a gallon they say that the emerging markets of china & india are ramping up--yes--they are now able to afford cars to drive to work to OUR JOBS. So if you think outsourcing doesn't affect you , think again.

  • On August 22, 2008, at 10:48 AM, ADC08 wrote: Report this Comment

    Yeah I was a outsourced at the other company in taxes that had layoffs in Feb. I really get a kick out of the CEO's that say it's difficult to find workers with the skill sets and education in America. This is code for we want to pay one third of the salary to people in another country and don't care how the product suffers. Where's the unions for Technology workers? It seems that if the AFL-CIO had a branch for that, I would be the first to join it. Another JA is Bill Gates who says they need to increase the number of I-9's. Well at the company I worked for they utilized them like indentured servants. They had to work over 80 hours a week and always told me that as soon as they get their residency they are finding another job.

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