What's Intuit Uptu? Dave Marino-Nachison (TMF Braden)
August 12, 1999
With nearly $593 million in revenues in fiscal 1998, one might wonder why personal finance software developer Intuit (Nasdaq: INTU) would bother buying a company like privately held Atlanta tax preparation software company SecureTax.
SecureTax offers online tax filing for individuals and, according to reports from dbusiness.com, had revenues of approximately $10 million last year. Terms of the deal weren't disclosed.
With those kind of revenue figures, it would seem SecureTax would have a way to go before it could challenge Intuit -- a $4.67 billion (in terms of market cap) company with about $165 million in selling and marketing expenses last fiscal year -- for market- and mind-share.
And Intuit can call upon not only the nearly 400,000 people that used its WebTurboTax offering this past tax season -- about 10 times more than the year before -- but an even bigger user base of the company's regular TurboTax software. An Intuit spokeswoman said SecureTax had 170,000 users last tax season.
What Intuit was going for was, in essence, a customer buy. If it used SecureTax, surmised President and CEO Bill Harris, they're the kind of people his company wants in the fold, willing and likely to do their heavy personal lifting online.
"Intuit gains access to a new group of potential customers who have demonstrated their willingness to do business on the Internet," said Harris, "customers who would likely be very interested in our other online financial services, including our Internet-based mortgage and insurance businesses."
Intuit clearly wants to be a leader in the online space: Harris said in the interview that he expects online revenues to represent "significantly" more than 10% of the company's total for the fiscal year, a good deal better than company estimates reported earlier in the year. That should help boost profitability as well -- through the first three quarters of fiscal 1999, gross margins were up slightly to 22% from 20% last year.
This year, Intuit's online tax preparation business is beginning a complete transition to the Web, and Harris believes its growth -- online filings this past tax season were more than double year-ago levels at 1.5 million, according to Intuit's fiscal Q3, which ended April 30, earnings release) -- signals that consumers are becoming more willing to do complex personal financial activities on the Internet.
The more Intuit can offer its users, the more success it should have converting its traditional software users to the online format while bringing new users online as well.
Investors might want to look out for other acquisitions from Intuit with that approach in mind. Also worth noting are comments from a July Bloomberg Forum interview in which President and CEO Bill Harris said the company won't be shy about buying companies that could make its product families more attractive to customers. "The [priority is] primarily to fill out existing product lines," Harris said, mostly with small technology acquisitions and, to a lesser degree, services buys.
This isn't really that kind of deal, however, although there may be some bells and whistles Intuit can incorporate into its offering. A quick peek at SecureTax's site doesn't really add much insight to the two program's relative advantages and disadvantages, although SecureTax certainly doesn't shy away from comparisons. Readers with input on this might want to post their thoughts on our Tax Strategies or Intuit message boards.
Dueling Fools, 6/16/99, "The War of '99: Money v. Quicken"
StockTalk Interview, 3/23/99, Intuit Pres. & CEO Bill Harris