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:
