Intuit Gets to It

When Intuit Inc.’s company campus flooded during heavy rains a few months ago, it was only the latest calamity to befall the maker of the world’s most popular personal finance software.

Over the last four years, the Mountain View, Calif.-based company has endured a buyout by Microsoft Corp. that was nixed by the government, an aborted foray into online banking, the first layoffs in its history and losses totaling $254 million.

But ask founder and Chairman Scott Cook what Intuit has going for it today, and he chooses an unlikely word: “Momentum.”

Indeed, Intuit has somehow not only survived its string of setbacks but has emerged with an outlook brighter than at almost any time in its 15-year history.

The company still has a strong hold on the financial software market with its Quicken, TurboTax and QuickBooks products. But analysts say the company’s stock price has rebounded from about $23 last summer to nearly $50 of late mainly because of its online prospects.

During the last six months, the company has established its https://www.quicken.com site, which offers everything from tax tips to home mortgages, as the most frequently visited financial site on the Internet, according to researcher Media Metrix.

Of course, there are hundreds of other companies, including Microsoft, that are fighting for turf in the online financial space.

But analysts say Intuit has taken a commanding position by exploiting its flagship products, striking deals with some of the biggest players in cyberspace and taking advantage of the financial industry’s fears about Microsoft.

“There’s a lot that still needs to happen,” said Genni Combes, an analyst at Hambrecht & Quist in San Francisco. “But I think Intuit is going to be the clear market leader.”

In many ways, the Internet turns business upside down for Intuit, a company that for a long time thrived in a very cyclical business by tending to itself, upgrading its products once a year and collecting money from millions of consumers.

But online, no company can survive on its own, the upgrade cycles are faster, and the money flows not up from consumers but down from companies that want help selling their products.

Even at this early stage, the fact that Intuit has adapted to these changes marks a significant accomplishment for a company that, like so many others rooted in the stand-alone PC world of the 1980s, was utterly blindsided by the Net.

Just as the Net was blooming in 1995, Intuit was in the midst of building an enormous private computer network for connecting banks to their customers. It was a bit like building a new buggy factory just as the automobile was invented.

Charging banks for use of this network was supposed to be a blockbuster business for Intuit, perhaps worth $100 million a year within five years. Instead, it became a white elephant.

“All of a sudden, the Net popped up and the private network was obsolete,” said Bill Harris, Intuit’s executive vice president responsible for much of the company’s online strategy. “We’d invested a lot in this system, and we had to essentially say, ‘See you later.’ ”

The company managed to sell its private network to another online banking firm, CheckFree, for $227 million, more than it had spent to build it.

Still, the turmoil created what Harris called “a big struggle internally” in 1996. Many Intuit employees bolted for other companies while executives wrestled over strategy.

It was more than a year later, in October 1997, that the company finally launched Quicken.com. Though still a work in progress, the site has become a financial mega-market, serving up such basic fare as stock quotes, but also handling complex transactions such as tax returns.

In many ways, the Net was tailor-made for this type of commerce. Unlike books, shirts or flowers, financial products are basically documents that can easily be reduced to bits of data on a computer. You can’t compare bottles of wine on the Net, but you can compare insurance policies.

At Quicken.com, for instance, consumers can outline their life insurance needs and sit back while Transamerica, Prudential, State Farm and five other firms bid for their business. Typically, these companies pay Intuit for the access, and pay again if they close a deal.

Even in taking tiny percentages, Intuit and other online firms could rake in millions if experts are right that up to 20% of all financial products could be purchased online within 10 years. After all, car insurance alone is a $108-billion market annually.

To grab a big chunk of that, Intuit is exploiting what in many ways is a home-field advantage it has long enjoyed at the intersection of computers and financial products.

The company, founded in 1983, built a $600-million business by helping everyday people use computers to manage their finances. About 10 million people use Quicken to keep track of their investments, bills, bank accounts, loans and more. Another 3 million use TurboTax to do their taxes or QuickBooks to handle small-business accounting chores.

In putting more of its content and software on the Internet, Intuit risks cannibalizing sales of its shrink-wrapped software. But Quicken sales have been stalled for several years anyway because of market saturation, and the Net represents one of the few avenues to growth.

For now, the old-fashioned products remain key to Intuit’s strategy because they provide brand-name recognition and are driving much of the online traffic. New versions of Quicken and TurboTax come with dozens of embedded links to the site, making sure that if users want to update their stock portfolios or check the latest tax law changes, they do it at Quicken.com.

To attract new customers, Intuit has cut a flurry of deals with companies that operate some of the most popular gathering sites on the Net.

It paid $40 million last year for a 19% ownership stake in Internet navigation site Excite Inc., and another $30 million to be the exclusive source of financial material for America Online Inc.’s Web site. As a result, if Excite or AOL.com users want financial information, they’re routed to Quicken.com.

A few weeks ago, Intuit joined with cable TV giant Tele-Communications Inc. and BankAmerica Corp. in a venture that aims to enable consumers to do home banking through their television sets.

Few online rivals have the kind of cash or clout it takes to cut such deals. One that does is Microsoft, the Redmond, Wash.-based giant that is Intuit’s fiercest rival on and off the Internet.

The two companies’ personal finance products, Quicken and Money, are ranked one and two in market share. And while Quicken.com is the most frequently visited financial Web site, Microsoft’s Investor.com is close behind.

Four years ago, Microsoft decided it would be easier to buy Intuit, which agreed to the $2.4-billion offer. But federal regulators blocked the deal over antitrust concerns.

“Cheers went up in some of our buildings,” said Cook, 45, a native of La Canada. “I was initially disappointed.”

But over the last year, Cook said, he has come to see the failure of that deal as an advantage because many financial institutions are nervous about being squashed by Microsoft.

There is some evidence that he’s right. Forrester Research recently surveyed 50 financial companies and found that “nearly 80% are wary when dealing with Microsoft,” although many also said they would still buy its products.

Microsoft executives say they have no trouble finding willing financial partners on the Net. “That’s why Investor.com has 12 [stock] brokerage partners, four times the number Intuit has,” said Chris Payne, Microsoft’s site manager.

But Intuit has managed to exploit the situation by cozying up to banks in ways that Microsoft hasn’t been able to. Just last week, Intuit announced a deal that will allow NationsBank and others to deliver customized versions of Quicken software to their customers.

Analysts say the battle with Microsoft, and the legions of other online firms, is bound to drag on with little payoff in the short term.

Intuit is trying to differentiate itself by going “broad and deep,” as Harris puts it, offering a wider range of more detailed content.

This is a costly approach because, unlike many sites that merely provide links to products or services, Intuit wants its site to be able to handle entire transactions. The company has hundreds of employees developing complex software engines for the site, including one that will let users outline a mortgage, then get bids from the nation’s largest lenders and close a deal without leaving Quicken.com.

Intuit executives acknowledge that Quicken.com probably won’t be profitable for several years and that it generates less than 5% of the company’s revenue. But Cook said it’s the fastest-growing segment of the business and will one day overtake traditional software sales.

In the short term, Cook said, the objective is simply to stay in front of the Internet wave, “instead of being pounded by it.”

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On the Rebound

Intuit saw it stock price tumble to $22.94 last summer form a high of $84 in the fall of 1995. The price has rebounded, bolstered by the software maker’s online efforts, to $48.69 at the market’s close Friday. Monthly closes since March 1995 and latest:

Source: Bloomberg News

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Greg Miller can be reached via e-mail at greg.miller@latimes.com