Intuit sheds mortgage loan business
The financial software and services specialist says it will spin off Quicken Loans, its mortgage business, as it retools to focus on small-business customers.
The company also adjusted its financial forecast.
Intuit formed Quicken Loans when it acquired Rock Financial in 1999. The subsidiary makes home mortgage loans in all 50 states through the Quicken Web site and through a handful of former Rock Financial offices in Michigan.
The division will become a separate company led by Dan Gilbert, chairman of Quicken Loans and founder of Rock Financial. Intuit will retain a 12.5 percent ownership interest. The deal is expected to close in 90 days.
Intuit CEO Steve Bennett said in a statement that while Quicken Loans has generated solid revenue and profit, the business no longer fits with Quicken's core strategy, which has shifted from consumer finance to small-business finance.
"They have outstanding products and services and an experienced and talented management team, but the business is no longer a good strategic fit for Intuit," he said.
Intuit last year launched its Right for My Business campaign, a long-term effort to become the main supplier of financial software and services for small businesses. The strategy has included the release of specialty versions of its QuickBooks accounting software and acquisition of small-business niche companies such as payroll specialist CBS Employer Services and software maker Management Reports.
Intuit also revised financial estimates for its 2002 fiscal year, which ends July 31, and fiscal 2003, citing the loss of Quicken Loans revenue as well as higher-than-expected revenue from small-business products. Revenue for 2002 is now estimated at $1.36 billion, from the previous estimate of $1.50 billion to $1.51 billion. Earnings are expected to be 95 cents a share, from the previous forecast of $1.10 per share.
Projected revenue for 2003 was raised to $1.65 billion to $1.75 billion, making for year-over-year revenue growth of 22 percent to 28 percent. Earnings were pegged at $1.25 to $1.31 per share, which would mean earnings growth of 32 percent to 38 percent. Previous forecasts called for revenue growth of 17 to 22 percent and earnings growth of 25 to 30 percent.
Raymond Stern, Inuit's senior vice president of corporate development and strategy, said the new forecasts show the small-business strategy is paying off, and the Quicken Loans divestiture will add to the payoff.
"As a result of this move, we're putting this company on a very different growth trajectory, with much less volatility," he said. "The mortgage industry as a whole is one that goes in cycles, depending on interest rates and economic conditions."