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Intuit revenue up, despite TurboTax flap

The financial software and service company reports solid sales and profit growth, despite customer complaints over new antipiracy technology.

Financial software and services company Intuit reported sales and earnings growth for its second quarter of fiscal 2003, including the company's beleaguered tax preparation software.

The company reported net income of $128.4 million for the quarter, which ended Jan. 31, compared with $129.9 million in the same period a year ago. Earnings per share came in at 60 cents, up from 55 cents a year ago. Revenue totaled $558.1 million, from $475.9 million a year ago.

Excluding one-time charges, earnings were $184.4 million, or 61 cents a share. On that basis, analysts polled by research firm First Call had predicted earnings of 57 cents a share.

The company reported strong sales growth in all business areas, including its TurboTax tax preparation software and services division. Revenue was up 11 percent for the division, to $95.3 million from $85.9 million in the same quarter last year, despite ongoing customer complaints surrounding new antipiracy technology included in the boxed software.

Chief Executive Steve Bennett said the flap over TurboTax's use of "product activation" has had minimal impact on the company's business, with retail returns still well under 1 percent and a slight increase in customer support staffing to handle questions regarding the new technology. On the upside, Intuit expects a solid increase in revenue, as customers who used to use a borrowed version of TurboTax now have to pay for the software.

"For a small but very vocal group of people, product activation is a crusade," Bennett said during a conference call with financial analysts. "For the vast majority of our customers, it's a nonissue. For Intuit, it's a business opportunity."

Bennett added that Intuit's share of the tax preparation software market stands at 69.3 percent, almost identical to its market share at the same point in the tax season last year. "While it's still too early to declare victory, all the signs are positive...and we're on track for another great consumer tax season," he said.

Growth in other business units, including the QuickBooks accounting software division, showed payoff from the company's "Right for My Business" strategy, which has shifted the company's focus to small and medium-sized businesses and inspired Intuit to acquire and shed some consumer-oriented businesses, including the Quicken Loans mortgage operation.

Based on the second-quarter results, Intuit raised financial estimates for the 2003 fiscal year. The company now expects pro-forma earnings per share of $1.38 to $1.42, from previous estimates of $1.32 to $1.38.