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Intuit buys payroll firm

With the acquisition of Computer Resources Incorporates, the maker of personal-finance software expands into services.

Personal finance software maker Intuit has purchased a payroll services firm for $200 million in cash and stock, marking a new foray into services for the company.

Privately held Computer Resources Incorporated, based in Reno, has been operating Intuit's payroll service for small businesses from the Web site since fall.

Intuit, maker of titles such as Turbo Tax and Quicken software, serves the small-business market with its QuickBooks accounting software, which contains functions such as online payroll and direct deposit. The purchase aims to expand Intuit's revenue base by adding services.

"We really believe that our opportunity here is not to take customers from other payroll services but to expand the market," said Intuit CEO Bill Harris told CNET's "The vast majority of small businesses in the country do not have a payroll service."

Payroll services like Automated Data Processing or Paychex generally serve larger companies.

Although Intuit's small-business accounting software, QuickBooks, already includes links to the online payroll service, Intuit is building those links in its Quicken software to ship by the end of the year, Harris said. Some 3 million small businesses use Quicken to keep their books.

Rakesh Sood, an analyst at Goldman Sachs who follows Intuit, praised the deal.

"The acquisition extends Intuit's reach into a set of businesses that is a little larger than it has dealt with," said Sood. "It let's them cross-sell outside the QuickBooks installed base."

Sood also like's CRI's existing relations with a number of financial institutions, including Wells Fargo Bank and U.S. Bancorp, that offer CRI's payroll services to their banking customers.

"We would like to accelerate that kind of distribution," CEO Harris said. "There are a small number of financial institutions that would love to deliver electronic services to customers. We want to do it with them on a co-branded or private-label basis."

Intuit recently declared that it would sell its 9.9 percent stake in No. 2 Internet directory Excite, a sale which could generate more than $500 million.

Intuit will exchange about $175 million in cash and $25 million in stock for Reno, Nevada-based Computing Resources. The transaction is expected to close between April and June.

The acquisition will have no impact on earnings for Intuit's
fiscal third and fourth quarters, and could add 1 cent to earnings for fiscal 2000, the company said.

Computing Resources has sales of about $30 million a year and is profitable, Intuit said, without revealing more details.

Intuit shares fell 5.9375 to 90.0625. The announcement came after the close of regular U.S. trading.

Bloomberg contributed to this report.