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News of losses cuts Intuit stock

Weighed down by a restructuring charge, Intuit reports a widened net loss for the quarter and sees a dip in its stock.

Weighed down by a restructuring charge, Intuit (INTU) today reported a widened net loss, which caused the stock to slip in after-hours trading.

The personal finance software maker traded at 27-1/2 after the bell, 1-1/8 below an unofficial close of 28-5/8, dealers said.

The company reported a fourth-quarter net loss of $19.8 million, or 42 cents per share, due to a one-time restructuring charge of $10.4 million. In the same period a year ago, Intuit reported a loss of $22 million, or 16 cents per share.

Excluding charges for acquisition and restructuring, the company would have posted a loss of 17 cents per share, on target with Wall Street analysts? expectations for the quarter, according to First Call.

Revenue grew 10 percent to $94.1 million, up from $85.2 million a year ago.

The company said it typically experiences lower revenue and operating losses for the July and October fiscal quarters due to the seasonal nature of its tax-return preparation products. During those periods, sales of such software slips, the company said, while operating expenses necessary to develop and support the updated versions continue. Intuit's highly seasonal business means that the company posts its strongest earnings in its January and April quarters.

Wall Street analysts have praised Intuit as a sleeper whose numbers do not give an accurate picture of the company's potential.

"This is a very broadly misunderstood stock with a vast market opportunity," said Lawrence Marcus, equity analyst with BT Alex. Brown.

Some investors associate the company exclusively with Quicken, the company's original personal finance software, though that software will account for only 10 percent of the company's business next year, according to Marcus. The real value of the company lies elsewhere, he said.

"The core business is tax and small business software, which is really growing at 20 percent and justifies the full value of the company today," said Marcus.

Another part of Intuit's market opportunity is the nascent online financial services business. In addition to its consumer site Quicken Financial Services Network and an insurance site, Intuit has formed key online partnerships with both Microsoft (MSFT) and Excite (XCIT). In June, Intuit and Microsoft signed a deal that will make Quicken Financial Network a premiere Active Channel preconfigured on version 4.0 of Microsoft's Internet Explorer browser.

The same month, Intuit bought a 20 percent stake in Excite in a $40 million deal expected to yield a financial services channel on the Excite network. That deal could bring Intuit as much as 60 to 70 percent of channel revenues, according to a report by Robertson, Stephens.

"We think the company is in transition from a software company to an e-commerce company, with the potential to be quite successful in the world of online financial services," said report author Gary Craft in an interview. "It's a transition to a realm where Intuit is a master, with their savvy with technology and their acumen in marketing products and services to their customer base. If they make the transition successfully it could be a powerful story. At Robertson, Stephens, we believe they will make this transition, but we're waiting for signs, some indication of when it will happen."

Over the next 12 to 18 months, those indications could include traffic numbers on the Quicken Financial Network, market share for online financial services, transactions on the insurance site, the successful deployment of the Excite channel, and the income from transaction fees and advertising revenue.

Whatever happens with Intuit's online ventures, analysts advise patience when it comes to Intuit's numbers. "This is not an earnings-driven story for investors," said Marcus. "It's an event-driven story. The stock will go up because the numbers have stopped coming down."

"We're not going to see the numbers going up in fiscal 98," he warned.

Intuit posted gains of $68 million for the year, or $1.44 cents per share, up from a loss of $20.7 million, or 46 cents per share, for fiscal 1996. Revenue for the year was $598.9 million, up from $538.6 million a year ago, and included the second-quarter $71.2 million sale of Intuit Services. Excluding acquisition and restructuring charges, Intuit would have posted net income of $37.9 million, or 80 cents per share, up from $32.2 million, or 68 cents per share, for fiscal 1996.

Reuters contributed to this report.