THE DAY AHEAD: Intuit outlasts competition offline and online

Intuit (Nasdaq: INTU) shareholders have a lot to cheer about following the company's fourth quarter and fiscal 2000 results. The competitive landscape will have Intuit fans cheering even more.

When we last checked in with Intuit a couple of quarters ago, the tax and accounting software/e-finance portal was fending off Microsoft (Nasdaq: MSFT), which was making a run at Intuit and its TurboTax software, and a host of dot-coms including e-Loan (Nasdaq: EELN), Insweb (Nasdaq: INSW) and others.

But a funny thing happened on the way to fiscal 2001 -- Microsoft dropped out of the tax software race and dot-coms are more concerned with staying afloat than attacking Intuit.

On a conference call, Intuit officials sounded a bit shocked, but had to admit that the competitive landscape is the best it has been in years.

And it's paying off on the bottom line. Intuit topped estimates by a nickel with a fourth quarter loss of 4 cents a share on revenue of $162.3 million. Analysts were expecting sales of roughly $150 million. The fourth quarter is Intuit's slowest, and the company typically reports losses.

The company has improved its operations, turned three of eight Web businesses profitable and has a commanding market share in the finance software market. Now with Microsoft out of the tax software picture, Intuit officials said they will divert what would have been Microsoft marketing expenses to building its Web businesses. Microsoft still competes with Intuit with its Microsoft Money software.

Intuit didn't want to sound cocky about beating the competition, but executives did float some rosy financial projections. Intuit projected revenue growth of 22 percent in fiscal 2001, up from 16 percent in fiscal 2000. Operating income growth will more than double as margins jump a full percentage point. In addition, the company is doubling its investment in Internet products and services.

Apparently life is grand when Intuit has $1.5 billion in cash on the books. Officials said they intend to put that money to good use via investments.

Web investment pays off

In recent years, Intuit looked a bit clumsy on the Web. Unlike its dot-com competition, which was blowing IPO or venture capital funding to gain share, Intuit had to juggle Web investments and profits.

Now the Web effort is paying off. For the year, Intuit said Internet revenue jumped 109 percent to $294 million. About 37 percent of Intuit's revenue came from distributing its desktop software.

Based on the company's previous report of Internet revenue exceeding $242 million for the first nine months of fiscal 2000, Intuit saw Web revenue of nearly $52 million in the fourth quarter.

Online advertising generated $74 million in revenue in fiscal 2000. Transaction revenue on the Internet totaled $112 million. Those two businesses combined grew more than 90 percent during the year.

The three profitable Web properties -- Quicken TurboTax for the Web product and its electronic tax filing business and QuickBooks Internet Gateway -- were profitable. CEO Steve Bennett declined to make predictions about what other properties would become profitable in 2001, but did note that Intuit's online mortgage business should turn a profit in 2001.

As for Intuit's next Web targets, Bennett said the company will invest heavily in small business services. Intuit will also push online bill payment, boost its auto insurance business by linking up with more carriers and increase online mortgage volume.

One big customer database

Intuit has amassed one impressive customer database. Executives hinted at some ways to leverage it by advertising across Web properties and in software packages.

That plan is nice, but it's only the beginning. How Intuit mines its customer data will go a long way to boosting margins, revenue and the bottom line.

Quicken TurboTax had 5 million customers with its Web version chipping in 1.4 million; QuickBooks has 2.9 million registered users; and Quicken had 14 million users.TDAIN

• Intuit tops 4Q estimates, bullish on future
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