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Intuit, CheckFree go to arbitration

As rumors swirl about a possible acquisition of CheckFree by Yahoo, Intuit and CheckFree--partners in a bill-presentment venture--will let a third party decide their legal dispute.

Intuit and CheckFree will let an arbitrator decide the outcome of their legal dispute over who can make deals with Web portals as part of their partnership in the online billing business.

The decision comes amid speculation that Yahoo will buy CheckFree, a bill-payment service that is 20 percent owned by Intuit.

See related story: Intuit suit alleges Checkfree strayedAs first reported by CNET in March, CheckFree had negotiated independently to strike a still-unannounced deal with Yahoo to provide billing services to the portal, drawing a warning from Intuit.

In its complaint, Intuit contends that its contract with CheckFree requires that Intuit participate in any negotiations with portals. Intuit contends that, despite its previous warning, CheckFree negotiated with another, unidentified portal.

"The lawsuit has been submitted to arbitration, and we expect it to be resolved expeditiously," said CheckFree spokeswoman Laurinda Wilson.

CheckFree's deal with Yahoo has churned the rumor mill among Wall Street analysts. Private comments by Yahoo chief executive Tim Koogle at this week's Hambrecht & Quist investor conference ignited speculation that Yahoo may be interested in buying CheckFree outright.

CheckFree's Wilson declined to comment on the Yahoo rumors, as did Yahoo spokeswoman Sarah Ross.

Speculation about Yahoo's plans may stem from its deal with CheckFree, essentially an outsourcing agreement.

CheckFree and many banks have offered online bill payment for several years; indeed, some 350 banks outsource that function to CheckFree. Bill presentment involves giving customers an electronic bill to pay and delivering it either at the bill issuer's Web site, a bank's Web site, by email, or through personal finance software such as Intuit's Quicken.

For bill presentment, CheckFree is vying with TransPoint--a joint venture of Microsoft, First Data Corporation, and Citibank--to sign up cable operators, utilities, and credit card firms that send bills monthly. Transpoint is scheduled to launch next week.

In its earnings report yesterday, CheckFree said it has signed up 49 bill issuers for its service, including AT&T, MCI WorldCom, cable operator Cox Communications, home lender Countrywide Credit, Nevada Power, and Illinois Power. Twenty-one are already presenting their bills electronically via CheckFree.

Earlier this month, CheckFree said, Bank One launched electronic billing and payment, bringing the total to more than 20 sites that offer that service through CheckFree. Other sites include First Union, Intuit's, Charles Schwab, Prudential, Morgan Stanley Dean Witter, Navy Federal Credit Union, and several other credit unions.

Although most of the interest in online billing services has so far come from banks, Netcenter, the former Netscape site now owned by America Online, has also signaled its interest in online billing. Because bills are often paid monthly, Web portals see them as a way to build ongoing traffic to their sites.

Financial analysts are divided on whether a Yahoo acquisition of CheckFree would make sense. At U.S. Bancorp Piper Jaffray, Tim Klein, who follows CheckFree, is skeptical, but his colleague Safa Rashtchy thinks buying CheckFree would boost Yahoo's e-commerce capabilities.

On the other hand, "by going with Yahoo, CheckFree would alienate other distribution alternatives," said Piper Jaffray's Tim Klein.

Gary Craft, analyst with e*Offering, doubts an acquisition is in the works, but he thinks Yahoo needs a partner like CheckFree to get into online transactions.

"Yahoo is more in information aggregation, but they outsource technology platforms. So instead of building insurance quotes, they outsource that to InsWeb," Craft said. Similarly, CheckFree has the links to financial networks, customer service, back-office operations, and the ability to move funds that Yahoo will need for the billing service.

Craft wouldn't be surprised, however, if Yahoo ends up collecting a bounty from CheckFree or a subscription fee from users for the online billing service.