Intuit Divests Non-Core Businesses

According to Intuit’s Small Business Employment Index, small and medium businesses (SMBs) in the country are witnessing weak growth in employment and compensation rates. The July Index showed that employment within SMBs grew 0.17% in the month, while average monthly compensation grew 0.3%. Revenues for SMBs have fallen 0.5% over the previous month, indicating that the market remains tough.

Intuit’s Financials
The SMB-focused player Intuit (Nasdaq:INTU) also slipped in meeting market expectations. The company’s Q4 revenues grew 13.6% over the year to $651 million, missing the market’s projections of $652.5 million. The loss for the quarter of $0.08 per share was significantly higher than the Street’s targeted loss of $0.04 per share. For the quarter, product revenues grew 3% over the year to $240.0 million and services and other revenues grew 21% to $411.0 million.

By segment, the Small Business Group grew 19% over the year. Revenues from the company’s Financial Management Solutions grew 17% owing to increased subscriptions for QuickBooks Online and QuickBooks Enterprise. Employee Management Solutions revenues recorded 13% growth driven by an increase in Intuit Online Payroll and Enhanced Payroll subscribers. Online Payroll subscribers grew 19% and Payment Solutions revenue grew 31% over the year.

Intuit ended the year with revenues rising 10% over the year to $4.15 billion. EPS for the year grew 16% to $2.97.

For the current quarter, Intuit expects revenues of $630 million-$640 million with a non-GAAP loss of $0.06-$0.07 per share. Intuit projects current year revenues to be $4.55 billion-$4.65 billion with non-GAAP diluted EPS of $3.32-$3.38. The Street projects revenues of $653 million for the quarter with a loss of $0.08 per share. For the year, the market was projecting EPS of $3.41.

A Redesigned Portfolio for Greater Emphasis on SMBs
To build on its core strength, Intuit is reorganizing its portfolio. Earlier last quarter, it sold its corporate banking business to Bottomline Technologies. The move will help it to sharpen the focus of its financial services group on consumers and small businesses. Last week, it announced plans to sell Intuit Websites to Endurance International Group. Intuit believes that it does not have the capabilities to cater to the growing demand of maintaining and promoting a social media presence by SMB consumers. The sale will help their consumers get better satisfaction for their Web-based demands.

A New Approach to TurboTax Debit Cards
Recently, the company’s tax refund card has received significant negative publicity. The TurboTax refund card lets tax filers receive refunds from the IRS on a debit card. Consumers are given the card free of cost for the first month and for subsequent months are charged a monthly fee of $5.99 if their balance falls below $50. However, complaints abound regarding inaccessibility of cards, shutting down of the card without any notice, and in some cases long delays in getting the cards to the consumers owing to stringent security reviews.

Apart from these concerns, the introduction of stricter banking regulations surrounding the responsibility for covering the costs of lost cards are also making the product difficult for Intuit to handle. As a result, Intuit is working with a partner to launch a debit card during the 2012-2013 tax season. The company believes it will be able to improve consumer satisfaction and be more profitable when it offers the card through a partner than by managing the business in-house.

Intuit’s stock is trading at $58.43 with a market capitalization of $17.18 billion. It touched a 52-week high of $62.33 in February this year.