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Intuit Inc  (INTU)
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    Sector  Technology    Industry Software & Programming
   Industry Software & Programming
   Sector  Technology

Intuit Inc

Business Description


Our mission is to transform the way people run their businesses and manage their financial lives. Our goal is to create changes so profound and simple that customers wouldn’t dream of going back to their old ways of keeping their books, managing their businesses, preparing their taxes or organizing their personal finances. Our products and services fall into the following principal categories: QuickBooks® small business accounting and business management solutions; small business products and services that include payroll, financial supplies, technical support and information technology management solutions; TurboTax® consumer tax products and services; ProSeries® and Lacerte® professional tax products and services; Intuit-branded business management solutions designed to meet the specialized requirements of businesses in selected industries (which we call “Verticals”); and our other businesses, which consist primarily of Quicken® personal finance products and services and our Canadian business.

Company Growth Strategy

Intuit has a tradition of successful customer-driven innovation, using technology to address complex customer problems and develop solutions that make things easier. By applying strategic and operational rigor to this foundation, we believe we can accelerate our customer-driven innovation and deliver stronger revenue and profit growth.

There are four key fundamentals that support our growth strategy:

• We deliberately choose to be in businesses with large, underserved market opportunities where we believe we have the strategic and durable advantage to produce long-term profitable growth.

• We use operational rigor and process excellence methodology, tools and resources to execute more effectively on a daily basis. Our goal is higher service levels at lower cost.

• We expand our tradition of customer-driven innovation by looking for new, large customer problems and challenging conventional wisdom to create solutions for customers and profitable growth for Intuit.

• We apply strategic rigor to identify new adjacent markets and acquire companies that help us expand our leadership positions in our small business and tax businesses. Our goal is to create new growth platforms that drive faster profitable growth.

Intuit offers products and services in six business segments: QuickBooks, Small Business Products and Services, Consumer Tax, Professional Accounting Solutions, Vertical Business Management Solutions and Other Businesses.

Markets

During the past two years, we have expanded both the markets that we serve and the products and services that we offer in our target markets. Historically, our target markets were individuals and small businesses with less than 20 employees. We continue to serve those markets with products and services such as QuickBooks, TurboTax and Quicken. In addition to these markets, we are now targeting small businesses with up to 250 employees. We are addressing this new customer segment with a number of new products and services under the umbrella of our Right for My Business strategy. We are introducing accounting solutions to meet the specialized requirements of certain small businesses by developing industry-specific versions of QuickBooks, which we call “flavors.” We have introduced new Premier and Enterprise versions of QuickBooks for companies that, due to their larger size or complexity, have more demanding accounting needs. We have also introduced business solutions that go beyond accounting software to address a wider range of business management challenges that small businesses face.

Direct Marketing Programs. For our core desktop software products (QuickBooks, TurboTax and Quicken), we use various types of direct marketing campaigns — including mail, email and telephone solicitations, direct-response newspaper and magazine advertising, and television and radio advertising — to generate software orders, stimulate demand and generally maintain and increase consumer awareness of our products. We also use workflow-integrated in-product messaging in several of our software products to market our other related products and services. In addition, we have recently initiated new direct marketing programs in which we ship certain software products directly to customers without charge. Customers electronically unlock and pay for the products when they are ready to use them. Direct marketing campaigns are one of the most effective ways to encourage existing customers to purchase additional products and services, including software upgrades.

Direct Sales Channel. Our direct sales efforts have historically focused on generating sales of relatively inexpensive, off-the-shelf products to existing customers through call centers. Our service offerings, such as Intuit Payroll Services Complete Payroll, as well as our more sophisticated, higher-priced software products, require a different approach to direct sales than our traditional desktop software. As we have expanded our service offerings and introduced more high-end software products and business management solutions over the past two years, we have been enhancing our direct sales capabilities to support revenue growth in these new areas, as well as in our core desktop software. We are investing in technology to consolidate and improve our management of customer contact data and order management tools across business divisions and we are training our customer service personnel in consultative selling techniques. We have expanded our direct sales staff and broadened its role to include more extensive and personalized contact with existing and potential customers. In addition, the products and services we offer through our Vertical Business Management Solutions segment are sold primarily through direct sales organizations. As a result of all of these factors, we expect that direct sales will become an increasingly important source of revenue and will increase our selling and marketing expenses over the next few years.

COMPETITION

For our QuickBooks, TurboTax and Quicken desktop software, we believe the most important competitive factors are product features, ease of use, size of the installed customer base, brand name recognition, price, product and support quality and access to distribution channels. We believe we compete effectively on these factors as our three principal desktop software products are the leading products in the retail sales channel for their respective categories. For most of our products and services other than desktop software, we believe the most important competitive factors are features and ease of use, brand name recognition, speed in getting new products and services to market, the ability to distribute them effectively (through online methods or through retailers, third party resellers and direct distribution) and quality of implementation and support. For our service offerings such as outsourced payroll, service reliability and scalability of operations are also important factors. We believe we compete effectively on these factors.

Competitors for our small business accounting and business management offerings include companies such as Best/Peachtree Software (which is owned by The Sage Group PLC), Microsoft Corporation, and MYOB Group. Microsoft has several small business offerings that compete with our small business offerings, including Microsoft Business Solutions Small Business Manager, Microsoft Busines Solutions CRM and Business Contact Manager for Microsoft Office Outlook® 2003. We expect that Microsoft small business offerings will continue to compete with our small business offerings, perhaps even more directly in the future. As we expand the depth and breadth of our small business offerings, we face competition from companies that are already offering industry-specific small business solutions and business management tools and services for larger small businesses. In addition to established competitors, other potential competitors have expressed significant interest in providing accounting and other products and services to small businesses.

Our payroll services compete directly with traditional payroll service providers as well as Web-based service providers. Significant competitive factors include distribution channels and a highly fragmented market, including financial institutions that are developing or promoting their own payroll services. We face direct competition in our Intuit Payroll Services Complete Payroll business from traditional payroll services offered by a number of companies, including ADP and Paychex, as well as hundreds of regional and local companies. Our QuickBooks Assisted Payroll service competes directly with companies offering Web-based payroll services, and indirectly with companies offering other payroll solutions. Various companies also offer tax table subscription and electronic filing services similar to our QuickBooks Do-it-Yourself Payroll offering.

Our financial supplies business competes with a number of business forms companies, including New England Business Service and Deluxe Business Systems, as well as with printing services offered by franchises such as Kinko’s and large office supply retailers such as Office Depot and Staples. Other competitors include direct mail check printers, banks and a number of smaller-scale Internet-based printing companies. In addition, our QuickBooks products include some features (such as customizable invoicing and 1099 tax form printing) that compete with our supplies products. Online bill payment services and online payroll services with direct deposit capabilities also offer competitive alternatives to printed checks. Significant competitive factors for the supplies business include ordering convenience, methods of reaching customers, product quality, speed of delivery and price. We believe that our convenient access to our large QuickBooks and Quicken customer bases is a significant competitive advantage for our financial supplies business.

Consumer Tax

Competition in the consumer tax preparation market is intense. Our major domestic competitor for both desktop and Web-based consumer tax software continues to be H&R Block, the makers of TaxCut software. In addition, a number of smaller competitors have entered the online consumer tax preparation market segment, and other larger competitors may enter both the desktop and Web-based consumer tax market segments in the future. Our consumer tax products and services also compete for customers with professional tax preparers, particularly those with franchise operations and including those who use our professional tax return preparation software.

We also face potential competitive challenges from publicly funded government entities that offer electronic tax preparation and filing services at no cost to individual taxpayers. The federal government signed a three-year agreement with the Free File Alliance in October 2002 under which a number of private sector companies, rather than the federal government, are providing Web-based federal tax preparation and filing services at no cost through voluntary public service initiatives such as our Intuit Tax Freedom Project. As a member of the Free File Alliance, we continue to actively work with others in the public sector to advance the goals of the Free File Alliance program and to support a successful public-private partnership.

Professional Accounting Solutions

The professional accounting solutions and tax preparation software market segment has many competitors. Our largest competitors in the United States are CCH Incorporated, with its ProSystem fx product line; Kleinrock Publishing, with its ATX product line; and the Thomson Corporation, with its Creative Solutions and GoSystem offerings. We also have many smaller competitors in this market segment. The professional tax market has been highly fragmented in the past, but it has experienced some consolidation in recent years.

Vertical Business Management Solutions

All of our Vertical Business Management Solutions businesses operate in highly competitive and fragmented environments where no competitor has a significant share of the market segment. We may experience pricing pressure in these market segments because we compete with many small companies, who have fewer resources than larger companies and are therefore more likely to focus on near-term sales. In each of these market segments, the possibility exists that through either consolidation within the market segment or the entry into the market segment of new companies a significant competitor will emerge.

Other Businesses

In desktop personal finance software, the Microsoft Money product is our primary domestic competition. We also face competition from Web-based personal finance tracking and management tools that are available at no cost to consumers through financial institutions and others. There are many competitors for our other personal finance products and services. Some portal Web sites and financial institutions also provide offerings such as Web-based bill presentment and payment services that compete with services we offer.





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