2632 Marine Way
Mountain View, California 94043
Telephone: (650) 944-6000
Toll Free: (800) 446-8848
Fax: (650) 944-3699
Web site: http://www.intuit.com
Sales: $1.87 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: INTU
NAIC: 511210 Software Publishers
Intuit Inc.'s TurboTax software is the number one selling tax software program in the United States. One in four tax returns completed are prepared using an Intuit tax product. Holding the lion's share of the market in its primary business lines, including Quicken personal finance software, Intuit changed strategy in the early years of the 21st century to fuel slowed growth.
Intuit was the brainchild of entrepreneur Scott Cook, who cofounded the company with Tom Proulx in 1983. Cook, then only 23 years old, had moved to northern California in 1980 and was working in banking and technology assignments for the consulting firm Bain & Co. One night he and his wife, Signe, were sitting at their kitchen table in San Francisco paying their bills. It occurred to Scott that there must be a better way to manage their household finances and automate the hassle of bill paying. Inspired to start his own software company, he went to Stanford University to place an advertisement for a programmer. When he got to the campus, he stopped a passing student, Tom Proulx, for help in locating a bulletin board. Proulx, it turned out, had done some programming and agreed to write a simple check-balancing program for Cook. In his dorm room he created the first Quicken program, which he and Scott used to launch Intuit.
Cook's idea for a check-balancing program was unique, but he was only one of many people trying to break into the burgeoning personal computer software market at the time. According to several associates, it was his background, intellect, and enthusiasm that separated him from the rest of the pack. Cook earned degrees in both math and economics at the University of Southern California (USC). (He credited summer internships with the federal government with encouraging him to go into business rather than the bureaucratic public sector.) Also at USC, Cook took it upon himself to resurrect the school's ailing ski club. He rented out a cabin at the nearest ski area and charged club members a mere $1 per night to stay. The club became one of the most successful organizations on campus and played an important role in getting him accepted into Harvard's graduate business school. Indeed, Cook was one of only a handful of students to enter Harvard straight out of undergraduate school and was the youngest member of his 800-member class. "When I look back, that ski club success, as much as anything, led me to believe that I could start a successful company," Cook explained in 1992 to the Business Journal—San Jose.
Cook was snatched up by the Cincinnati-based marketing giant Procter & Gamble immediately after he graduated from Harvard in 1976 and was placed in charge of the Crisco shortening brand. At Procter & Gamble he met coworker Signe Ostby, his future wife. In 1980 the couple moved to California for its climate, with Cook taking the consulting job with Bain and his wife becoming vice-president of marketing at Software Publishing Corp. During the next few years Cook gained important experience related to banking and technology while his wife learned about marketing software. Meanwhile, Tom Proulx labored in his dorm room creating the first version of Quicken. After polishing up the program the two launched Intuit in 1983.
While Proulx contributed the technical expertise to the original Quicken program, Scott drew on his consumer marketing background to ensure that the program would meet a real need in the marketplace. He conducted numerous telephone interviews and focus groups, for example, in an effort to determine exactly what households needed financially and what features were most important to potential customers. Coworkers called his emphasis on customer input fanatical, and Cook's fixation eventually became well known within the software industry. The application resulting from this research allowed people to enter data on screens that looked much like a check and a checkbook. The data was automatically processed, thus eliminating much of the tedium of balancing a checkbook.
Cook and Proulx started Intuit in Proulx's basement with a single product and seven employees. Cook originally planned to sell the software through bank branches, a strategy that soured when he realized that banks were poorly equipped to sell prepackaged software. Moreover, because Intuit was just one of several companies trying to market a personal financial software program, Cook was unable to find a retail distributor that would take his unknown product. By 1985 the company was struggling to stay afloat. Three employees left when Cook and Proulx became unable to pay salaries. The other four, still believing in their product, kept working for six months without any pay.
Cook remained surprisingly upbeat and helped to buoy the Intuit team during their initial struggles. Whenever Proulx's wife would come down into the basement to see how things were going, Cook would tell her that they could not be better. "The truth is that things couldn't be worse," Proulx recalled in 1995 to the San Francisco Business Times. "Years later he told me that in 1985, when we were out of money, if someone had agreed to buy the company from him to pay off his loans, he would have done it." In fact, Cook was more than $300,000 in debt and was facing a long 30 years of trying to pay off those obligations if his venture failed. "I never had any doubt that he would eventually succeed," Proulx said. "A large part of my belief was from having been propagandized by Scott."
By 1986 Cook and Proulx were beginning to see some light at the end of the tunnel. Importantly, the Apple version of Quicken was getting positive attention in the trade press, and sales were slowly picking up. Recognizing the power of such trade articles to generate sales, they made a pivotal decision that turned the company around. Instead of selling the programs through banks, they would sell them directly to customers through advertisements. In a risky move that could have quashed the entire venture, Proulx coaxed a reluctant Cook into placing $125,000 worth of advertisements, despite the fact that they had only $95,000 left in the bank. Cook wrote the ads himself, drawing on his marketing experience at Procter & Gamble. He emphasized the benefits of the program as opposed to its features, unlike most software ads of the time. "End financial hassles" was the key benefit touted in Cook's ads.
The advertising campaign was a success, and from that point forward Intuit's fortunes improved. Still, the company lacked a broad retail distribution channel and faced growing competition in the financial software market. In an effort to expand his advertising efforts and boost Quicken's exposure, Cook approached more than 30 venture capital firms during the mid-1980s. All of them turned him down, including one represented by his former Harvard roommate. Nevertheless, Cook and Proulx persisted. Cook determined that word-of-mouth critiques of his program and customer loyalty would become the most valuable advertising tools at his disposal. For that reason, he decided that customer service and input would take top priority throughout the entire company.
Stories of Cook's obsession with customer service abound. Once, while visiting the office of a software association, Cook walked by a clerk entering data on one of his programs. He immediately stopped to interview her about the application and later incorporated one of her suggestions into a version of the program. When Cook preached customer service to his employees at a meeting in 1988, he told them that he wanted Intuit's service to improve to the point where customers would become "apostles" for Quicken by purchasing other Intuit products and telling their friends about Intuit's offerings.
By the late 1980s Intuit was clearly on the fast track to success. In just a few years sales of Quicken exploded, and the program became one of the best-selling personal financial applications. Intuit suddenly had little problem securing more financing. Several well-known venture capital companies, including Sierra, Technology Venture Investors, and Kleiner Perkins Caufield and Byers, were willing to back Intuit's efforts to expand its retail distribution. Thus, during the late 1980s and early 1990s Quicken became one of the top-selling software applications in the world, surpassed only by such industry staples as WordPerfect and Lotus 1-2-3. Sales climbed to $55 million in 1991 from just $20 million three years earlier, and Intuit's workforce more than doubled in 1991 to about 425 employees.
Intuit broadened its scope in 1991 when it introduced Quick-Pay, a software program designed to help small businesses process their payroll. The $60 program, which was designed to work in conjunction with Quicken, was readily accepted by many users of Quicken. Intuit followed that introduction in 1992 with QuickBooks, a full-featured small-business bookkeeping program that provided an easier and less-expensive alternative to traditional accounting software. It was priced at about $140 and was also designed to work in cooperation with both Quicken and QuickPay. By 1992, Quicken (at a retail price of $70) was dominating the personal financial software market with a powerful 70 percent share. Much of that success was attributable to the company's emphasis on customer satisfaction: one 1992 survey showed that 85 percent of all Quicken users had recommended the program to at least one other person.
After 20 years Intuit continues to transform business and financial management for small businesses, accounting professionals and consumers.
Having established its dominance in the market for stand-alone personal and small-business financial software, Quicken started looking at the much bigger picture. Indeed, Cook and his associates believed that Intuit's future was in providing a means of electronically linking customers with banks, brokers, and other businesses, and in providing various electronic financial services to the public. To that end, Intuit struck a deal with Visa that allowed Quicken users to download credit card statements directly onto their computers and into Quicken. In 1993 Intuit spent $243 million to purchase ChipSoft, which allowed customers to file tax returns electronically. Intuit scored again later that year when it bought out National Payment Clearinghouse Inc., a processor of electronic transactions, for $7.6 million.
Cook realized in 1993 that Intuit was evolving from an entrepreneurial startup company to an established corporation. The company had even gone public by that time on the OTC market and was rapidly adding employees and facilities in the wake of ongoing acquisitions and surging sales. Early in 1994 Cook selected 53-year-old William V. Campbell to serve in the newly created post of president and chief executive officer. Campbell, a former Apple executive, was skilled in building organizations. In addition to his background in the computer industry, he had also served as the head football coach at his alma mater, Columbia University. Campbell would oversee the day-to-day operations at Intuit while Cook, as chairman of the board, would continue to spearhead the company's strategic plans.
By the mid-1990s Intuit was drawing attention from a much larger suitor, with software giant Microsoft eyeing Intuit as a possible takeover target. To Microsoft, Intuit represented an entry into the only major software category in which it did not have a significant presence. Microsoft was competing successfully with its own personal financial program, Microsoft Money. By 1994, though, that application was serving only 22 percent of the market, compared to Quicken's walloping 70 percent. Furthermore, Intuit owned other programs of interest to Microsoft, such as TurboTax, MacInTax, and ProSeries, all of which were geared for the personal and small-business tax-return-preparation market. Finally, Intuit had valuable experience related to conducting computerized transactions over telephone lines.
Microsoft, with Cook's cooperation, attempted a buyout of Intuit in 1995. Critics and Microsoft competitors balked, claiming that the merger was anticompetitive and would give Microsoft too much power in the software industry. To Cook's dismay, the Justice Department tried to block the deal, which would have been the largest merger in the history of the software industry. Both Microsoft and Intuit fought the Department's efforts, and Microsoft even offered to sell off its Money program. Nevertheless, the $2 billion deal eventually collapsed. With that, Microsoft CEO Bill Gates renewed his efforts to make Microsoft Money a contender. Microsoft hired away a top Intuit salesman and launched a revamped version of Money to be used with Microsoft's long-awaited new operating system, Windows 95.
Like Microsoft, Intuit turned its attention back to its growing array of products following the failed merger. The company was still trying to digest the flurry of product and company acquisitions completed during the early 1990s. To that end, Intuit was working to consolidate and streamline its information systems and operational and financial controls. Intuit also began its online banking service in 1995 and acquired Japanese software company Milk Way KK. Even though the company's fiscal year was shortened by two months in 1994, revenues surged to about $194 million. In the long term, Intuit was positioning itself to become a leader in the burgeoning electronic banking and financial services industries.
The mid-1990s were a difficult period for Intuit. Not only was the company recovering from the disappointment from the failed Microsoft merger, but Intuit was also facing challenges in the software front. Overall sales of packaged software were declining as an increasing number of computers were sold with software installed, and Intuit's software sales were also affected by a saturated market—many in the target audience for personal finance software already owned Quicken. Another imposing threat to Intuit was the increasing presence of the Internet, which signaled the possibility of the demise of stand-alone software programs. Between November 1995, when Intuit's stock hit a high of $89 per share, and August 1997, the share price fell 72 percent, to $25 per share. The company racked up net losses of $44.3 million and $20.7 million for fiscal 1995 and 1996, respectively. The company was forced to eliminate nearly 10 percent of its workforce in mid-1997. Analyst David Farina of William Blair declared in Fortune , "Quicken is over! … It's done. It's almost a nonfactor."
Intuit was not about to throw in the towel, however, and it worked to transform itself into a fast-moving Internet company, hoping to leverage its brand equity to attract consumers and gain credibility. "The Net was forcing us to learn fast, change fast, and even fail fast," Cook told Fast Company. "The only thing wrong with making mistakes would be not learning from them." Intuit decided to divest itself of non-core operations and sold Intuit Services Corporation, its online banking and electronic transaction processing subsidiary, to Checkfree in 1997. The company also sold its consumer software and direct marketing operations, Parsons, to Broderbund Software, Inc. Meanwhile, Intuit worked to increase its Internet presence. In 1996 Intuit acquired GALT Technologies, Inc., a provider of mutual fund information on the Web, for about $14.6 million. The following year the company invested about $40 million in Excite Inc. Excite, one of the leading Internet search engines, boasted about 2.5 million users daily. Under terms of the agreement, Intuit would be the exclusive provider of financial information on the Excite web page. Early in 1998 Intuit inked a $30 million deal with America Online, Inc. (AOL), and Intuit became the exclusive provider of tax preparation services, life and auto insurance, and mortgage services for AOL members. Intuit launched a revamped version of Quicken.com in 1997 that offered a host of financial services and information, including QuickenMortgage, an online service that allowed customers to search for mortgages from a number of different lenders. Quicken.com quickly became the most popular personal finance site on the Web, and Intuit's stock price began to climb. Intuit's William Harris, who became CEO in 1998, asked in Fast Company , "Isn't it amazing … how quickly you can become a company of the past—or a company of the future?"
Though Intuit focused its energies on the Internet, it did not neglect its core software operations. The company continued to enhance and improve its personal finance software and worked to bridge the gap between the Internet and packaged software by offering web versions and integrating web links. In fiscal 1999 Intuit introduced its QuickBooks Online Payroll service, which allowed QuickBooks users to connect with banks and tax agencies to facilitate payroll processing. By the end of the fiscal year, more than 6,000 businesses had signed up for the service. The company also offered WebTurboTax, which combined TurboTax features with electronic tax filing capabilities and allowed users to complete their tax returns and file them online. More than 240,000 1998 federal tax returns were completed and filed using WebTurboTax.
Intuit continued to make strategic acquisitions, and in 1997 it purchased Nihon Micom Co. Ltd. through its Japanese subsidiary. Nihon Micom developed accounting software for small businesses. The following year Intuit purchased Lacerte Software Corporation and Lacerte Educational Services Corporation for about $400 million. Lacerte developed professional tax preparation software. In 1999 Intuit bought the customer lists and intellectual property rights of TaxByte, Inc., a professional tax preparation software business, and Compucraft Tax Services, LLC, another professional tax preparation software company. Intuit also acquired Computing Resources, Inc., a payroll services provider, for about $200 million; Boston Light Software Corp., a developer of web products and software geared toward small businesses; SecureTax.com, which developed online tax preparation services; and Hutchison Avenue Software Corporation, a developer of web products and software. Intuit completed its acquisition of mortgage lender Rock Financial Corporation in December 1999.
In September 1999 William Harris stepped down as CEO. Former CEO William Campbell filled in as interim CEO as the search for a permanent replacement commenced. Intuit continued to add features to its Quicken.com web site, including the ability to view and pay bills, as well as view Discover credit card accounts. The company entered another agreement with AOL to be the exclusive provider of bill management services for AOL members, which numbered about 19 million in late 1999. Intuit also formed a number of partnerships with financial organizations, such as Fidelity Investments and Vanguard Group, to provide tax preparation software to online customers of those organizations.
For 1999, Intuit reported total revenues of $847.6 million, up 43 percent from 1998. Net income reached $376.5 million, a significant improvement over a net loss of $12 million in 1998. The leader of personal finance software was banking on becoming the leader of e-finance as well, building upon its legacy as an innovator and provider of personal financial management solutions. With more than 15 million customers, Intuit was in a strong position as it approached a new decade. The company planned to continue dominating the personal finance segment by offering the latest and greatest finance solutions, both online and off.
Revenue grew by 16 percent in fiscal 2000, driven by Intuit's well-established products. Only a quarter of the $1.1 billion in sales were web-related, according to Forbes , with only three of eight web businesses running in the black. "Quicken Insurance gets clobbered by the likes of InsWeb and traditional advisers. Its flagship online service, Quicken.com, is under siege from major banks and Weblets," wrote Erika Brown.
Former CEOs William Campbell and William Harris had promoted Intuit's entry on the Web, but its customer base was slow to move with them. Stephen Bennett, a former General Electric (GE) who came aboard in January 2000, said, "There is no crisis here, the house isn't burning. But we should be doing a lot better." Quicken customers, by and large, continued to use separate sites for paying bills, checking out mortgage rates, or buying stock, rather than merge all of their financial life onto one Intuit web product.
Bennett, for his part, was eyeing another market segment: businesses with more than 20 and up to 250 employees. Prior to his promotion to GE president, the 23-year veteran of the company led the small business division at GE Capital. Taking a page out of his GE boss Jack Welch's playbook, Bennett began with a revamp of Intuit's organizational structure with more managers reporting directly to him.
Bennett's goal, not surprisingly, was to increase sales and net income. The company's core QuickBooks product already held 85 percent of the retail market for small business accounting software, and Intuit wanted to cross-sell products and services such as inventory management or web design. A potential stumbling block was the speed at which small business owners made computer technology shifts.
Quicken, holding 73 percent of the personal finance software category saw unit sales fall by 27 percent in fiscal 2001, and Intuit registered an $82 million loss for the year. But TurboTax kept humming along powered by the complex U.S. tax laws.
Under Bennett, Intuit moved into the realm of larger small businesses—a segment also in the sights of Oracle, Microsoft, and SAP. QuickBooks Enterprise was introduced to meet those companies' tracking needs. Intuit also began bringing out nonaccounting industry specific software. More products were in the offing either to be internally developed or by way of acquisitions.
Intuit rebounded in 2002, in terms of profitability and stock price. Former GE managers were running the company's two major divisions, enforcing tougher internal operating standards, improved quality control, waste reduction, and performance-linked pay incentives. Bennett had spent nearly $500 million on software firm acquisitions. But by comparison Microsoft had spent $2.5 billion over two years doing the same thing.
Intuit's Quicken personal finance, QuickBooks small business finance, and TurboTax income tax filing offerings continued to lead their markets but the growth rate had slowed. The company was looking toward single-digit growth as it approached the mid-2000s.
QuickBooks Enterprise had not taken off as hoped, according to Business Week Online , nor had the products produced by the companies Bennett had acquired. The QuickBooks Point-of Sale system for small retailers on the other hand experienced strong growth. Bennett meanwhile shifted gears, moving toward serving smaller niches with simpler products.
"While some analysts are skeptical about growth prospects, there is a consensus that Bennett's plan makes Intuit a good long-term hold. 'If they grow revenue 10 percent, that's a phenomenal result,' " David Farina, technology analyst at investment bank William Blair & Co. told Business Week Online . He added, "In Silicon Valley, you are a failure if you're not growing 30 percent, but Intuit is in a different phase of its life. It's a very good, very dominant business that's well run. It's just in a transition in terms of buyers."
Fiscal 2004 revenue growth fell to 12 percent, down from 26 percent the prior year. But with the return to its roots—following customers home, watching what they do, and then going back and tweaking software—the company had produced positive results and expected better than anticipated numbers for 2005.
Blue Ocean Software, Inc.; Greenpoint Software (Canada); Intuit Canada Limited; Intuit Limited (U.K.).
H&R Block, Inc.; Microsoft Business Solutions; The Sage Group.
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—updates: Mariko Fujinaka,