Intuit, Inc. (INTU)

Some of the problems Intuit had with Turbotax this season were pretty dire. Yes they have persuaded the IRS not to fine payers who got caught in the ghastly mess they made of the e-file process. But they are charging a LOT of money for something which simply did not work in far too many cases for comfort. Then there was the estimated taxes gambit. They charge about $17 to remind the payer that he/she needs to make a payment. However once the return is complete one finds neatly printed out payment vouchers to be used to cover the payments. They have a 3 month trial for this "service" which I expect 90% of first time estimated taxpayers are going to duck out of. And they don't even include state estimated tax! So what on earth is the point? Intuit had done pretty well with only occasional glitches until 2007. Then all hell broke loose. I sure as blazes will NOT be using them next year. The problems they caused were many. They entirely emptied my bank account because the submitted forms told me I was paying both fed and state by check. I then discovered, once the returns were finally accepted that the bank information WAS embedded as it had been all along so both fed and state double dipped. I had to have several thousand taken from my credit card account to cover this. The interest and loan charges are going to be in the hundreds. After the well publicized problems, would a small claims court look kindly on a request for reimbursement? Am I alone in all this? I have a feeling I am not. I think that once the dust settles and the charges come home to roost, Intuit may be looking down the wrong end of some pretty wide dissatisfaction. Their competitors can now trumpet the trust angle and customers are going to try their product. Some may never return. If anyone were to ask for a recommended tax program for 2008, how many will remember the problems and play safe. Anything BUT Turbotax would be my response.

Gains 50% to $45 on takeover. 91% share small bus acctg & 74% consumer tax/finl. Sales 16% CAGR. 12/06 buys 2 online tools co for finl institutions, can cross-sell consumers. 4Q06 GOOG ad deal. Board inter-locks: CEO Scott Cook on EBAY, John Doerr on INTU AMZN GOOG, VRSN officer on INTU. 12/06 signed Kiplingers exclusive for tax info (ended HRB deal). $1B cash $3/shr. New Med Manager, possible MSFT GOOG EBAY others takeover.

Growth

Branding, branding, branding. Intuit's TurboTax, Quicken, and QuickBooks are all here to stay. FYI, Buffet puts a lot of value in branding, Intuit was a real bargain, up until today, but still not too overpriced.

Excellent margins and returns, with no debt. Good FCF. 11% insider ownership. Not an outstanding pick (I won't buy it for my real portfolio) because their growth is only average within the industry -- good retail sales growth but no market share growth, ie: everyone else is growing the same. Still, those margins and returns and FCF mean to me that the value of the stock should increase better than market.

New ceo starting jan 08- guidance is same as always- with a slight increase in growth- still holds number one tax software for most users. - reasonably steady growth.

Called intuit last week after reading the turbo tax support board. if you dont know they had a horible mistake which they blame on IRS (but the consensus is that it was intuit's blunder). if you paid your filing fees or your owed tax on time using direct deposit(or cc, i think) and asked for your rebate check to be direct deposited- it wont happen. mine was due may 9 but will be receiving it by mail june 29. this has happened to a huge amount of their customers. 2 points: there is a LOT of anger on the turbotax board, people,like me, who have used them for 10 years are adament that they wont use the product again. also there was a lot of people that said they called intuit and were immediately given refunds for the software. i called and quickly got refunds to my cc for both the softwae and the e-filing.94bucks. in talking to the support person on the phone it was clear that anyone with this issue can simply call and get the refund and that it is company policy to give it to all that ask. he also said that everyone that is calling is furious. i dont know how you quatify the loss of revenue for this past tax year or the number of lost repeat customers but it sure is tempting to short them. this info isnt very public but its real. any thoughts?

nico

TrackFirstAnalysis

gREAT pRODUCT

Temp pull back due to valuation scare. It should do well into the tax season.

Meets a market need.

INTU has been beaten up recently by the Wise ones, but they are heading into their peak earnings season and should have a couple of great quarters. Longer term, they are making bold moves to diversify and expand, which should help insulate them from the heavy seasonality caused by their tax-related business.

With current downturn economy many small businesses will pop up creating a need for Quickbooks Software. Also, many out of work accountants and bookkeepers can utilize this great software to manager multiple small businesses.

a good stock

Read my take on JTX.

Great stock.

Undervalued

My banks bill payer program is run by Digital Insight (an Intuit company), and I use their tax software. No complaints!

I'm a user of two key products - TurboTax and QuickBooks, and don't see anybody else outpacing this company in this growing domain any time soon.