Well recognized for its products such as TurboTax and Quicken,
financial and tax preparation software provider
) has opted to buy a San Francisco-based company called
Demandforce. The $423.5 million deal is expected to close this
Founded in 2003, Demandforce provides software-as-a-service
(SaaS) applications for marketing and customer relationship
management. Its products are primarily tailored for small and
medium businesses (SMBs). The company's products are generally used
in dental offices, auto repair shops, spas and salons, and
optometry. The software also helps the SMBs have real-time
interactions with customers through Facebook and Twitter.
The acquisition will be a perfect fit for Intuit's SMB business
segment. Upon closure, Demandforce will be included as a new
sub-segment in Intuit's SMB Group. The new division will be headed
by Demandforce's current president and founder, Rick Berry. As of
now, the group consists of three sub-segments namely Financial
Management Solutions, Employee Management Solutions and Payment
The new unit will help Intuit in cross-selling and up-selling
its products to existing customers, leading to faster product
adoption. With its capabilities, Demandforce is expected to add
1-2% to revenue growth in FY13 and have a neutral to slightly
dilutive effect on non-GAAP earnings for fiscal 2012 and 2013.
We believe that there is ample scope for the increase of
Intuit's SMB exposure. Intuit recorded 9.0% year-over-year revenue
growth in its SMB group in its second quarter 2012 results, and
expects to witness healthy year-over-year growth of 10.0-12.0% in
But we remain somewhat concerned about the prevailing macro
uncertainty in the U.S., which could be a drag on SMB revenue.
Intuit is a leading provider of business and financial
management solutions to small and medium-sized businesses,
consumers, accounting professionals and financial institutions. The
company delivered impressive second quarter results, beating the
Zacks Consensus Estimates on both the top and bottom lines. Though
revenue expectation for the upcoming quarter was kept unchanged,
the company raised its operating margin and EPS guidance.
But we think that Intuit is going to face stiff competition from
the leading payroll solution provider
), which introduced certain tools that aim to solve certain
tax-credit-related problems for SMBs.
Currently, Intuit has a Zacks #4 Rank, which translates into a
short-term Sell rating.
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