Intuit Prepares to Turbo-Charge Through Tax Season

Microsoft has withdrawn its competing software, leaving Intuit master of the field.
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As

Intuit

(INTU) - Get Report

releases the latest version of its

Quicken Turbo Tax

desktop software Tuesday, it's doing so with one less competitor than it faced a year ago. Gone is mighty

Microsoft

(MSFT) - Get Report

, which exited the market in March.

For Intuit, already the dominant player in this market, Microsoft's decision could mean an easier time with its annual tax software introduction.

"Intuit will likely do less discounting this year than last," says James MacDonald, an analyst with

First Analysis

. "We believe that the company will do well with the increased pricing flexibility ... which is already factored into our models." (MacDonald rates the stock accumulate, and First Analysis hasn't done any underwriting for Intuit or Microsoft.)

So far, Intuit hasn't pumped up prices. Last year TurboTax Deluxe retailed for $29.95. This year it goes for $39.95, but it has a $10 rebate. The basic TurboTax package sells for $19.95, the same as last year.

Intuit also got a boost Monday when

Standard & Poor's

said it was adding the company to its

S&P 500

index. The stock on Tuesday was up $5.31, or 12%, to $50.81. The move had been

expected.

Microsoft ended its short run in tax-preparation software in March when it dropped its

TaxSaver

, saying the product required too much spending to keep it competitive. Microsoft, which was considered a feared competitor because of its overall strength, instead started an alliance with

H&R Block

(HRB) - Get Report

, which is now Intuit's main competitor. In hopes of gaining some of Microsoft's 200,000 former customers, Intuit designed its latest software to automatically transfer last year's tax information from Microsoft's TaxSaver to Turbo Tax.

The new Turbo Tax version also can pull common tax information -- interest, dividends and stock transactions -- directly from companies like

Fidelity

and enter it in the correct forms. And it includes a feature that allows users to set up an IRA instantaneously on the Web. Bob Meighan, vice president of Intuit's consumer tax group, says the company expects to sell 6 million desktop software units this season, 1 million more than last year.

Last year, Intuit nailed 70% of the tax-preparation software business in the U.S. including desktop and Web-based software -- more than Microsoft and H&R Block combined.

"Intuit is delivering its products on time, it has one less competitor and is well positioned in online tax filing," says Justin Post, an analyst at

Deutsche Banc Alex. Brown

who rates the stock a strong buy. (His firm hasn't done any recent underwriting for Intuit or Microsoft.) Post estimates that revenue from Intuit's personal tax products will increase 27% in fiscal 2001, which ends July 30. The software maker's personal tax products pulled in $216 million in fiscal 2000.