Updated from 3:17 p.m. ET
said today that the lingering effects of a Y2K giveaway are the main reason the company will miss its financial estimates for the current quarter. At its annual analyst day Thursday, the financial software and services company opened the morning by cautioning it would log revenue of $425 million to $450 million instead of meeting revenue expectations of $455 million to $470 million for the third quarter ending April 30. In turn, the company lowered its sales estimates for the full year to $1.26 billion to $1.30 billion from $1.32 billion to $1.34 billion.
"The economic slowdown was not the real reason for the warning," said Intuit CFO Greg Santora. Santora explains that in 2000, Intuit gave out 350,000 free copies of its QuickBooks software so customers would be Y2K compliant. As a nasty side effect, those happy recipients aren't upgrading in 2001 at the 20% to 30% rate expected, which pinches the small-business segment that comprises 35% to 40% of Intuit's business. Intuit gave away free Quicken Y2K upgrades last year as well, but Quicken users are still upgrading because of Quicken's relatively cheap price tag -- under $50 vs. QuickBook's several hundred dollar price.
Additionally, Intuit is feeling the pain in the weakened market for Internet advertising. Its Quicken.com portal and QuickBooks Internet Gateway are adding to the company's revenue shortfall. Throw into the mix a slowdown in Japan, and revenue is coming in light.
On the good-news side, Intuit assured the analyst community that lagging third-quarter revenue wouldn't get in the way of business growth. CEO Stephen Bennett said the company was confident in its projections for the rest of the year and was unlikely to change them.The company promised the Street it would turn in 20% growth in operating income over the next three years -- it's counting on even higher growth rates in 2002 -- and is sticking by operating income estimates of $205 million to $213 million for 2001. (Those numbers exclude things such as acquisition-related charges and investment losses.)The company is a staple provider of personal and small-business financial software, and typically logs the bulk of its yearly revenue in the second and third quarters around tax time. Some analysts felt there was no reason to overreact, as investors did dinging the stock Thursday because the revenue dip was minimal. Intuit closed lower, down $12.44, or 29.4%, to $29.81."We're certainly seeing a lot of fund outflows today, but the stock will bounce back," says analyst Mike Wallace of
. He has a buy rating on the stock and his company has done no recent underwriting for it.
"Compared to most companies in techland, like
, Intuit is pretty solid. They had only a 3% revenue reduction and left their profit alone," said David Farina, an analyst from
, who maintains a strong buy on Intuit despite the warning. (His firm co-managed an Intuit secondary offering three years ago.) "Things have to get really bad in this country before people go back to pen and paper to do their taxes."
Intuit revealed the downturn just more than three weeks after reporting its second-quarter results on Feb. 20, when it notched $457.6 million in revenue. Its lower revenue projections for the third quarter represent a 38% increase from the year-ago quarter's $329.1 million.