Business and financial management solutions provider Intuit Inc. (INTU - Snapshot Report) is undertaking massive reorganization initiatives. After realigning some of its business operations in May, Intuit has now announced the divestiture of the Intuit Financial Services (IFS) business. It also plans to offload the Healthcare business and further realign its Accounting business. The reorganizations are part of Intuit’s decision to focus more on core businesses i.e. tax preparation service and small business solutions.
Intuit will sell the IFS unit to a private equity investment firm, Thoma Bravo for a cash consideration of $1.025 billion. The IFS unit provides digital (online and mobile) banking solutions to financial institutions. The unit, which was formed after acquiring Digital Insight for $1.35 billion in 2007, failed to match company expectations of performing in line with the core businesses.
The divestiture will be completed within a few months. Post completion, Intuit expects the cash proceeds to fund upcoming share repurchases.
Earlier, on May 20, 2013, Intuit announced realignment of its business operations into six go-to-market divisions that will report directly to the chief executive officer. The new divisions are as follows: (1) Small Business Financial Solutions (combination of QuickBooks, Payment Solutions, and the Intuit Partner Platform), (2) Small Business Management Solutions (comprising Employee Management Solutions and Demandforce), (3) Consumer Tax, (4) Consumer Ecosystem (focused on solving important consumer problems with solutions such as Quicken and Mint.com), (5) Accounting Professionals, and (6) Financial Services.
As per the current reorganization plan, the Financial Services segment will be dissolved while the Accounting Professional segment will be further subdivided into two groups, namely Accountant and Advisor Group and ProTax.
Intuit currently generates less than 5% of its total revenue outside the U.S. The recent announcement complements its plan to focus on expanding its international presence. The realignment will be effective from Aug 1, 2013.
We believe that increased focus on SMB and Tax businesses will allow Intuit to boost its organic growth. But stiff competition from leading payroll solution provider Paychex Inc. (PAYX - Snapshot Report) in the SMB arena, seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concern us.
Currently, Intuit has a Zacks Rank #3 (Hold). Investors can also have a look at Pegasystems Inc. (PEGA - Snapshot Report) and Sykes Enterprises (SYKE - Snapshot Report), which have Zacks Rank #1 (Strong Buy) and are worth buying.