It seems that Intuit Inc.’s (INTU - Free Report) divestment plan announced last year has moved a step ahead. Per sources, the company has found a buyer for Quicken, a well-known home-accounting software. H.I.G. Capital, a private equity firm, is buying the business for an undisclosed amount and the transaction is likely to be closed this April.
Launched in 1983, Quicken is one of the oldest desktop accounting software from the pre-Windows era, and was first to run on Microsoft Corp.’s (MSFT - Free Report) DOS. Even though a number of similar tools were available at that time, Quicken was the simplest.
Quicken has contributed significantly to Intuit’s growth over the years. However, last year, the company listed out some of its units that were no longer important to the core business and were no longer generating sufficient revenue. Quicken was one of these. Therefore, in August, the company decided to offload three of its businesses, namely Quicken, QuickBase and Demandforce. (Read: Will Intuit Get Buyers for Quicken, QuickBase & Demandforce?)
Notably, Intuit has offloaded Demandforce to Internet Brands, an El Segundo, CA-based integrated online media and software services provider, for an undisclosed amount (read: Intuits' Unit Divestment Plan: Finds Buyer for Demandforce). Demandforce took care of online marketing and communication services to small businesses, and was acquired by Intuit in 2012 for $423.5 million.
With the sell-off of Quicken and Demandforce, the company now has only one unit — QuickBase — left to offload. QuickBase is a software platform used by businesses for project collaboration and management.
In our opinion, the TurboTax software maker is following its peers that are trying to shift from selling software to cloud-based subscription providers. Cloud-based solutions, as against software-based ones, have gained popularity because they offer anywhere, anytime access.
According to Intuit, the divestment will help it to “focus on and invest in businesses that strengthen the ecosystem and align with two strategic goals: to be the operating system behind small business success, and to do the nations’ taxes in the U.S. and Canada”.
Intuit previously expected these divestitures to have a negative impact of approximately $250 million on fiscal 2016 revenues and 10 cents on non-GAAP earnings per share. The company currently expects full-year revenues in the range of $4.525–$4.600 billion and non-GAAP earnings per share between $3.45 and $3.50.
We believe that Intuit’s decision will help it to focus more on the fast-growing online businesses. Notably, the company’s cloud-based accounting software QuickBooks Online’s subscriber base jumped 57% year over year in fiscal 2015 to 1.075 million.
Intuit’s efforts to convert itself into a cloud-based tax and accounting solution provider are encouraging. Notably, the company recently reported a year-over-year revenue growth of more than 23% in second-quarter fiscal 2016, mainly on the back of its ongoing transformation into a global cloud company and higher demand resulting from the U.S. tax season.
Intuit currently carries a Zacks Rank #2 (Buy). A couple of well-ranked stocks in the broader technology sector are Avid Technology, Inc. (AVID - Free Report) and Blackbaud Inc. (BLKB - Free Report) , both sporting a Zacks Rank #1 (Strong Buy).
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