In announcing a decision to lay off 7 percent of its work force, Intuit couched the decision of terms of realigning its business to support what it called Connected Services.
That includes developing mobile and social networking services.
But in many ways, this looked like a typical layoff to cut costs with key business areas not performing as they once did.
One of those includes the company’s ProTax business, which involves the sale of Lacerte and ProSeries software. When it issued guidance for the year ending July 31, Intuit predicted revenue growth wide range from a negative 1 percent to a positive 1 percent. Meanwhile, the original growth predictions for QuickBooks was scaled back as a significant amount of business disappeared.
It’s the ProTax results that have a broader application.
There is little growth in the professional tax software market. And companies like Thomson and Wolters Kluwer, which owns CCH, don’t generally have upper managements that want to hear that revenue is going to be flat. Anyone with ambition doesn’t want to be in charge of that kind of unit.
Over the last few years, these companies fueled revenue growth by acquisition. But the targets have been purchased and most of the business digested. Judging from the complaints about the number of leads coming out of trade shows, vendors are fighting over users who switch products, generally estimated to be about 5 percent of all preparers.
The one valuable target left to acquire is Drake Software, whose CEO, Tim Hubbs, just left to return to the hospital business.
I am not suggesting this shows that Drake is for sale. But I am suggesting that we have reached a time where Thomson, Intuit and CCH are likely to offer Phil Drake more and more money to sell to them.
Because if these professional tax businesses can’t grow, we may see more realignments like Intuit’s.
