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Intuit Inc. Message Board

  • tom_richards_mm tom_richards_mm Oct 18, 2000 11:18 AM Flag

    What's next?

    Well, what do we have -- a nice set-up for an
    October rally or a freefall over the precipice and into a
    new era of dramatically lowered
    expectations?

    It's a rhetorical question. One can find pundits to
    support either view. In fact, one can easily find pundits
    who support one view one day and another the next,
    which confirms their humanity and the fact that they
    are just as likely to have their emotions flipped
    around as the rest of us.

    My guess is that the
    high P/E is the kiss of death going forward. It will
    be in a year like this one has been that Intuit will
    eventually fail to keep its record of great fourth quarter
    price performance -- especially with a P/E greater than
    25 which, historically, was itself high.

    It
    has become clear to me that my opinion (that the
    market is about to rebound) is more a wishful than fact
    based. On the basis of facts, I could make either
    argument -- depending on the subset of facts that I select
    to use.

    Over the past several years, a
    downturn has been equated with an opportunity. Perhaps.
    But, a downturn can also be a
    warning.

    Conclusion: Avoid guessing what the market will do. Wait for
    it to signal before acting. And, for Pete's sake,
    avoid margin. Barron's showed two remarkable graphs
    this year -- a chart of the Nasdaq and a chart of
    margin debt. Both have soared dramatically and are still
    near historic peaks if one takes the long view. That
    margin debt may well be expected to explode soon or
    later. Whether we personally are operating on margin or
    not, we will all be affected when it does. But, no
    doubt about it, those who have the debt will be at the
    epicenter of the blast.

    For the long term, I am
    looking at health care and defense stocks. Vanguard
    Special Health is, by a factor of two, my single largest
    position -- thanks mostly to the rapid doubling of my
    January 1998 stake in that fund. I'm letting it all ride.
    For defense, Raytheon looks good to me as a
    consolation prize to myself if Bush gets elected.


    (What the hell is with Gore? He seems unable to control
    his behavior -- probably a result of having had power
    for so long that he never had to learn to control it.
    He's been an alpha male for too long despite the
    nonsense at the beginning of the campaign. It's a shame.
    IMHO, he's the lesser of the two evils. Bush's Star
    Wars nonsense and his likely Supreme Court
    appointments both depress me. Also, it seems a shame that he
    will get elected -- in large part -- by buying the
    gullible with a taxcut that will give up the "surplus"
    that 8 years of Clinton's effective, if stormy,
    leadership has created. While social security is on the
    ropes, there is no surplus. The money should, in fact,
    go to a locked box earmarked specifically for social
    security and to paying down the debt. Even Gore's tax cut
    is absurd. Clinton, for all his sexual immaturity
    and efforts to disguise it, is a statesman compared
    to these two pandering pols.)

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    • Right now, INTU is indulging in the "gravy"
      portion of net revenue. Advertising revenue is simply an
      exchange for eyeballs. Currently, this is INTU's greatest
      asset - butts in the seats. Not only that, but the
      demographics have got to get a lot of companies drooling.
      People with money to manage and frequent web users.
      Small business owners. People who not only care to
      manage their money, but pay for the tools to do
      it.

      Let's get on to the other portion of the equation:
      interface. INTU's interface is dominant in this sector.
      Inertia will work in INTU's favor. People won't change,
      unless they have a compelling reason to do so. This will
      encourage companies to develop handshakes for their
      applications/websites. Maurice's PeopleSoft example is a good one for
      this approach. PeopleSoft adds value to its offering
      by providing this handshake. Another one (which I
      submitted as a suggestion to INTU) would be an alliance
      with Safeway. Safeway has a consumer card, which acts
      as a universal coupon - but, wait a minute - it also
      records your buying habits. How about downloading this
      data for your own personal budgeting purposes? Not a
      bad loyalty scheme.

      Where the B2B will really
      take hold is with QuickBooks. Order entry, billing,
      aggregation, logistics and other applications can be made
      available to the small business on a pay-as-you go basis
      (or whatever makes sense).

      Have you seen the
      Quicken Credit Card? The Quicken ISP? Here they come.
      Because of the role that INTU plays in people's finances
      (and that of small business), the possibilities are
      practically endless. This probably is responsible for their
      seeming lack of focus in the B2B space. There is so much
      "gravy" being offered that more complicated initiatives
      can wait.

      Last, but not least - why did MSFT
      want INTU so badly? Why did the government say no to
      the acquisition? Why hasn't MSFT given up the ghost
      on Money? Because there is a ton of money to be made
      by the dominant money-management software provider.
      Even for the also-ran (just not as much, or as rich a
      margin).

      There is a lot of information on INTU's employment
      site. PeopleSoft today, SAP tomorrow. This is not a
      company that it sitting on its hands. It's grabbing the
      dough and looking for more.

      I know I must seem
      like a cheerleader, but actually I simply share INTU's
      vision and admire (mostly) their execution. I expect the
      coming earnings statement to be a positive surprise on
      the order of the previous quarter.

      If you want
      to see a truly frightening P/E, take a look at AUTN.
      I see a very bright future for a company in their
      sector, but my personal jury is not yet out.

      P.S.
      - MSFT was the best example. There are few others.
      Who makes big-time consumer software anymore?
      Netscape?

    • Thanks. Your posts are more like what I was
      seeking. The "buzz, buzz" was in response to a post that
      sounded like my daughter's recitation of cliches (that
      sound fresh to her) as she describes why she likes some
      half-baked singer. ("She's honest and funny and sees through
      how people delude each other." Yeah, right. To me,
      Ani Defranco acts and sounds more like a
      proselytizing meathead than a deep-thinker -- by a mile. Give
      me my generation's Dylan any day. He didn't come
      across as a "nice guy" but he didn't threaten to have a
      nervous breakdown right before your eyes either. Haven't
      heard of Defranco? Well, then, be grateful.)

      V's
      B-to-B explanation is certainly validated by Intuit's
      forsaking of Customer Service except in the Quick Quotes
      Live section.

      I remain fuzzy about just what
      Intuit has to offer businesses. I can understand MSFT
      with its corporate operating systems emphasizing
      networking, its program development software, and its office
      tools. I'm still missing what Intuit is offering besides
      advertising space and links to the sites of its partners. Its
      product line, as I understand it, is essentially
      individual or small business (QuickBooks) oriented. The B2B
      -- other than selling advertising space and
      installing unwanted links on one's desktop to American
      Century's hopelessly frustrating site -- thus far seems
      more a sideline than a wise direction. Perhaps there
      is some hope in Maurice's example of simplifying tax
      preparation for employees. It may be a trick to get the small
      and mid-sized businesses that might be interested to
      use it instead of their accountants, but if the
      marketing is good . . .

      The question, though filled
      in a tad, is just what does Intuit have to offer on
      a B2B basis. It's telling that Volareus had to use
      Microsoft rather than Intuit for his specifics. V. is a
      bright guy. Maurice came up with one example. V.,
      writing after him, apparently had none left to offer.


      It ain't their faults. IF Intuit has a B2B strategy,
      it hasn't done a lot about making it specific and
      clear. Perhaps it should.

    • thoughts: the selling has been as mindless as the
      q1 buying melt up. at some point soon, the selfish
      interests of the mutual fund managers will switch from sell
      to buy mode. then through jan we may have an
      impressive upsurge as investors run to catch the train. then
      the slow economy reality hits again and the new
      president, as typical, sacrifices his 1st yr in office to
      make him look good for the last 2 yrs. so beyond that
      a repeat of sept-oct which repeated april-march.


      btw, you seem too savy to fall for that lockbox jive.
      congress spends the money and there never has never will
      be a lockbox. also, they've been spending the ss
      surplus for yrs, nothing is sacred but spending to
      congress.

      • 1 Reply to metasea
      • "btw, you seem too savy to fall for that lockbox
        jive. congress spends the money and there never will be
        a lockbox."

        Well, I agree that there never
        has been a lockbox. And, I also agree that the
        prospects for one are remote, but Gore's approach to the
        surplus is far closer to approximating a locked box than
        Bush's. (Gore will have an open box that he will
        discourage Congress from dipping into. Bush will raid the
        box to keep a campaign promise, thereby avoiding his
        father's mistake by squandering the future for the
        present. What makes Bush's raid unseemly to me is that he
        had nothing to do about husbanding the surplus that
        he is so eager to spend. He is like the beneficiary
        of a will who elects to have a Big Party with the
        fruits of another's labor -- which has been the story of
        much of his pampered life.)

        I do, however,
        believe that the Clinton-Gore surplus is less likely to
        be squandered by the spending of Gore than by a
        large, pandering tax cut by Bush.

        In my view,
        virtually every Republican and far too many Democrats were
        drawn to politics by the emotional urge to "stop those
        crooked bastards from stealing my money." Before Clinton
        -- who I DO believe to have been a very dedicated
        President despite his clay feet -- no politician showed any
        inclination to balance the budget except in his rhetoric.
        Clinton, besieged by attackers from every quarter, still
        managed to keep the budgets balanced and ushered in the
        greatest period of prosperity that the U.S. has ever
        known.

        I have no delusions about the election. I
        believe that Bush will win because Gore was overbearing
        and lost the debates on all that counts -- style.
        Since Bush is not exactly a great communicator, it says
        very little for Gore's charm factor. He has
        none.

        But, charm and style aside, the question is who is
        more likely to protect and grow the surplus -- the
        Republican or the Democrat. Contrary to what one might
        guess, the largest contributor to the growth of the
        national debt was Regan. The largest contributor to the
        shinkage of that debt? Clinton!

        Why? Republicans
        have no constituency for taxing. Their supporters want
        their money back and their guns by their sides. But, he
        who governs soon realizes that there are many
        legitimate reasons for government spending. In the end, the
        Republicans and the Democrats spend about the same. The
        difference is that the Republicans have been fighting a
        jihad against taxes while the Democrats have had to pay
        as they've gone if only to keep the Republicans from
        beating them up.

        It's a choice between "rebate
        and spend" vs. "tax and spend." Between the military
        and entitlements, the spending is a constant. So,
        which party will be responsible on the income side? For
        a couple of decades, the surprising answer has been
        The Democrats. As Yogi might say, "You can look it
        up. It's in the books."

        ----- Public Service
        Announcement ------

        My e-mail address is in my profile
        to keep the OT stuff off the boards. If someone
        wishes to continue this discussion, write me. I'll
        answer. I doubt that many here give a hoot one way or the
        other about my political views. Let's give them a
        break. And, yes, I did start it. Sorry.

    • tom_richards_mm,

      "My guess is that the
      high P/E is the kiss of death going forward. It will
      be in a year like this one has been that Intuit will
      eventually fail to keep its record of great fourth quarter
      price performance -- especially with a P/E greater than
      25 which, historically, was itself high."

      I
      would like to think that, going forward in time, "the
      record of great fourth quarter price performance" will
      continue, but with a different mix of sorts. The mix going
      from a tax preparation software performance to one of
      B2B performance, with the internet as the
      propellant/conduit. I foresee a tremendous surge in real estate,
      insurance, bill payment, small business accounting, and on
      line tax preparation transactions/business, to name a
      few, to take the lead.

      I'm not discounting what
      you are saying about P/E, but I believe that Intuit's
      P/E will be in line with it's metamorphosis to a full
      fledged internet B2B player.

      • 2 Replies to mauricethepantsman
      • "I'm not discounting what you are saying about
        P/E, but I believe that Intuit's P/E will be in line
        with it's metamorphosis to a full fledged internet B2B
        player."
        _______________________________________________

        You may be right. What are some examples of
        successful (from an earnings rather than stock price point
        of view) B2B players? And, just what -- specifically
        -- does Business-to-Business mean? (What is one
        doing and how is one making a profit in being a B2B
        player?)

        I understand sales. I understand product. I even
        understand service. But, B2B has me scratching my head.


        NOTE: These questions and comments are NOT gauntlets
        thrown to the ground. They are just questions that I'm
        asking because it has occurred to me that I don't know
        the answer to either of the questions. If you or
        someone else can provide some definitions and examples,
        I'd appreciate it.

      • I believe that INTU is moving away from the
        shrink-wrapped market to being an ASP. The B2B space is being
        kind to them and I think we will see another surprise
        re earnings.

        The current market environment
        may not be as kind to INTU as it was last quarter,
        but some eyebrows will be raised in the investment
        community. INTU is still considered a tax software company
        and the unexpected revenues should prove to be a
        pleasant surprise.

 
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