Friday, January 21, 2011

Intuit's Annual Shareholder Meeting (2011)

(Image above was added and taken on July 12, 2012)

I attended Intuit's annual shareholder meeting on January 19, 2011. CEO Brad Smith was his usual effervescent, charismatic self and handled the informal presentation. Shareholders were treated to Peet's coffee, Odwalla juice, slices of cake, scones, and fruit as well as a complimentary Quicken 2011 or TurboTax Investments and Rental Property CD. (Unfortunately, I can't use either one because I use TurboTax and Quicken's business versions.)

Among CEO Smith's Powerpoint slides, several stood out:

1. Intuit sees the market shifting from DIY to "Do It for Me." For example, look at Quicken. It automatically downloads information for you and renders much of the accounting process automatic.

2. CEO Smith drew laughs when he said that these days, when someone asks whether you can type 60 words a minute, the answer is still yes--and he then proceeded to mimic the motion of cell phone texting. His point was that Americans are using mobile phones to replace older technology, and Intuit was ahead of the curve.

3. CEO Smith is focusing on growth in Southeast Asia and India, although Intuit does not offer tax prep services in India. Intuit's businesses in India revolve around helping small businesses advertise and acquire paying customers, especially through the use of mobile phone services.

4. One of the coolest new products is Snaptax. Taxpayers filing 1040EZ forms pay only $14.99 when filing their tax returns, which is a good return on investment if you receive any kind of substantial IRS refund. More here.

The Q&A session was interesting. One shareholder, a Mac user, explained his experience buying a Mac and Intuit's Quicken software. He patiently and intelligently explained that Intuit's latest version of Quicken for Mac was terrible--because it was a barebones version of the PC version--causing him to go back to the Apple store and demand a refund. Then, when he arrived back home, he uploaded his much older Quicken program, which had more features than the new version made specifically for Apple.

He said he was "pissed off" with the experience and wondered why Intuit was able to offer TurboTax to Apple users but not Quicken. (In a deliciously sardonic aside, he pointed to his complimentary TurboTax and Quicken CDs and referred to them as a local shareholder's "dividend." Intuit, despite its large cash reserves, does not pay a dividend.)

Mr. Smith explained that his team had chosen to focus on the PC version of Quicken after Apple's woes many years ago. Recently, however, Intuit developed a Quicken for Mac version from scratch called Quicken Essentials. This new software is only a few months old, and Mr. Smith said he hoped customers would understand the difference between Quicken for PC--which has decades' worth of improvements--and Quicken Essentials for Mac, which is a work in progress.

I asked how the government was helping Intuit and how it was hindering Intuit. Obviously, Intuit's tax software business relies on a reasonably good relationship with the government. (Page 20 of Intuit's 10K states, "[T]here have been significant new regulations and heightened focus by the government on these [tax, payroll, payments, financial services and healthcare] areas.")

Mr. Smith said that he hoped for a mutually beneficial partnership with the government. At the same time, the government can be a hindrance when it seeks to provide tax preparation directly to consumers, which is not the government's core competency. Each side should stick with what they do best, said Mr. Smith.

I also asked about improving Quicken with respect to uploading pictures of receipts and invoices. Many businesses keep their receipts and copies of invoices in shoeboxes or envelopes. Why not allow a user to take a picture of a receipt or invoice with his/her camera and upload it or email it to Quicken, which will automatically match the invoice/receipt with the appropriate line item?

One key issue would be whether the IRS will accept e-versions of receipts and invoices as sufficient evidence in case of an audit; however, even without full IRS acceptance, adding an e-receipts feature to Quicken would help small businesses stay organized. Mr. Smith said the company was working on a product called QuickReceipts.

On another note, I was really happy to get the opportunity to briefly chat with Intuit co-founder Scott Cook after the meeting. Mr. Cook, lest we forget, helped Intuit beat Microsoft during its heyday years when it tried to foist Microsoft Money on the public. In an ironic twist, Microsoft's software ventures outside of its dominant operating system software have been failures, primarily because it keeps trying to compete with other natural quasi-natural-monopolies like Intuit and Sony/Nintendo.

I mentioned to Mr. Cook that I wasn't so keen on the idea of looking for growth and profitability in India. India has a very fragmented consumer marketplace, making it very difficult for any company to establish a dominant foothold (which harms a company's ability to increase its margins; it also has poor infrastructure; and most analysts who focus on India use financial projections based on overly optimistic macro factors (i.e., multiply anything by a billion and it looks like you can make lots of money). Mr. Cook politely explained that the first step was to generate revenue, and then profits.

I always enjoy Intuit's annual meetings and encourage shareholders to attend.

Disclosure: I own an insignificant number of Intuit (INTU) shares. I participated in one paid Intuit survey in 2010.

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