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Intuit Divests Products and Surprises Analysts in Fiscal 1Q16

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Part 3
Intuit Divests Products and Surprises Analysts in Fiscal 1Q16 PART 3 OF 8

Intuit Is Increasing Its Focus on QuickBooks Services

Intuit divested offerings to increase focus on subscription-based services

In the prior part of this series, we looked at Intuit’s (INTU) fiscal 1Q16 results. We also looked at the contribution of its operating segments to the company’s overall revenues.

In fiscal 4Q15, Intuit announced the divestiture of the following:

  • It divested Demandforce and QuickBase businesses, which were part of its Small Business segment. QuickBase is an online database that helps build custom apps (applications). Demandforce is an automated marketing solution aimed at small businesses.
  • It divested Quicken, a consumer finance product that was part of its Consumer Ecosystem product line under the Small Business segment.

Intuit announced that the divestitures were part of its move from the desktop to the subscription-based business model. The divestitures will enable the company to focus on its online, subscription-based services, especially its flagship cloud software QBO (QuickBooks Online). A subscription-based business provides recurring revenues that are stable and predictable, which is why they are preferable.

Intuit Is Increasing Its Focus on QuickBooks Services

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SMAC revolution has forced companies to expand their revenue avenues

The increased preference for cloud storage has disrupted the traditional, established IT (information technology) market. As a result, a majority of the legacy technology players such as Microsoft (MSFT), Oracle (ORCL), and IBM (IBM) have found themselves in transition. The shift from traditional software licenses and hardware sales to pay-as-you-go subscription revenues has forced these companies to alter their established business models.

According to Goldman Sachs and as the above graph shows, the cloud computing infrastructure market is expected to grow approximately three times its current size by 2018.

You can consider investing in the iShares SPDR S&P 500 ETF (SPY) to gain exposure to Intuit. SPY invests 0.15% of its holdings in Intuit.

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