The Wizard of Intuit
By most measures, Nov. 29, 1999, was already a stellar day for Stephen M. Bennett. After 22 years at General Electric Co., he was promoted to executive vice-president of GE Capital, a prize for boosting equipment-financing profits 150% and launching two GE Capital e-business units. But things would get even better: At home that night, a headhunter called. Software maker Intuit Inc. (INTU ) needed a chief executive. Bennett didn't hesitate. At GE, he says, "I wondered how much of my success was GE and how much was me."
Three years later, Bennett has his answer: A lot was him. After stagnating and stumbling during the dot-com boom, Intuit is hitting its stride in the tech bust. The 48-year-old GE vet has done a major reshuffle at the maker of QuickBooks small-business programs and TurboTax consumer software. Out went a raft of mostly money-losing online finance businesses. In came a half-dozen small acquisitions in the past year, all to beef up Intuit's small-business offerings.
And up went the earnings: Net income went from an $82 million loss in fiscal 2001 to a profit of $140 million in fiscal 2002, which ended in July. Pro forma profits, excluding items such as the costs of acquisitions, are on track to jump 50% this year. Meanwhile, revenue, which shrank 1% in 1998, was up 18% in the last fiscal year, to $1.36 billion, and analysts predict it will grow more than 25% this year. Intuit's stock is up 13% this year and 35% over the past 12 months, even as major indexes have lost 25% to 35%.
With numbers like that to his credit, Bennett is emerging as a management role model for Silicon Valley during the bust. Intuit was always innovative, and its products were easy to use--but Bennett has made the company disciplined and results-focused, too.
That's earning him admiring reviews even from competitors. "The key word there is definitely discipline," says Ronald F. Verni, CEO of Best Software Inc., a maker of small-business software. And Bennett's fans inside Intuit positively gush about him. "To say he's the best new CEO in technology damns him with faint praise," says founder and Chairman of the Executive Committee Scott D. Cook. "The question is: Is he the best new CEO in America? And he may well be."
Much of what Bennett is doing comes directly from the GE playbook. He recruited former GE subordinates to run both of Intuit's major divisions and demanded better-thought-out budgets and clearer objectives from all of his managers. Like GE ex-CEO Jack Welch, he teaches management seminars to up-and-comers. And like Welch, he insists on sticking to businesses where Intuit can be No. 1 or No. 2. "The first part of strategic rigor is: Are you in a business where you can win?" Bennett says.
His major focus is small businesses. Intuit already has about 85% of the $280 million market for accounting software for companies with fewer than 20 employees. Now Bennett is targeting a much larger $4.8 billion market by churning out new versions of QuickBooks for companies with up to 250 employees, and by selling new software applications. He has spent almost $500 million on acquisitions--two firms that handle payrolls and automate computer help desks, and four whose software helps manage industries from construction companies to nonprofit agencies.
Will it work? Intuit will do best when it's selling to growing companies that step up from QuickBooks or similar products. But it will get a stiff fight when it tries to move up to companies with hundreds of employees. That's where Microsoft Corp. (MSFT ) has staked out its ground. In the past two years, the software giant shelled out $2.5 billion to buy small-business software companies, and this fall it's coming out with new software for managing relationships with customers. Analysts believe there's plenty of room for both companies' small-business units to grow at more than 20% for the next two years, but the competition will heat up after that.
For now, Bennett's biggest challenges are internal. He intends to make Intuit much more efficient. The goal is to deliver operating-profit margins of 24% this fiscal year, up from 14% the year before he arrived and 21% last year. Software's top performers deliver margins of more than 30%. To achieve that at Intuit, Bennett is working to improve discipline.
To get employees focused on the bottom line, he adjusted pay incentives. Workers with top performance reviews get annual salary raises up to 10%, even when the average raise is 4% or less. "This was a consensus culture where rewards were spread like peanut butter," says Jim Grenier, Intuit's vice-president for human resources.
Bennett also is pushing GE-like programs to boost quality and trim waste. One result: Error rates for Quicken personal-finance software shipments fell to 2% during the release of the 2003 version from 22% for the 2002 edition. Intuit says its quality efforts have saved $10 million so far, with an additional $20 million due from projects under way.
In spite of the strides Bennett has made, Wall Street has mixed feelings about Intuit's stock. Ten analysts rate it a buy, while five call it a hold. That's partly because Intuit shares trade at 36 times 2003 estimated pro forma earnings. "Intuit's a great company, but right now the stock is fully valued," says Standard & Poor's analyst Scott Kessler.
Bennett, naturally, thinks otherwise. His target: to boost Intuit's stock 200% to 400% over the next several years. "My dream is to make that happen, then go to the beach," he says. Even now, he's having much more fun than his old boss, GE CEO Jeffrey R. Immelt, whose stock is down 35% this year.
By Timothy J. Mullaney in New York