Over the past couple years, Intuit (INTU) has been aggressive with acquisitions. As mobile and cloud technologies proliferate, this strategy has been a critical part of remaining competitive.
Intuit's deals include the $170 million acquisition of Mint Software (an on-demand personal finance manager), the $169 million deal for PayCycle (a web-based payroll provider) and the purchase of Medfusion (a developer of healthcare connection services). Typically, the company likes to wait for a market to show maturity and then acquire the category leader. It definitely helps that Intuit is sitting on a lot of cash.
But in some cases, it is important to be early in the market. And this appears to be the case in the rapidly-growing space for mobile applications, especially with Apple's (AAPL) iPhone and Google's (GOOG) Android. To this end, Intuit has acquired Cha-Ching, which develops Mac web programs and iPhone apps for personal finance.
A Look at Cha-Ching
To become an iPhone developer, the barriers to entry are minimal. You need to use a Mac computer, pay a $100 membership fee and download the software development kit, which is free. Of course, you need to be a good programmer and understand effective user interface design.
Interestingly enough, many of the iPhone app companies are small operations. The industry is still in the early stages and the monetization models are far from clear-cut (can you really make money with 99 cent downloads?)
One worry in the personal finance space is about putting your financial information on an iPhone app. If you take a look at some of the Cha-Ching community boards, the company appears to have had a sketchy history with its customers. (Then again, it looks like the founder started working for Intuit back in March! This is according to Juan Alvarez's LinkedIn profile.)
Yes, it is the wild-wild west for the iPhone app industry, reminiscent of the early days of the Internet.
The Importance of the iPhone
According to a massive research report from Morgan Stanley's Mary Meeker, there will be more smartphones than PCs by 2012. In fact, she believes that that mobile opportunity will be larger than the Internet boom.
So, for a company like Intuit, there is much at stake. While it has a variety of mobile apps, the strategy is still fuzzy. And this is definitely understandable when a market is highly dynamic.
Clearly, having a strong mobile strategy for the personal finance business is important to Intuit. This segment produced $452 million in revenues for the past nine months. However, mobile must become pervasive throughout all the product lines. Keep in mind that Intuit's TurboTax business accounted for $1.1 billion in revenues for the past nine months, with operating income of $764 million. It is perhaps this area that Intuit needs to get even more aggressive.
This means making a variety of small acquisitions of iPhone developers and even those in the Android space. And while the deals may be relatively small -- in terms of the headcount and price tags -- the impact can be critical.
Small Cap Investing
Learn now to invest in small companies the right way.View Course »