Intuit profit falls as ad spending rises

By Jim Finkle

BOSTON (Reuters) - Intuit Inc (INTU.O) posted lower quarterly profit on Thursday as it boosted advertising spending for its TurboTax tax preparation software and unit sales of its QuickBooks accounting software lagged its own forecasts.

Its shares fell 3.5 percent in after-hours trading following the earnings report.

Intuit reported net income of $115.2 million, or 34 cents a share, for the second fiscal quarter ended January 31, compared with net income of $145.4 million, or 40 cents, a year earlier.

Revenue rose 11 percent to $835 million.

Intuit reported QuickBooks revenue of $175 million, up 5 percent from a year earlier, but Chief Executive Brad Smith said unit sales missed company targets.

"It is really hard to put your finger on exactly what is going on in the small business category," Smith said in an interview. "Clearly macroeconomic conditions out there are challenging for small businesses today."

The primary rivals of QuickBooks are Microsoft Corp.'s (MSFT.O) Office Accounting and Sage Plc's (SGE.L) Peachtree.

QuickBooks advertising is scheduled to pick up in the third quarter, Smith said.

Intuit already has boosted spending to promote TurboTax as its key rival H&R Block Inc (HRB.N) beefed up its TaxCut software this year.

The company said this tax season's TurboTax software sales totaled 8.65 million units as of February 16, which includes two weeks after the quarter closed and represents a 13 percent increase from the same time last year.

Sales of desktop software, which customers install on their own computers, rose just 1 percent to 5.1 million. But its Online product, which customers access via the Web, saw sales soar 35 percent to 3.6 million units.

Intuit, which has 85 percent of the U.S. retail market for tax preparation software, started its annual advertising campaign on January 3, two weeks ahead of when it typically launches.

Spending on sales and marketing rose to $263.7 million from $219.5 million a year earlier.

The company is looking to minimize any loss of customers as a result of bad publicity it got over glitches in its system for filing taxes that delayed some returns last year.

It refunded about $10 million to 170,000 customers, arranged for them to get extensions from tax authorities and says it has taken steps to ensure the problem will not be repeated.