Microsoft buyout gives Intuit a push

October 15, 1994|By Bloomberg Business News

MENLO PARK, Calif. -- Microsoft Corp.'s planned buyout catapulted shares of Intuit Inc. by 34 percent yesterday, while Microsoft's stock fell 2.4 percent after analysts lowered earnings estimates for the personal computer software giant.

L After the market closed Thursday, Redmond, Wash.-based Micro

soft and Menlo Park, Calif.-based Intuit announced the biggest purchase ever in the booming PC software industry. Microsoft will buy Intuit in a $1.5 billion stock transaction that places Microsoft in control of the growing market for software that helps people manage their finances.

A purchase of such size -- more than 12 times Intuit's 1993 revenue -- is unusual for Microsoft. But it brings into Microsoft's fold a pesky competitor that has bedeviled Chairman Bill Gates, who has fought a long and expensive battle to avail with Intuit, maker of the popular Quicken financial software.

"Great strategic fit," wrote analyst Stephen McClellan of Merrill Lynch & Co. "Intuit is a strong, well-run leader in consumer personal finance PC software, and this acquisition will put Microsoft in position to take major advantage of the rapidly emerging . . . CD-ROM software market."

More acquisitions are likely for Microsoft, which has $3.6 billion in cash on hand, said John Girton, an analyst at Van Kasper & Co. in San Francisco. "They participate in many areas of the software industry, so they can go in any number of directions," he said.

Intuit shares jumped to $73.25 -- above the price guaranteed by Microsoft -- before settling at $67.375. More than 6.2 million shares traded, compared with daily volume of 176,600 for the past three months.

The companies' boards agreed to the transaction in which each share of Intuit stock will be exchanged for 1.336 shares of Microsoft stock. The agreement ensures that Intuit shareholders receive no less than $71 per Intuit share in Microsoft shares -- a premium of 52 percent over Intuit's stock price Thursday.

Microsoft closed yesterday at $55.9375, down $1.3125.

Citing transaction costs, Mr. McClellan lowered his fiscal 1995 earnings estimate for Microsoft to $2.10 from $2.30, but left intact his "buy" rating on the stock.

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