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Intuit, Inc. (Nasdaq: INTU) rose 1 15/16 to 47 11/16 Tuesday after the company agreed to sell its online insurance services division to InsWeb Corp. in exchange for a 16.6 percent stake in InsWeb, worth about US$14 million.
As part of a related agreement, Sacramento, California-based InsWeb will become the exclusive aggregator of online insurance services for Intuit's Quicken.com and QuickenInsurance Web sites, as well as some Quicken desktop products. In return, Intuit will get a share of the revenue from the five-year distribution agreement.
"The sale of our consumer online insurance business is consistent with our strategy to focus our resources on businesses where we have a sustainable competitive advantage or are on a path to achieve one," said Intuit president and chief executive officer Steve Bennett.
Bennett will gain a seat on InsWeb's board as part of the agreements. Intuit also agreed not to buy additional InsWeb shares for three years.
InsWeb said the deals will add $10 million to annual revenue and contribute net cash of $5 million beginning in the first full year of operation.
The companies said they expect to close the agreements in the first quarter of 2001, though a specific launch date has not been determined.
Intuit said the deals will have "no material impact" on its target of 22 percent revenue growth for fiscal 2001. The deals, the company said, are likely to boost pro forma operating income by $3 million to $5 million, with the amount spread over the third and fourth fiscal quarter. There will also be one-time costs of about $10 million, the company said.
Intuit, based in Mountain View, California, makes financial services software, including the popular Quicken and TurboTax consumer software. The company also provides online tax-preparation and online mortgage services.
InsWeb ended Monday at 1 3/4, down 1/4.
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