Microsoft Deletes Merger With Intuit Because Of Antitrust Battle Gates To Pay $46 Million Penalty To Personal Finance Software Maker
Microsoft Corp. called off its proposed merger with Intuit Inc. on Saturday rather than endure months of antitrust litigation with the Justice Department.
The government sued last month to block Microsoft’s $2 billion purchase of Intuit, maker of the popular Quicken personal finance program. The deal announced seven months ago would have been the biggest software merger ever.
“It’s unfortunate that after such a broad government review the merger faced additional months of uncertainty in the courts,” said Microsoft Chairman Bill Gates. “This is a fast-paced industry experiencing lots of change. Progress toward realizing our goals could not wait until the government’s lawsuit was resolved.”
Intuit chairman Scott Cook said: “The delays caused by the government’s prolonged review and litigation would cost both companies valuable time.”
The Justice Department hailed the decision: “This is truly a victory for the American consumer,” said Assistant Attorney General Anne Bingaman.
In its suit filed in San Francisco, the Justice Department’s antitrust division contended that Microsoft’s takeover of Intuit would likely lead to higher prices and less innovation in the growing market for personal finance software.
Microsoft is the world’s largest producer of personal-computer software. Intuit, based in Menlo Park, Calif., is the leading developer of personal finance, small business accounting and tax preparation software.
Microsoft will pay Intuit $46.25 million for canceling the deal, Cook said, adding that his company already spent about $4 million on it. Microsoft officials said the payment, to show up on the next quarterly financial statement, would amount to about 5 cents per share.
Microsoft decided to call the merger off, and Gates and other Microsoft executives told him about it Friday, Cook said.
“They were uncomfortable proceeding with litigation because of the timing. We were comfortable with the litigation because we thought we would win,” Cook said. “Frankly, I’m disappointed. I’m disappointed in the length of time these procedures take and in Microsoft’s decision. We would have preferred to seek the merger.”
“This was the one outcome that I don’t think anybody expected,” said Jeff Tarter, editor of SoftLetter, an industry newsletter. “Most of what I’ve heard from the Wall Street analysts and the legal community was the Justice Department’s case was so flimsy that it was just a matter of time before the case got thrown out of court.”
Cook did not rule out possible future alliances with Microsoft, but said it was too early to say whether Intuit will be part of the on-line computer service Microsoft expects to start later this year.
Intuit’s Quicken makes it easier for families to balance their checkbooks, plan monthly budgets and handle other household finances. An estimated 7 million people use Quicken, representing about 70 percent of the personal moneymanagement software market, the Justice Department has said.
Microsoft’s personal-finance program, Money, had a 22 percent share of the market. The other main competitors, H&R; Block Financial and Computer Associates, control less than 10 percent of the market.
As part of the deal announced on Oct. 13, Microsoft, based in suburban Redmond, agreed to give Money to rival Novell Corp. of Provo, Utah. Bill Neukom, Microsoft’s corporate counsel, said the transfer of Money was contingent on the completion of the Intuit merger, and no penalty would be paid to Novell.
Telephone calls to Novell officials were not immedately returned Saturday.
Microsoft officials said they are continuing to develop Money, with a new version due this fall.
Neukom told a Saturday teleconference call that when the merger was proposed, Microsoft expected it would close by March or April. That was critical, he and other Microsoft officials said, in order to have the merger squared away before the fall and early winter, the traditional selling season for personal finance software.
But the government Friday sought a two- to three-week delay in the trial, initially scheduled for June 26, and Neukom said that could have pushed the judge’s decision well into autumn. Even if Microsoft were successful, a government appeal could mean the matter might not be resolved until mid-1996 at the earliest, he said.
“What the government did was new data,” Gates said. “There was no amount of expertise that would have allowed us to predict what the government did.”
David Coursey, editor of PC Letter, an industry newsletter, said the decision bodes poorly for any other company Microsoft might want to acquire.
“The company is now large enough that almost anybody of any size that would be of value to them are going to find themselves in the same circumstance that Intuit did. You would think they would want to fight it for that reason alone,” Coursey said.