Xero rival jumps by $4.3 billion
Xero’s sharemarket success has been put into perspective after shares in United States rival Intuit spiked on strong sales and a bullish financial forecast.
The market value of Intuit jumped by US$3 billion (NZ$4.3b) in after-hours trading on the Nasdaq exchange on Tuesday as its shares rose by 9 per cent to a new record above US$140.
The increase in Intuit’s value exceeded the entire sharemarket value of Xero, which is worth $3.3b on the New Zealand stock exchange.
Intuit dominates the US accounting software market with its product Quickbooks, which is now available in the form of cloud service Quickbooks Online.
Intuit’s head of small business, Sasan Goodarzi, who is based in Silicon Valley, said Intuit was now ‘‘nearly’’ matching Xero sale-forsale in the United Kingdom, which he said was a big advance on a year ago.
It was also the ‘‘fastestgrowing’’ cloud accounting software firm in Australia, he said.
Intuit last reported 53,000 customers in Australia – still far fewer than Xero’s Australian customer base of 446,000.
Melbourne-based MYOB has 585,000 small-business customers in Australia and New Zealand, including 336,000 who still use desktop versions of its software and have yet to move to the cloud.
Xero chief executive Rod Drury said Intuit had been spending heavily and chasing ‘‘low-end’’ customers outside the US to boost subscriber numbers rather than sales revenue.
‘‘They definitely have quality revenue in the US. But they are not winning over accountants in the UK and Australia,’’ Drury said.
‘‘We know they are spending a lot of money in the UK. We don’t see them getting a lot of quality revenue there. There is no way Intuit is winning in the markets that we are in.’’
Goodarzi said Intuit was involved in a land grab, aware that its revenues would increasingly be derived from customer data that it could help customers use to their advantage, and from add-ons to its core accounting software.
He likened that to selling razors and then razor blades.
Intuit was excited about its opportunities in Australia but had no plans to pursue Xero’s home base in New Zealand, he said.
Quickbooks Online was available to Kiwis, ‘‘but we are not going to make a concerted effort in New Zealand’’, Goodarzi said.
‘‘Our criteria for entering a country is the size of the customer pain, the digital readiness of customers and what we need to do with a product to win in that market. When we think about that and the size of the market, New Zealand doesn’t fit those criteria.’’
Intuit’s gain in after-hours trading was the largest since it listed nearly 25 years ago.
Drury said the fact Intuit’s sharemarket jump matched the value of Xero showed Xero had a massive amount to grow.
‘‘How can Xero be worth a tenth of their [market capitalisation] and yet we are half their size in the cloud market?’’
While the vast bulk of Intuit’s customers still use desktop software, Intuit has 2.2 million subscribers for cloud service Quickbooks Online. Subscriber numbers outside the US increased by 70 per cent over the year to April 30 to reach 433,000, its latest quarterly result showed.
Xero topped a million customers in March and reported 44 per cent annual growth in its latest filing in May.