MBS GONERS.
Two people from Doug Burgum's inner circle, Jodi Uecker-Rust and Michael Olsen, are leaving Microsoft Business Solutions. The official position is that the two decided to leave to pursue other interests—Uecker-Rust to spend time with a young family and Olsen to launch a communications consulting company. Anybody care to calculate the odds of such simultaneous decisions? This is a very big deal. Uecker-Rust spent 20 years with Burgum at Great Plains, where she was COO, and then at MBS as corporate vice president. Olsen, now MBS's director of public relations, was group vice president of communications at Great Plains. Tami Reller, formerly Great Plains CFO, remains the only Great Plains alum among the MBS VPs. Reller, on maternity leave, has been pictured as a rising star at Microsoft. Incidentally, Curt Anderson, Microsoft senior director of investor relations, this month told an investor conference that MBS is off “to a good start” in getting its share of a $15 billion market (accounting, ERP, and CRM). Don't good starts include losing less money?

EMPLOYEES BUY ACCOUNTMATE.
In a busy week, Best Software also said it was selling AccountMate to its employees. The group is headed by David Dierke, executive vice president for sales, who becomes president and CEO; Tommy Tan, the AccountMate vice president of development, now chief technology officer; and David Render, sales manager under Dierke at the former SBT Accounting Systems, who will be COO. Dierke left SBT before its acquisition by Accpac in 2001, then joined AccountMate after its purchase by Softline. Sage/Best had already sold Datafaction, which specializes in accounting software for the entertainment industry, to its founder, Brian Kleinman. ( Wasn't it the Rolling Stones who sang, “I can't get no Datafaction?”). Sage's first-half report notes that non-core accounting revenue fell from roughly $31.3 million for last year's first half to 26.4 million. That includes AccountMate and Datafaction. The sale prices were not disclosed.

BEST DETAILS PROFITS.
Revenue for Best Software's parent Sage hit $594.1 million for the first half ended March 31 with operating income of $160.9 million. After I reported on the initial results in the last newsletter, a reader chided me for not digging behind the numbers. He had a point. Best's sales were up 21 percent in constant dollars, but the Sage slide presentation shows organic growth in the core accounting market was 6 percent. That's still better than the 4 percent MBS did for the March quarter and Sage/Best is making money. MBS is not. Surprisingly, CRM sales fell by 8 percent because of missed shipments on new versions of Act and SalesLogix. Not all the news was good on the revenue side for acquired four companies, but operating margins increased for all four. While Timberline's sales dropped to about $29.9 million, off from $31.7 million a year ago, its operating margin doubled. With Best doing the currency calculations from pounds to dollars, its first-half revenue was $243.5 million, with operating income of $55.1 million.

INTUIT NUMBERS RISE.
The QuickBooks folks racked up $713 million in revenue with net income of $264 million for the April quarter. Sales were up 12 percent while earnings were down10 percent from a year earlier. A 12 percent rise in costs hurt the bottom line. Last year's earnings also got a $71 million boost from a gain on the sale of Intuit KK in Japan. Intuit, which previously denied reports in this newsletter that Lacerte was losing customers, told analysts that it “lost some customers to lower-priced competitive options." Then, I got an email from the Lacerte PR noting that Lacerte is a high-end package and isn't losing customers, which I guess means the losses came from ProSeries. Intuit is looking for $109 million to $112 million for fiscal 2004 for its vertical packages (FundWare, MasterBuilder, Eclipse, and MRI). That's up from $94.8 million for FY 2003. Intuit issued a 22-page press release about its earnings, half of which spelled out pro forma results. My 13-year-old daughter has actual and pro forma results in school. The school reports actual grades. I provide the pro forma numbers, telling her how she would have done if she had turned in more of her homework on time.

EXACT ONLINE .
Interesting that Exact Software has introduced WebShop, online order entry and cataloguing. When I asked the if the company could provide an eCommerce case study sold by a VAR, the company said “no,” it could only come up with sites sold by the direct sales force. … Somebody at Exact headquarters must be happy with financial results. The company is boosting its dividend from .55 euros to .75.That's a 36 percent boost in any currency. By the way, Exact North America is abandoning the wilds of Marion, Ohio, home to its predecessor Macola, for the big-time town of Columbus. The move is expected around June 7.

MASTERBUILDER GOES ALL CHANNEL.
Intuit has dropped its direct sales force to sell the MasterBuilder construction software solely through resellers. There are already 19 resellers and Intuit seeks only 25 to operate in protected regions. The quirk is that resellers are sales agents who only sell, while Intuit fulfills orders and more than 300 ProAdvisors perform the installations. Looks a little clunky to me. Setting up protected territories has not worked for a lot of people. On the other hand, the structure addresses the complaint that resellers often sell, then install, resulting in a boom-bust revenue cycle. CEO Steve Bennett had predicted that Intuit wouldn't go more heavily into the channel (although he was talking more about QuickBooks Enterprise Solutions), while some people beneath him were saying, “Of course we will.” I think for the future with other products, of course it will.

EPICOR BEGINS SCALA OFFER.
Epicor's delayed takeover of Scala Business Systems got under way last week via a Dutch auction tender offer, which expires on June 11. The Epicor offer is $1.8230 per share in cash and .1795 shares of Epicor stock for each share of Scala stock. (Given an open book test, I might have a shot at explaining Dutch auctions.) A tribute to Epicor's growth in sales and profits is that Pacific Growth Equities initiated coverage of the stock. Making money will get you some attention.

HARDY SPINS OUT OF CLIFTON.
Alan Hardy, who merged Effective Systems Consulting with Clifton Gunderson in July 2002, is spinning the operation out of the CPA firm next month. Hardy is transferring the Best Software practice and staff from CG to resume selling MAS90/200/500, Mip, and BusinessWorks under the old name. Hardy told his customers that independence and conflict-of-interest issues in the CPA community were involved. So maybe when Matt Camden left as chief technology officer in April, everything wasn't as hunky-dory as announced.

INTUIT: NAMES IN THE NEWS.
Outside of the MasterBuilder Announcement, Intuit has been quiet product-wise. But it is doing a good job PR-wise. Exec vp Lorrie Norrington was featured in BusinessWeek Online's special report on women, which calls her “Intuit's Small Business Maven.” CEO Steve Bennett got a mini-profile from the New York Times in a recurring feature called “The Boss.” It included a note that he uses TurboTax to prepare his taxes, but then goes to an accountant. That's a big improvement from the days a few years ago when the CPA mavens would provide advisor programs while the marketing people would bash accountants.

BEST AND CCH ALLY.
Best's decision to drop the tax system it acquired with its purchase of CPASoftware two years ago was not a surprise. The package, Visual Tax, had about 300 users. The surprising thing was Best's decision to ally with CCH to provide integration with CPAPractice Manager (the former Visual Practice Management) with CCH's ProSystem fx—especially since CCH offers a practice management system. Best's press release describes this “as a first step” and says the companies have agreed to provide complementary products and services to each other's customers. Other than on the practice management software front, the two companies don't compete in that many places. Best, which says it wants to play in the public accounting market as its parent Sage does in England, could certainly use access to CCH's tax research materials.

MICROSOFT GOES MOBILE .
Microsoft has kicked off a small business push that is utilizing Microsoft Across America, a 27-foot van filled with what is essentially a mobile computer lab. The van will tour 18 cities to show small business owners the latest in Microsoft technology. I guess they gave up on the bid to buy the Oscar Mayer Weiner Van. I could have envisioned small business owners singing: “I wish I were a Microsoft employee. Oh, that is what I'd really like to be. Because if I were a Microsoft employee, I wouldn't have to run this company.” The first suggestion for naming the vehicle for tech-heavy Microsoft was the Microsoft Weenie-mobile.

APPGEN GETS NEW LOOK.
Appgen, the Long Island accounting software company purchased by Aptus, now bears the imprint of its new owner. Aptus, based in Tacoma, Wash., plans to make Appgen's packaged software available online. The retooled Appgen Web site, describes Aptus as a utility computing company. What was interesting was the phrase e-Accounting Services on Appgen's Web site. Since that sounded very similar to the e-Accounting Total Solutions offered by struggling Insynq, a utility software company also based in Tacoma (both companies are located at 1127 Broadway), a visit to Insynq's SEC filings showed that two Insynq officers and shareholders own Aptus, gave it financial assistance, and that Insynq is licensing the e-Accounting model and brand. Insynq, whose financial reports are peppered with statements about lawsuits and settlements, sports a qualified opinion from its auditors on its financial statements. The Insynq 10-Q for the February quarter, whose filing was delayed, noted Insynq owed the IRS $780,000 in back taxes and penalties. Insynq withdrew a proposed Offer in Compromise, paid the IRS $100,000, and is awaiting word on a proposed payment plan.

MBS DEALER GRIPES.
I asked a few resellers what they would tell Don Nelson, Microsoft's general manager, managed partners, about the channel. Here are some replies. "What's going wrong is the fact that Microsoft is slowly unraveling the loyalties of its partner channel with poor management decisions. We used to have unlimited support as GP resellers. Now it's five support incidents per year. We used to have GP partner conferences in which bonds were formed and reinforced through close interactions with GP staff and other resellers. Now we have conferences in which we are merely cogs in the vast Microsoft machinery. … Why are they allowing and adding one- and two-man operations to sell MBS when they cannot support customers in the way they should be in the old GP days? … Why are they continuing the CRM no-margin program? You get 5 percent maybe an with order to Tech Data. Then, you register the software with Microsoft and if the client confirms you are their recommender, Microsoft sends you 60 percent after two months and maybe another 10 percent if you meet volume quotas. Basically, we lend them the margin for two months, make nothing on the order, and 20 percent doesn't cover sales and marketing costs in our case."

RANDOM THOUGHTS.
We're waiting for the real secret of “Friends” to be revealed, namely how people in their 20s and 30s with so-so jobs could afford a $2 million two-bedroom apartment in Greenwich Village (yeah, yeah, they mentioned rent control). … Jerry Springer has been named as an at-large delegate to the Democratic National Convention. He's heading a committee to study “Transvestite Politicians and the People Who Love Them” … Good thing the accounting publications at Thomson three years ago moved from 11 Penn Plaza opposite Madison Square Garden and the Republican convention. I'm not sure I'd clear security. …My daughter installed Windows XP on our home computer while I was out, assigning herself administrator privileges. So how come she can't remember the assignments, but could completely program our cell phone without instructions? … The movie “Van Helsing” has Frankenstein, the Wolf Man, Dracula, and Mr. Hyde. As one office wag said, “All it was missing was Abbott and Costello.”

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Consulting Insights May 21, 2004 (next issue mails June 4, 2004)
By Bob Scott, Editor
robert.scott@thomsonmedia.com

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