The Eclipse product never seemed to fit into the Intuit portfolio. It's a wholesale distribution package aimed more in the Microsoft Dynamics level market, with software prices typically in excess of $50,000.
Activant, which will pay $100 million in cash for the business, is one of a few private equity funded consolidators that has been making moves in the mid-market. One of their more notable acquisitions has been Prophet21, a product also aimed at the distribution space. Another such consolidator is Consona, which among many other brands owns Made2Manage and Onyx. Both Activant and Consona fly far under the radar when compared to Infor, but they are worth paying attention to.
This sale all but closes a chapter in Intuit's history. A few years ago Intuit embarked on an acquisition path aimed at providing customers who have outgrown QuickBooks the option of another Intuit product instead of moving to competitors like Great Plains or Sage. As his company began this up-market push in 2002 with vertical acquisitions, Intuit CEO Stephen Bennett commented that
"When we were just losing those customers to (rival) Great Plains Software, it was dumb. Now that Microsoft has bought Great Plains, it's really stupid for us to lose customers to Microsoft."
The stated goal at the time was to build a Vertical Business Management Solutions division into a $500M - $1B business with 30%+ operating margins by 2007-2008. To say they have missed the mark would be quite an understatement. The business unit significantly missed its guidance in FY03, delivering $94.8 million. In FY04 the vertical business grew 15% to $109 million. Following that result Intuit began selling off some of its acquired vertical businesses, and in FY05 ceased reporting a separate revenue result for verticals.
Why have they sold it now? Three reasons...
1. It's just not core to their strategy anymore. All but one of the vertical pieces has been divested at this point, some for losses. American Fundware was purchased for $26 million in 2002 and sold to Kintera for $11 million in 2005. Intuit acquired OMware, creator of the Master Builder construction management product, in 2001 for approximately $42 million. They sold it to Sage last year for less than $30 million. Blue Ocean (help desk and IT asset management software) was picked up for $177 million in late 2002 and sold for $200 million three years later. Intuit paid $85 million for Eclipse.
2. The business was not growing. When the MasterBuilder unit was sold to Sage an Intuit representative informed me that “the verticals aren't core” to the business any longer. However, unlike each of the divested vertical products the two remaining ones at that time, Eclipse and MRI (real estate and property management) where still showing growth and would apparently be kept so long as that growth continues. It seems that Eclipse may have become an anchor on Intuit's growth numbers. You can bet that the moment MRI (aka Intuit Real Estate Solutions) ceases to be accretive to Intuit’s growth rate, it too will be sold off.
3. Intuit has learned what it wanted about the distribution business. I maintain that at some point in this journey Intuit appears to have become less interested in building a mid-market business out of the acquired products, and more interested in leveraging the acquired IP into vertical flavors of QuickBooks Enterprise. That product is now available in Contractor, Nonprofit, and Wholesale & Distribution editions. The sale off of MRI may also coincide with a release of QuickBooks Enterprise Real Estate Edition.
Intuit started with hopes of leveraging its brand identity onto a collection of disparate products aimed at retaining its customers and even winning net new customers in the mid-market against Microsoft and Sage. It didn't quite work out that way. However, by applying the learning from this venture into verticalized flavors of its core product, Intuit has emerged with something much stronger. The customer add rate on QuickBooks Enterprise speaks for itself.