Intuit Processing Unit Shaking Up Its Management

Intuit Services Corp., the leader in processing PC-initiated banking transactions, is getting new management.

Interim chief executive David Kinser acknowledged "a perception that ISC has not performed up to standards," and the people who ran the Intuit Inc. payment processing unit are gradually departing the scene.

Bruce A. Burchfield has resigned as chief executive officer but remains chairman and said he intends to remain "active in the strategy side of the company," which Intuit acquired for $7 million in 1994. Alex Sarelas, who with Mr. Burchfield co-founded the firm, then called National Payment Clearinghouse Inc., has resigned as director of technology.

President and chief operating officer Tom Daniel and information manager Erik Stillman both plan to leave within the next two months.

Intuit Inc. CEO William V. Campbell asked Mr. Kinser, a software executive from the San Francisco area, to run Intuit Services until a full- time replacement is hired.

Outside observers said executives at the parent software company in Menlo Park, Calif., were dissatisfied with management's performance at Intuit Services. The problems reportedly came to a head in February and March, when some customers' bill payments went to the wrong merchants and others' payments were posted late.

Gary Arlen, a Bethesda, Md.-based expert on the on-line industry, said criticism of the services company was running so high within Intuit that "at some point, someone had to take the rap."

"That part of the business has encountered a number of problems," added Peter Rogers, an analyst in San Francisco with Bear, Stearns & Co. "It has ended up costing the company a lot more money."

But analysts also point to some positive signs. While rising transaction volume contributed to the snags earlier this year, Intuit Services has improved its ability to deal with the increase. Just last week it announced the renewal of a contract to process electronic banking transactions and bill payments initiated through Microsoft Corp.'s Money software, which was the Intuit unit's entree into the PC-banking market.

Mr. Daniel, who worked for Intuit Inc. prior to joining the processing subsidiary, said the Microsoft renewal sent "a message that Intuit Services will be a viable player for a long time to come."

Mr. Burchfield, a former First Chicago Corp. and MasterCard International executive, had been expected to scale back his involvement in Intuit Services.

What he began as an entrepreneurial bill-payment processor in Downers Grove, Ill., now employs 200 people, handles the business of more than 300,000 PC-banking customers, and generates approximately $20 million of Intuit's $550 million in annual revenue.

Mr. Daniel's departure, though a surprise to outside observers, was voluntary, said Mr. Kinser.

Mr. Daniel said he plans to take time off with his family before looking for another job. He said he prefers challenges that are "under construction ... Things were going so smoothly (at Intuit Services) that it was beginning to get a little boring."

Mr. Stillman declined to comment about his departure. Mr. Sarelas did not return phone calls.

Analysts and competitors agree that the market for processing home banking payments is getting more competitive. Intuit Inc., as a provider of the market-leading Quicken personal finance software, is viewed by some bankers as a competitor even as it provides back-office support through Intuit Services.

"Even without competition, it would require some dexterity for Intuit Services to position itself so that it is both attractive for consumers and profitable," said Mr. Rogers.

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