Intuit Inc. said it has agreed to acquire a payroll processor to strengthen its small-business product lineup.
The financial software company said it would pay $200 million in cash and stock for Computing Resources Inc., which provides payroll and tax accounting services to 22,000 small businesses in the western part of the country. The Reno company said revenues are running at an annual rate of $30 million.
The deal, which is expected to close within two months, represents "the next logical step in the evolution of our working relationship," said William Harris, president and chief executive officer of Mountain View, Calif.-based Intuit.
In September, Intuit contracted with Computing Resources to add Internet-based payroll processing services to its QuickBooks software, which is used by two million businesses.
The current deal involves $100 million in cash, the issuance of $25 million of Intuit stock, and three annual cash payments of $25 million.
Mr. Harris said he is striving to provide small-business owners with a low-cost payroll service.
Automated processing would help small businesses avoid the more than $2 billion of fines that the government collected from small businesses last year due to errors in payroll reporting, Mr. Harris said.
Intuit would use the direct deposit system to debit small businesses' accounts and credit those of employees and various tax collecting entities.
"As we expand Intuit from a purely software business to a more services- oriented company, we are using the Internet to promote and distribute these services electronically," Mr. Harris said.
Intuit plans to continue to work with banks to distribute the QuickBooks software under their brands, letting them cultivate "very sticky and deep relationships with small businesses," he said.
The acquisition could make Intuit, which already has redistribution agreements with about 80 banks for its consumer and business software, a more attractive partner in the eyes of banks, said Rakesh Sood, an analyst at Goldman, Sachs & Co. It would also give Intuit more cross-selling opportunities in the small business market.
"Intuit's focus thus far has been with really small companies, and this enables them to reach bigger businesses," Mr. Sood said.
Computing Resources would operate as a part of Intuit's small-business division. Ranson Webster, chairman and chief executive officer, would remain CEO.
