With the proposed merger of Microsoft Corp. and Intuit Inc. dashed against the rocks of legal adversity, many bankers are breathing sighs of relief.

Microsoft's bid to acquire Intuit - the maker of the world's most popular personal finance software package, Quicken - had been seen by many as the most dangerous of a number of nonbank threats to banking's control of its customers.

While Microsoft's decision to yield to Justice Department pressure and withdraw its merger proposal does not eliminate the specter of nonbank competition in the electronic commerce market, it does allay banks' fears for the short-term.

"They're feeling a lot better today, banks everywhere," said Michael Killen, president of Killen & Associates, a Palo Alto, Calif. consulting firm.

Indeed, without the ability to feed off each others's strengths - Microsoft's undisputed dominance in the PC-based software market and Intuit's 81% market share in personal finance software - both companies would appear to represent much less of a threat to the banking industry.

In fact, the breakdown of the merger would seem to cast both companies - Intuit in particular - in more favorable light, from the perspective of bankers.

Scott Cook, Intuit's chairman and chief executive, indicated that many institutions were talking to the company even prior to the dissolution of the proposed merger.

"Some of their (Microsoft's) bank partners have gotten more interested in working with us," Mr. Cook said during a conference call announcing the break-up.

Microsoft, too, has signed on a number of financial institutions to use its personal finance software, known as Money. The customers are: U.S. Bancorp, First Chicago Corp., Michigan National Corp., and Chase Manhattan Corp.

Meanwhile, Intuit is said to be working with a consortium of a dozen banks to offer home banking services sometime this fall based on Quicken. Both U.S. Bancorp and First Chicago are among the group working with Intuit.

For the banks that have been willing to work with both of these companies, not much has changed, said Linda Parker, vice president of emerging delivery for U.S. Bancorp.

The bank, she said, still intends to push forward with plans to roll out Quicken home banking services to its customers this fall.

"It's business as usual for us," agreed Jim Grant, a senior vice president with First Chicago Corp.

To some extent, the relief that many bankers feel in the wake of the deal's collapse is justified.

This weekend's development is sure to impede Microsoft's progress in its electronic commerce endeavors, Mr. Killen said.

However, Mr. Killen cautioned that several other significant nonbank competitors loom large on the home banking horizon, including AT&T, MCI Communications Corp., and International Business Machines Corp. He believes any one of these companies might successfully court Intuit in the wake of Microsoft's withdrawal.

Mr. Cook extinguished any flaring rumors that his company is ready to be swallowed up by another giant.

"We saw the Microsoft opportunity as a unique one," Mr. Cook said. "This company is not for sale now. We have no interest - none, zero, zip - in selling to someone else now."

Although he said the "doors are now open" to allying with on-line service and telecommunications companies, Mr. Cook continued to stress a commitment to partnering with banks as opposed to cutting into the more lucrative aspects of their business. But his rivals are still wary.

William M. Randle, a senior vice president for marketing and strategic planning at Huntington Bancshares Inc., said he sees this recent development as merely "a minor inconvenience" for both PC power players. He said the break-up "does not change any of the mechanics at all...they're both giants. It doesn't make their motives any less threatening."

Paul Harrison, the president of Meca Software Inc., said he believes Intuit's strategy, much like Microsoft's, is to maintain control of the processing and bill payment transactions and foster a greater sense of customer loyalty to its own brand name than to the bank.

Meca makes Managing Your Money, a competing personal finance software package that holds only a fraction of the market share of Quicken. BankAmerica Corp. and NationsBank Corp. announced earlier this month that they will buy Meca.

"All banks are going to be much more wary of all the high-tech companies," Mr. Killen said. "Banks have got to be really worried because high-tech companies know their business and have always wanted more transaction-oriented business."

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