þ		Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

OR

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                                          to                                          

Delaware		77-0034661
(State of incorporation)		(IRS Employer Identification No.)

2700 Coast Avenue, Mountain View, CA 94043
(Address of principal executive offices, including zip code)

(650) 944-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

		Title of Each Class		Name of Exchange on Which Registered
		Common Stock, $0.01 par value		NASDAQ Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of Intuit Inc. outstanding common stock held by non-affiliates of Intuit as of January 30, 2009, the last business day of our most recently completed second fiscal quarter, based on the closing price of $22.65 reported by the NASDAQ Global Select Market on that date, was $6.8 billion.

There were 321,936,540 shares of Intuit voting common stock outstanding as of August 31, 2009.

Portions of the registrant’s definitive proxy statement for its Annual Meeting of Stockholders to be held on December 15, 2009 are incorporated by reference in Parts II and III of this Annual Report on Form 10-K.

 

 

 

Item				Page
PART I
ITEM 1:		Business			3
ITEM 1A:		Risk Factors			16
ITEM 1B:		Unresolved Staff Comments			27
ITEM 2:		Properties			27
ITEM 3:		Legal Proceedings			27
ITEM 4:		Submission of Matters to a Vote of Security Holders			28
PART II
ITEM 5:		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			28
ITEM 6:		Selected Financial Data			31
ITEM 7:		Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
ITEM 7A:		Quantitative and Qualitative Disclosures About Market Risk			53
ITEM 8:		Financial Statements and Supplementary Data			55
ITEM 9:		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			102
ITEM 9A:		Controls and Procedures			102
ITEM 9B:		Other Information			102
PART III
ITEM 10:		Directors, Executive Officers and Corporate Governance			103
ITEM 11:		Executive Compensation			104
ITEM 12:		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			105
ITEM 13:		Certain Relationships and Related Transactions, and Director Independence			105
ITEM 14:		Principal Accountant Fees and Services			105
PART IV
ITEM 15:		Exhibits and Financial Statement Schedules			106
		Signatures			110
EX-4.01
EX-10.33
EX-21.01
EX-23.01
EX-31.01
EX-31.02
EX-32.01
EX-32.02

Intuit, the Intuit logo, QuickBooks, TurboTax, Lacerte, ProSeries, Digital Insight, and Quicken, among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners.

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Please see the section entitled “Forward-Looking Statements and Risk Factors” in Item 1A of this Report for important information to consider when evaluating these statements.

PART I

ITEM 1

BUSINESS

CORPORATE BACKGROUND

General

Intuit Inc. is a leading provider of business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals and financial institutions. Our flagship products and services, including QuickBooks, Quicken and TurboTax, simplify small business management and payroll processing, personal finance, and tax preparation and filing. ProSeries and Lacerte are Intuit’s leading tax preparation offerings for professional accountants. Our financial institutions division, anchored by Digital Insight, provides online banking services that help banks and credit unions serve consumers and businesses with innovative solutions.

We had revenue of $3.2 billion in our fiscal year ended July 31, 2009, and had approximately 7,800 employees in major offices in the United States, Canada, India, the United Kingdom and other locations as of that date.

Intuit was incorporated in California in March 1984. We reincorporated in Delaware and completed our initial public offering in March 1993. Our principal executive offices are located at 2700 Coast Avenue, Mountain View, California, 94043, and our main telephone number is 650-944-6000. Our corporate Web site, www.intuit.com, provides materials for investors and information relating to Intuit’s corporate governance. The content on any Web site referred to in this filing is not incorporated by reference into this filing unless expressly noted otherwise. When we refer to “we,” “our” or “Intuit” in this Annual Report on Form 10-K, we mean the current Delaware corporation (Intuit Inc.) and its California predecessor, as well as all of our consolidated subsidiaries.

Available Information

We file reports required of public companies with the Securities and Exchange Commission (SEC). These include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other reports, and amendments to these reports. The public may read and copy the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 202-551-8090. The SEC also maintains a Web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We make available free of charge on the Investor Relations section of our corporate Web site all of the reports we file with the SEC as soon as reasonably practicable after the reports are filed. Copies of Intuit’s fiscal 2009 Annual Report on Form 10-K may also be obtained without charge by contacting Investor Relations, Intuit Inc., P.O. Box 7850, Mountain View, California 94039-7850 or by calling 650-944-6000.

BUSINESS OVERVIEW

Intuit’s Mission

We seek to be a premier innovative growth company that empowers individuals and businesses to achieve their dreams.

Our customers include small and medium-sized businesses, consumers, accounting professionals and financial institutions. We help them solve important business and financial management problems, such as running a small business, paying bills and income taxes, or balancing a checkbook. We believe our innovative products and services simplify the lives of millions, while helping them save and make money.

Emerging technology and market trends are changing the way people live and work, and the way we help customers. We’re connecting those customers to our solutions and with each other in ways that add more value to our products

and services. And we’re taking a global view as well, creating solutions for customers whose personal and professional lives often transcend geographic borders.

We organize our portfolio of businesses into four principal categories — Small Business Group, Tax, Financial Institutions and Other Businesses. These categories include seven financial reporting segments.

Small Business Group: This category includes three segments — Financial Management Solutions, formerly known as QuickBooks; Employee Management Solutions, formerly known as Payroll; and Payments Solutions, formerly known as Payments.

	•		Our Financial Management Solutions segment includes QuickBooks financial and business management software and services, technical support, financial supplies, and Web site design and hosting services for small and medium-sized businesses.
	•		Our Employee Management Solutions segment provides payroll products and services for small businesses.
	•		Our Payments Solutions segment provides merchant services for small businesses, including credit and debit card processing, electronic check conversion and automated clearing house services.

Tax: This category includes two segments — Consumer Tax and Accounting Professionals.

	•		Our Consumer Tax segment includes TurboTax income tax preparation products and services for consumers and small businesses.
	•		Our Accounting Professionals segment includes Lacerte and ProSeries professional tax products and services. This segment also includes QuickBooks Premier Accountant Edition and the QuickBooks ProAdvisor Program for accounting professionals.

Financial Institutions: This segment consists primarily of outsourced online services for banks and credit unions provided by our Digital Insight business. It includes our online banking and bill-pay services as well as our Personal FinanceWorks and Small Business FinanceWorks offerings, which provide comprehensive online financial management solutions for consumers and small businesses.

Other Businesses: This segment includes Quicken personal finance products and services, Intuit Real Estate Solutions, and our businesses in Canada and the United Kingdom.

Our core growth strategy remains unchanged: To be in growth businesses, high-profit businesses and attractive new markets with large unmet or underserved needs that we can solve well.

We adapt our approach to meet changing demographics, technology and market trends. Our Connected Services strategy, announced in fiscal year 2008, reflects a world where people and businesses are increasingly connected, whether through desktop, laptop or handheld devices. With this expanded connectivity, people expect access to services any time, any place. By implementing this strategy, we intend to create customer delight by offering easy-to-use connected services that solve customers’ problems while building durable competitive advantage.

Nearly 50 million people use our QuickBooks, payroll, payments, TurboTax, Digital Insight and Quicken products and services. This positions us to succeed by connecting these people to our services and to each other. We do this in three different ways:

	•		Connecting customers directly to our online services: We host services such as QuickBooks Online, online payroll services for small businesses, Web site services for small businesses, TurboTax Online, and online banking services for financial institutions. Sometimes referred to as Software as a Service, or SaaS, these offerings are designed to deliver clear benefits and value to customers.
	•		Connecting our services to our software: We offer services, such as small business payroll and merchant services, that can be connected with software, such as QuickBooks. This can create powerful solutions that we believe give us a competitive advantage.
	•		Connecting people to people: We are increasingly using our products as a platform to connect people to each other and to us, allowing them to share information and solve problems together. For example, our TurboTax Live Community allows participants to submit and answer each other’s questions while preparing their income tax returns.

We have made significant progress in this connected services environment. More than 56% of our $3.2 billion in fiscal 2009 revenue came from connected services.

To compete in this connected world, our strategy is to take advantage of three emerging technology and market trends:

	•		Social: Linked to businesses and each other in a connected world, people shape product development, share their expertise and influence opinion like never before. Customers can share advice with each other by using the online forums available in each of our major products. In a social world, people connect and contribute to our product offerings.
	•		Mobile: As technology moves from the desktop to the palmtop, we are focusing on mobile services that deliver “in the pocket” — any place at any time that’s convenient for customers. For example, Intuit GoPayment helps small businesses improve sales and cash flow by accepting credit card payments on their mobile phones.
	•		Global: As geographic borders become less important to businesses, we are working to help customers take advantage of a global marketplace and find new customers in new markets.

Summary

As our strategy evolves, we remain committed to developing innovative products and services that are so convenient and easy to use that customers actively recommend them to others. We call these customers promoters — people who create positive word-of-mouth by promoting our brand to others. For more than 25 years we’ve worked to solve their important business and financial management problems. Looking ahead, we will also work to help them solve each other’s problems, connecting people to people and to solutions.

PRODUCTS AND SERVICES

We offer our products and services in the seven business segments described in “Business Overview” above. The following table shows the classes of similar products or services that accounted for 10% or more of total net revenue in fiscal 2009, 2008 and 2007.

		Fiscal				Fiscal				Fiscal
		2009				2008				2007
Financial Management Solutions (QuickBooks)			18	%			19	%			20	%
Employee Management Solutions (Payroll)			12	%			11	%			13	%
Consumer Tax			31	%			30	%			30	%
Accounting Professionals			11	%			11	%			12	%
Financial Institutions			10	%			10	%			6	%

Our products and services are sold mainly in the United States and are described below. International total net revenue was less than 5% of consolidated total net revenue for fiscal 2009, 2008 and 2007. For financial information about these segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and Note 15 to the financial statements in Item 8.

Financial Management Solutions (formerly known as QuickBooks)

QuickBooks Software. Our QuickBooks product line brings bookkeeping capabilities and business management tools to small and medium-sized business users in an easy-to-use design that does not require them to be familiar with debit and credit accounting. We offer a range of products to suit the needs of different types of businesses. Our desktop software products include QuickBooks Simple Start, which provides accounting functionality suitable for very small, less complex businesses and is offered in both free and paid versions; QuickBooks Pro and QuickBooks Pro for Mac, which provide accounting functionality suitable for slightly larger businesses; QuickBooks Premier,

which provides small businesses with advanced accounting functionality and business planning tools; and QuickBooks Enterprise Solutions, designed for larger businesses. Our Premier and Enterprise products also come in a range of industry-specific editions, including Manufacturing, Wholesale and Distribution, Retail, Non-Profit, Contractors, and Professional Services. In addition, we offer a Web-based version of QuickBooks called QuickBooks Online that is suitable for multiple users working in various locations and offered in both free and paid versions.

QuickBooks Technical Support. We offer several technical support options to our QuickBooks customers. These include support plans that are sold separately and priced based on the length of the plan. We also offer a free self-help information section on our QuickBooks.com Web site and free access to the QuickBooks Community, an online forum where QuickBooks users can share information with each other.

Web Services for Small Businesses. We offer services to small businesses that help them establish a presence on the Web, maintain and promote their Web sites, and sell or market their products online.

Financial Supplies. We offer a range of financial supplies designed for small businesses and individuals that use QuickBooks and Quicken. These include paper checks, envelopes, invoices and deposit slips. In addition, we offer business identity services that include business cards and stationery. We also offer tax forms, tax return presentation folders and other supplies for professional tax preparers. Our customers can personalize many products to incorporate their logos and use a variety of color, font and design options.

QuickBase. Our QuickBase offering is a Software as a Service (SaaS) platform based on a robust database that allows business users to select ready-made online workgroup applications or create custom solutions for their businesses. The most common solutions include project collaboration, sales team management and employee management. QuickBase customers pay a monthly or annual subscription fee that varies based on the number of users and the amount of data and file storage they need.

Intuit Developer Network. The Intuit Developer Network is an initiative that encourages third-party software developers to build applications that exchange data with QuickBooks and other Intuit products by giving them access to certain application programming interfaces. The Intuit Developer Network has launched the Intuit Partner Platform, which allows developers to sell online applications to Intuit’s customers. Developers can choose to build on Intuit’s platform or any platform they choose, but all applications must integrate with the platform in specific ways. Developers who register with the Intuit Developer Network have access to the latest QuickBooks software development kit, the Intuit Partner Platform, QuickBooks software downloads, and member benefits such as marketing tools, developer forums and one-on-one engineering support. At the end of fiscal 2009, approximately 325 third-party applications were available for QuickBooks and other Intuit products at www.marketplace.intuit.com.

Employee Management Solutions (formerly known as Payroll)

QuickBooks Payroll is a family of products sold on a subscription basis to small businesses that use QuickBooks and prepare their own payroll or want some assistance with preparing their payroll. It is also sold to accountants who use QuickBooks and help their clients manage their payrolls. The product family includes QuickBooks Basic Payroll, which provides payroll tax tables and payroll reports; QuickBooks Enhanced Payroll, which provides payroll tax tables, payroll reports, federal and state payroll tax forms, workers’ compensation tracking, and eFile & Pay for federal and state payroll taxes; QuickBooks Enhanced Payroll for Accountants, which has several accountant-specific features in addition to the features in QuickBooks Enhanced Payroll; and QuickBooks Online Payroll, for use with QuickBooks Online. We also offer QuickBooks Assisted Payroll, through which we provide the back-end aspects of payroll processing, including tax payments and filings, for customers who process their payrolls using QuickBooks. Direct deposit is available with each of these offerings for an additional fee. Intuit Online Payroll provides small business payroll services on a subscription basis that do not require customers to use QuickBooks. This offering includes online payroll tax calculation, payroll reports, direct deposit, electronic payment of federal and state payroll taxes, and federal and state payroll tax forms. In July 2009 we acquired PayCycle, Inc., a provider of online payroll services to small businesses that we plan to integrate with our existing payroll offerings during fiscal 2010.

Payments Solutions

Merchant Services. We offer a full range of merchant services to small businesses that include credit card, debit card, electronic benefits, and gift card processing services; check verification, check guarantee, and electronic check conversion, including automated clearing house (ACH) and Check21 capabilities; and Web-based transaction processing services for online merchants. In addition to transaction processing services, we provide a full range of support for our clients that includes customer service, merchant and consumer collections, chargeback and retrieval support, and fraud and loss prevention screening.

QuickBooks Point of Sale Solutions. In fiscal 2009 we transferred our Point of Sale offerings from our Financial Management Solutions segment to our Payments Solutions segment to align this product group more closely with the customers they serve. We offer Basic, Pro and Multi-Store versions of QuickBooks Point of Sale, which help retailers process sales using barcodes, track inventory and customer purchases, and integrate with QuickBooks. We also offer Cash Register Plus, an entry level product for small retail businesses that helps them manage detailed sales data, track customers, and manage daily tasks more efficiently. We sell these software products with or without the accompanying hardware.

Consumer Tax

Our TurboTax products and services are designed to enable individuals and small business owners to prepare and file their own federal and state personal and small business income tax returns quickly and accurately. They are designed to be easy to use, yet sophisticated enough for complex tax returns.

Tax Return Preparation Offerings. For the 2008 tax season we offered a range of software products and services that included desktop and online versions of TurboTax Basic, for simple returns; TurboTax Deluxe, for taxpayers who itemize deductions; TurboTax Premier, for taxpayers who own investments or rental property; and TurboTax Home and Business, for small business owners. We also offered TurboTax Business desktop software for larger businesses and TurboTax Free Edition online for the simplest returns. These offerings are subject to change for the 2009 tax season. TurboTax Live Community is an online forum where participants can learn from and share information with other users while preparing their income tax returns.

Electronic Filing and Other Services. Through our electronic filing center, our desktop and online tax preparation customers can electronically file their federal income tax returns, as well as state returns in all states that support electronic filing. For the 2008 tax year our online tax services were offered through the Web sites of nearly 2,800 financial institutions, electronic retailers and other merchants.

Intuit Tax Freedom Project. Under the Intuit Tax Freedom Project, we provide online federal and state income tax return preparation and electronic filing services at no charge to eligible taxpayers. In fiscal 2009 we provided approximately 1.4 million free federal returns under this initiative. We are a member of the Free File Alliance, a consortium of private sector companies that has entered into an agreement with the federal government to provide free online federal tax preparation and filing services to eligible taxpayers. See also “Competition — Consumer Tax” later in this Item 1.

Accounting Professionals

Our Accounting Professionals segment provides software and services for accountants and tax preparers in public practice. These include offerings that help professional accountants and tax preparers provide accounting, payroll, tax planning and tax compliance services to their individual and business clients, and that help them manage their own practices more effectively.

Tax Offerings. Our tax software product lines for accounting professionals are Lacerte and ProSeries. Lacerte software is designed for full-service accounting firms that prepare the most complex returns. We offer two versions of our ProSeries software: ProSeries Professional Edition, designed for year-round tax practices that prepare moderately complex tax returns; and ProSeries Basic Edition, designed for the needs of smaller and seasonal tax practices. Accounting professionals license these tax products for a flat fee for unlimited use, or use them to print or electronically file tax returns on a “pay-per-return” basis. Accountants and tax preparers using Lacerte and ProSeries can file their clients’ tax returns using our electronic filing services.

Accounting Offerings. Our accounting offering for professionals, QuickBooks Premier Accountant Edition, provides the tools and file-sharing capabilities needed to efficiently complete bookkeeping, trial balance, write-up, and financial reporting tasks. Our QuickBooks ProAdvisor Program is a subscription-based membership that provides QuickBooks and QuickBooks Payroll software for professional accountants, technical support, training, product certification, access to marketing tools and discounts on products purchased on behalf of clients.

Financial Institutions

Our Digital Insight business provides outsourced online banking offerings that are hosted in our data centers and delivered as on-demand services to small and medium-sized financial institutions. No single financial institution accounted for more than 10% of this segment’s total net revenue in fiscal 2009, 2008 or 2007.

Consumer Banking. We offer Internet banking services that financial institutions make available to their retail customers. These services include the ability to view transaction history, account balances, check images and statements; funds transfer between accounts; inter-institutional transfers; bill payment and bill presentment; and Personal FinanceWorks, our comprehensive online personal financial management solution.

Business Banking. We also offer Internet banking services that financial institutions make available to their business customers. These services include features similar to those of our consumer offering as well as lockbox reporting; payroll direct deposit; wire and inter-account fund transfers; account reconciliations; foreign exchange trade; and Small Business FinanceWorks, our comprehensive online business financial management solution.

Other Businesses

Quicken. Our Quicken line of desktop software products helps users organize, understand and manage their personal finances. Quicken allows customers to reconcile bank accounts, pay bills, record credit card and other transactions, and track investments, mortgages and other assets and liabilities. Quicken also allows customers to flag their tax-related financial transactions and download that information into our TurboTax consumer tax return preparation software. We offer Quicken Starter Edition and Quicken Deluxe as well as Quicken Premier, which offers more robust investment and tax planning tools; Quicken Home and Business, which allows customers to manage both personal and small business finances in one application; and Quicken for Mac. We also offer Quicken Online, which brings customer bank account, credit card and bill payment information together on the Internet under a single password, and Quicken Mobile, which allows Quicken customers with iPhones to manage their personal finances through their iPhones.

Intuit Real Estate Solutions. Our Intuit Real Estate Solutions business offers software and related technical support, consulting and training services for residential, commercial and corporate property managers. In addition to its domestic operations, this business has operations in several international locations.

Canada and the United Kingdom. In Canada, we offer versions of QuickBooks that we have “localized,” that is, customized to meet the unique needs of customers in that specific international location. These include QuickBooks software offerings, payroll offerings and service plans. We also offer QuickTax consumer tax return preparation software, professional tax preparation products and services, and localized versions of Quicken in Canada. In the United Kingdom, we offer localized versions of QuickBooks and QuickBooks Payroll, including products and services sold in partnership with banks.

PRODUCT DEVELOPMENT

Since the markets for software and related services are characterized by rapid technological change, shifting customer needs and frequent new product introductions and enhancements, a continuous high level of investment is required to innovate and quickly develop new products and services as well as enhance existing offerings. Our product development efforts are becoming more important than ever as we pursue our Connected Services strategy, which reflects a world where people and businesses are increasingly connected by technology and expect access to services at any time in any place.

We develop the majority of our products and services internally. We have a number of United States patents and pending applications that relate to various aspects of our products and technology. We also supplement our internal development efforts by acquiring or licensing products and technology from third parties, and establishing other relationships that enable us to enhance or expand our offerings more rapidly. We expect to expand our third party technology relationships as we continue to pursue our Connected Services strategy.

Our traditional core desktop software products – QuickBooks, TurboTax, Lacerte, ProSeries and Quicken — tend to have predictable annual development and product release cycles. We also develop innovative new offerings such as Intuit GoPayment and Quicken Mobile for which development cycles can be more rapid. Developing consumer and professional tax software and services presents unique challenges because of the demanding development cycle required to accurately incorporate tax law and tax form changes within a rigid timetable. The development timing for our payroll, merchant services, and financial institutions offerings varies with business needs and regulatory requirements and the length of the development cycle depends on the scope and complexity of each particular project.

In our Financial Institutions business, we have developed interfaces with the systems of many of the major providers of core processing software and services to financial institutions. These system interfaces allow us to access a financial institution’s host system to provide end users access to their account data. In addition to developing new interfaces, we continue to enhance our many existing interfaces in order to deliver more robust connectivity and increase operating efficiencies.

We continue to make substantial investments in research and development, and we expect to focus our future research and development efforts on enhancing existing products and services and on developing new products and services that will offer increased ease of use, be customized for specific customer categories, be Web-integrated or Web-based, and feature improved integration with other Intuit and third party products and services and with our internal information systems. We also expect to continue to focus significant research and development efforts on ongoing projects to update the technology platforms for several of our products. Our research and development expenses were $566.2 million or 18% of total net revenue in fiscal 2009, $605.8 million or 20% of total net revenue in fiscal 2008, and $472.5 million or 17% of total net revenue in fiscal 2007.

SEASONALITY

Our QuickBooks, Consumer Tax and Accounting Professionals offerings are highly seasonal. Some of our other offerings are also seasonal, but to a lesser extent. Revenue from our QuickBooks software products tends to be highest during our second and third fiscal quarters. Sales of income tax preparation products and services are heavily concentrated in the period from November through April. In our Consumer Tax business, a greater proportion of our revenue has been occurring later in this seasonal period due in part to the growth in sales of TurboTax Online, for which revenue is recognized upon printing or electronic filing of a tax return. The seasonality of our Consumer Tax and Accounting Professionals revenue is also affected by the timing of the availability of tax forms from taxing agencies and the ability of those agencies to receive electronic tax return submissions. Delays in the availability of tax forms or the ability of taxing agencies to receive submissions can cause revenue to shift from our second fiscal quarter to our third fiscal quarter. These seasonal patterns mean that our total net revenue is usually highest during our second quarter ending January 31 and third quarter ending April 30. We typically report losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from our tax businesses is minimal while operating expenses continue at relatively consistent levels. In addition, the timing and composition of new customer offerings that include both product and service elements can materially shift revenue between quarters. We believe the seasonality of our revenue is likely to continue in the future.

MARKETING, SALES AND DISTRIBUTION CHANNELS

Markets

Our primary target customers are small and medium-sized businesses, consumers, accounting professionals, and small and medium-sized financial institutions. The markets in which we compete have always been characterized by rapid technological change, shifting customer needs, and frequent new product introductions and enhancements by competitors. Over the past several years, the widespread availability of the Internet has accelerated the pace of change and revolutionized the way that customers learn about and purchase products and services. Real-time, personalized online shopping experiences are rapidly becoming the standard. In addition, many customers now begin their shopping process in one channel and ultimately make their purchase in a different channel. This drives the need to create integrated multi-channel shop and buy experiences. Market and industry changes are quickly rendering existing products and services obsolete, so our success depends on our ability to respond rapidly to these changes with new business models, updated competitive strategies, new or enhanced products and services, alternative distribution methods and other changes in the way we do business.

Our target customers for online banking services are small and medium-sized financial institutions seeking an outsourced solution that allows them to compete with the larger national banks in their market. We also provide online financial management solutions to financial institution customers of core processors.

Marketing Programs

To sell our products and services to small and medium-sized businesses, consumers and accounting professionals, we use a variety of marketing programs to generate software orders, stimulate demand and generally maintain and increase customer awareness of our products and services. These programs include Web marketing, including purchasing key words from major search engine companies; direct-response mail and email campaigns; telephone solicitations; newspaper, magazine, billboard, radio and television advertising; and promotional offers that we coordinate with major retailers. We also use workflow-integrated in-product discovery in some of our software products to market other related products and services, including third-party products and services. In our Financial Institutions business, our marketing efforts are primarily focused on identifying potential financial institution clients and marketing our services to consumer and small business end users in cooperation with our financial institution clients.

Sales and Distribution Channels

Multi-Channel Shop and Buy Experiences. Our consumer and small and medium-sized business customers increasingly use the Internet to research both online and desktop products and services. Some customers buy and use our products and services entirely online. Others purchase desktop products and services using the Internet. Still others prefer to make their final decision at a retail location. We coordinate our Web sites, promotions and retail displays in support of this integrated multi-channel shop and buy model.

Direct Sales Channel. We sell many of our products and services for small and medium-sized businesses, consumers and accounting professionals directly to our customers through our Web sites and call centers. Telesales continues to be an effective channel for serving customers that want live help selecting the products and services that are right for their needs.

In our Financial Institutions business, we sell our products and services to financial institutions using a direct sales model and, to a lesser but increasing extent, in cooperation with core processing partners. Our typical sales cycle is approximately six to twelve months for new financial institutions and four to six months for add-on sales to existing customers.

Retail Channel. We sell our QuickBooks, TurboTax and Quicken desktop software as well as our QuickBooks Payroll and Intuit Online Payroll services and merchant credit card payment processing services at retail in the United States. We sell these products and services directly and through distributors to office supply superstores, warehouse clubs, consumer electronics retailers, general mass merchandisers, online retailers, and catalogers. In Canada and other international markets we also rely on distributors and other third parties who sell products into the

retail channel. The retail channel provides broad customer reach through retailer-sponsored advertising and exposure to retail foot traffic. This channel also gives us the opportunity to communicate our product and service lineup and messages through multiple touch points and allows us to serve our customers at relatively modest cost.

Other Channels. We have strategies to address the alliance partner, solution provider and personal computer hardware manufacturer channels. Revenue from these channels is currently less significant than revenue from our direct and retail channels, but it is growing. We sell our consumer and small business products and services through selected alliance partners, primarily banks, credit unions, and securities and investment firms. These alliance partners help us reach new customers at the point of transaction and drive growth and market share by extending our online reach. Solution providers combine our products and services with value-added marketing, sales and technical expertise to deliver a complete solution at the local level. Relationships with selected personal computer hardware manufacturers help us attract new customers for our core software offerings.

In our Financial Institutions business, we have joint marketing arrangements with several core processing vendors. They include Fiserv, Inc., Open Solutions, Inc., Fidelity Information Services, Inc., Metavante Corporation and Computer Services Inc. To deliver bill payment and bill presentment services to our financial institution customers, we also maintain value-added reseller relationships with major providers such as Metavante Corporation and CheckFree Corporation (part of Fiserv).

COMPETITION

Overview

We face intense competition in all of our businesses, both domestically and internationally. Competitive interest and expertise in many of the markets we serve, particularly small business, consumer tax and online banking, have grown markedly over the past few years and we expect this trend to continue. Some of our existing competitors have significantly greater financial, technical and marketing resources than we do. In addition, the competitive landscape can shift rapidly as new companies enter markets in which we compete. This is particularly true for online products and services, where the barriers to entry are lower than they are for desktop software products and services. To attract customers, many online competitors are offering free or low-priced entry-level products which we must take into account in our pricing strategies.

Our most obvious competition comes from other companies that offer technology solutions similar to ours. However, for many of our products and services, other important competitive alternatives for customers are third party service providers such as professional accountants and seasonal assisted tax preparation businesses. Manual tools and processes, or general-purpose software, are also important competitive alternatives. Many of our new customers previously used pencil and paper or software such as word processors and spreadsheets, rather than competitors’ software and services, to perform financial tasks. We believe that there is a long-term trend away from manual methods and toward the use of both desktop and online software to accomplish these tasks that will continue to provide growth opportunities.

Competition Specific to Business Segments

Small Business Group. Our QuickBooks desktop product is the leading small business financial management software at retail. Our small business products and services face competitive challenges from companies such as NetSuite Inc. and The Sage Group plc, that offer software and associated services that directly target small business customers. Increasingly, our small business products and services also face competition from free or low cost online accounting offerings as well as free online banking and bill payment services offered by financial institutions and others. In our payroll business we compete directly with Automatic Data Processing, Inc. (ADP), Paychex and many other companies with payroll offerings. In our merchant services business we also compete directly with large financial institutions such as Wells Fargo, JP Morgan Chase and Bank of America and with many independent sales organizations, including First Data Corporation, Elavon, Global Payments and FIS-Certegy.

Consumer Tax. In the private sector we face intense competition from H&R Block, which provides assisted tax preparation services in its stores and a competing software offering called TaxCut, and from several other tax preparation service providers and online offerings, including 2nd Story Software’s TaxACT. These competing offerings subject us to significant price pressure.

We also face competitive challenges in our Consumer Tax business from publicly funded government entities that offer electronic tax preparation and filing services at no cost to individual taxpayers. We are a member of the Free File Alliance, a consortium of private sector companies that has entered into an agreement with the federal government. Under this agreement, the member companies provide online federal tax preparation and filing services at no cost to eligible federal taxpayers, and the federal government has agreed not to provide a competing service. Approximately 20 states have also adopted Free File Alliance public-private agreements while approximately 20 other states offer some form of direct government tax preparation and filing services free to qualified taxpayers. We continue to actively work with others in the private and public sectors to advance the goals of the Free File Alliance policy initiative and to support successful public-private partnerships. However, future administrative, regulatory or legislative activity in this area could harm our Consumer Tax business.

Accounting Professionals. Our ProSeries professional tax offerings face competition from CCH’s ATX and TaxWise offerings. Our Lacerte professional tax offerings face competition from competitively-priced tax and accounting solutions that include integration with non-tax functionality. These include CCH’s ProSystems fx Office Suite and Thomson Reuters’ CS Professional Suite and GoSystems Tax. We also face growing competition from online tax and accounting offerings, which may be marketed more effectively or have lower pricing than our offerings for accounting professionals.

Financial Institutions. The market for Internet banking services is highly competitive. In the area of consumer Internet banking, a number of companies offer outsourced online banking services to financial institutions, including: Online Resources, S1 Corporation and FundsXpress (a subsidiary of First Data Corporation). In addition, several companies whose primary offerings are core processing or bill payment processing services also provide online banking services. These companies include Fiserv, Inc., Open Solutions, Inc., Fidelity Information Services, Inc., Jack Henry and Metavante Corporation. In addition, many of these firms offer our products through a referral or reseller arrangement with us. We also compete for new customers with relatively recent entrants into the online financial management solutions market. As we negotiate service contract renewals with current customers, competitive pressures may require us to make concessions on pricing and other material terms to convince these customers to remain with us.

Competitive Factors

We believe the most important competitive factors for our core software products — QuickBooks, TurboTax, Lacerte, ProSeries and Quicken – are ease of use, product features, size of the installed customer base, brand name recognition, value proposition, cost, and product and support quality. Access to distribution channels is also important for our QuickBooks, TurboTax and Quicken products. In addition, support from accounting professionals and the ability for customers to upgrade within product families as their businesses grow are significant competitive factors for our QuickBooks products. Productivity is also an important competitive factor for the full-service accounting firms to which we market our Lacerte products. We believe we compete effectively on these factors as our QuickBooks, TurboTax, and Quicken products are the leading products in the retail sales channel for their respective categories.

For our service offerings such as small business payroll, merchant payment processing services and outsourced online banking, features and ease of use, the integration of these products with related software, brand name recognition, effective distribution, quality of support, cost and scalability of operations are important competitive factors.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

We provide customer service and technical support by telephone, e-mail, online chat, online communities, and our customer service and technical support Web sites. We have full-time and outsourced customer service and technical support staffs. We supplement these staffs with seasonal employees and additional outsourcing during periods of peak call volumes, such as during the tax return filing season or following a major product launch. We outsource to several firms domestically and internationally. Most of our internationally outsourced consumer and small business customer service and technical support personnel are currently located in India and the Philippines.

We offer free self-help information through our technical support Web sites for our QuickBooks, TurboTax, Accounting Professionals and Quicken software products. Customers use our Web sites to find answers to commonly asked questions and check on the status of orders. Under certain support plans, customers can also use our Web sites to receive product updates electronically. Support alternatives and fees vary by product. We also sponsor online user communities, such as Intuit Community for small businesses and accounting professionals and TurboTax Live Community, where customers can share knowledge and product advice with each other.

MANUFACTURING AND DISTRIBUTION

Desktop Software and Supplies

The main steps involved in manufacturing desktop software are manufacturing compact discs (CDs), printing boxes and related materials, and assembling and shipping the final products.

For retail manufacturing, we have an agreement with Arvato Digital Services, Inc. (ADiS), a division of Bertelsmann AG, under which ADiS provides a majority of the manufacturing volume for our launches of QuickBooks, TurboTax and Quicken, as well as for day-to-day replenishment after product launches. ADiS has operations in multiple locations that can provide redundancy if necessary. We also have an agreement with JVC America Inc. under which JVC provides secondary outsourced manufacturing volume for these launches and for day-to-day replenishment.

For retail distribution, we have an agreement with ADiS under which ADiS handles all logistics services. Our retail product launches are operationally complex. Our model for product delivery for retail launches and replenishment is a hybrid of direct to store deliveries and shipments to central warehouse locations. This allows improved inventory management by our retailers. We also ship products for many of our smaller retail customers through distributors.

ADiS also provides most of the manufacturing volume and distribution services for our direct desktop software orders. We have an exclusive agreement with Harland Clarke, a division of M&F Worldwide Corporation, to fulfill orders for all of our printed checks and most other products for our financial supplies business.

We have multiple sources for all of our raw materials and availability has historically not been a significant problem for us.

Prior to major product releases for our core desktop software products we tend to have significant levels of backlog, but at other times backlog is minimal and we typically ship products within a few days of receiving an order. Because of this fluctuation in backlog, we believe that backlog is not a reliable predictor of our future core desktop software sales.

Internet-Based Products and Services

Intuit’s data centers house most of the systems, networks and databases required to operate and deliver our Internet-based products and services. These include QuickBooks Online, online payroll services, merchant payment processing services, Web site hosting services for small businesses, TurboTax Online, consumer and professional electronic tax filing services, Digital Insight outsourced online banking services, and Quicken Online. Through our data centers, we connect customers to our products and services and store customer and business information. As our businesses continue to move toward delivering more online products and services in conjunction with our Connected Services strategy, our infrastructure will become even more critical in the future. Currently we have a number of data centers primarily located in the western United States. Over time we expect to transition to fewer data centers in more geographically diverse locations. In fiscal 2008 and 2009 we built a new data center in Washington state that we began occupying in the second half of fiscal 2009. We expect this data center to support the hosting and high availability requirements of many of our existing and future connected services offerings.

PRIVACY AND SECURITY OF CUSTOMER INFORMATION AND TRANSACTIONS

We are subject to various federal, state and international laws and regulations and to financial institution requirements relating to the privacy and security of customer and employee personal information. We are also subject to laws and regulations that apply to the Internet, behavioral tracking, telemarketing, email activities and credit reporting. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, store or transmit the personal information of our customers or employees, communicate with our customers, and deliver products and services, or may significantly increase our compliance costs. If our business expands to new industry segments and new uses of data that are regulated for privacy and security, or to countries outside the United States that have strict data protections laws, our compliance requirements and costs will increase.

Through a Master Privacy Policy Framework designed to be consistent with globally recognized privacy principles, we comply with United States federal and other country guidelines and practices to help ensure that customers and employees are aware of, and can control, how we use information about them. Our primary Web sites, such as QuickBooks.com and TurboTax.com, have been certified by TRUSTe, an independent organization that operates a Web site privacy certification program representing industry standard practices to address users’ and regulators’ concerns about online privacy. We also use privacy statements to provide notice to customers of our privacy practices, as well as provide them the opportunity to furnish instructions with respect to use of their personal information. We participate in industry groups whose purpose is to influence public policy and industry best practices for privacy and security.

To address security concerns, we use security safeguards to help protect the systems and the information customers give to us from loss, misuse and unauthorized alteration. Whenever customers transmit sensitive information, such as a credit card number or tax return data, to us through one of our Web sites we use industry standards to encrypt the data as it is transmitted to us. We work to protect our systems from unauthorized internal or external access using numerous commercially available computer security products as well as internally developed security procedures and practices.

GOVERNMENT REGULATION

The financial services industry is subject to extensive and complex federal and state regulation. Our financial institution customers, which include commercial banks and credit unions, operate in markets that are subject to rigorous regulatory oversight and supervision. The compliance of our products and services with these requirements depends on a variety of factors including the particular functionality, the interactive design and the charter or license of the financial institution. Our financial services customers must independently assess and determine what is required of them under these regulations and are responsible for ensuring that our systems and the design of their Web sites conform to their regulatory obligations.

Our Digital Insight subsidiary is not directly subject to federal or state regulations specifically applicable to financial institutions such as banks and credit unions. However, as a provider of services to financial institutions, our Digital Insight subsidiary is examined by the Federal Financial Institution Examination Council under the Information Technology examination guidelines. Although we believe we are not subject to direct supervision by federal and state banking agencies with regard to other regulations, we have from time to time agreed to examinations of our business and operations by these agencies.

Our Consumer Tax and Accounting Professionals businesses are also subject to federal and state government requirements, including regulations related to the electronic filing of tax returns, the provision of tax preparer assistance and the use and disclosure of customer information. In addition, we offer certain other products and services, such as small business payroll, which are subject to special regulatory requirements. As we expand our financial institutions, tax and small business products and services, we may become subject to additional government regulation. New laws or regulations may be adopted in these areas that could impose significant limitations on our business and increase our cost of compliance. We continually analyze new business opportunities, both domestically and internationally, and new businesses that we pursue may require additional costs for regulatory compliance.

We are subject to federal and state laws and government regulations concerning employee safety and health and environmental matters. The Occupational Safety and Health Administration, the Environmental Protection Agency, and other federal and state agencies have the authority to put regulations in place that may have an impact on our operations.

INTELLECTUAL PROPERTY

Our success depends on our proprietary technology embodied in our offerings. We protect this proprietary technology by relying on a variety of intellectual property mechanisms, including copyright, patent, trade secret and trademark laws, restrictions on disclosure and other methods. For example, we regularly file applications for patents, copyrights and trademarks and service marks in order to protect intellectual property that we believe is important to our business. We currently hold a small but growing patent portfolio. We also have a number of registered trademarks that include Intuit, QuickBooks, TurboTax, Lacerte, ProSeries, Digital Insight and Quicken. We have registered these and other trademarks and service marks in the United States and, depending on the relevance of each brand to other markets, in many foreign countries. Most registrations can be renewed perpetually at 10-year intervals. We also license intellectual property from third parties for use in our products.

Although our portfolio of patents is growing, the patents that have been issued to us could be determined to be invalid and may not be enforceable against competitive products in every jurisdiction. In addition, third parties have asserted and may, in the future, assert infringement claims against us. These claims and any litigation may result in invalidation of our proprietary rights or a finding of infringement against us along with an assessment of damages. Litigation, even if without merit, could result in substantial costs and diversion of resources and management attention. In addition, third party licenses may not continue to be available to us on commercially acceptable terms, or at all.

EMPLOYEES

As of July 31, 2009, we had approximately 7,800 employees in major offices in the United States, Canada, India, the United Kingdom and other locations. We believe our future success and growth will depend on our ability to attract and retain qualified employees in all areas of our business. We do not currently have any collective bargaining agreements with our employees, and we believe employee relations are generally good. Although we have employment-related agreements with a number of key employees, these agreements do not guarantee continued service. We believe we offer competitive compensation and a good working environment. We were named one of Fortune magazine’s “100 Best Companies to Work For” in each of the last eight years. However, we face intense competition for qualified employees, and we expect to face continuing challenges in recruiting and retention.

This Annual Report on Form 10-K contains forward-looking statements. All statements in this report, other than statements that are purely historical, are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “forecast,” “estimate,” “seek,” and similar expressions also identify forward-looking statements. In this report, forward-looking statements include, without limitation, the following:

	•		our expectations and beliefs regarding future conduct and growth of the business;
	•		our expectations regarding competition and our ability to compete effectively;
	•		our expectations regarding the development of future products, services and technology platforms and our research and development efforts;
	•		our intention to create easy-to-use connected services that solve customer problems while building durable competitive advantage;
	•		the assumptions underlying our critical accounting policies and estimates, including our estimates regarding product rebate and return reserves; stock volatility and other assumptions used to estimate the fair value of share-based compensation; and expected future amortization of purchased intangible assets;
	•		our belief that the investments that we hold are not other-than-temporarily impaired;
	•		our belief that the reduction in liquidity of the municipal auction rate securities we hold will not have a material impact on our overall ability to meet our liquidity needs;
	•		our belief that our exposure to currency exchange fluctuation risk will not be significant in the future;
	•		our assessments and estimates that determine our effective tax rate;
	•		our belief that our income tax valuation allowance is sufficient;
	•		our belief that our cash and cash equivalents, investments and cash generated from operations will be sufficient to meet our working capital, capital expenditure and other liquidity requirements for at least the next 12 months;
	•		our belief that long-term trends toward the use of both desktop and online software will provide future growth opportunities;
	•		our belief that our facilities are adequate for our near-term needs and that we will be able to locate additional facilities as needed; and
	•		our assessments and beliefs regarding the future outcome of pending legal proceedings and the liability, if any, that Intuit may incur as a result of those proceedings.

We caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. We encourage you to read carefully all information provided in this report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment. These forward-looking statements are based on information as of the filing date of this Annual Report, and we undertake no obligation to revise or update any forward-looking statement for any reason.

Because forward-looking statements involve risks and uncertainties, there are important factors that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include the following:

We face intense competition in all of our businesses, and we expect competition to remain intense in the future. The number, resources and sophistication of the companies with whom we compete have increased as we continue to expand our product and service offerings. Our competitors, whether new or well-established, may introduce superior products and services, reduce prices, gain better access to distribution

channels, have greater technical, marketing and other resources, have greater name recognition, have larger installed bases of customers, have well-established relationships with our current and potential customers, advertise aggressively or beat us to market with new products and services. We also face intensified competition from providers of free online and desktop accounting, tax, banking and other financial services. In order to compete, we have also introduced free offerings in several categories, but we may not be able to attract customers or effectively monetize all of these offerings, and customers who have formerly paid for Intuit’s products and services may elect to use free offerings instead. These competitive factors may diminish our revenue and profitability, and harm our ability to acquire and retain customers.

Our consumer tax business faces significant competition from both the public and private sector. In the public sector we face the risk of federal and state taxing authorities developing software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers. These or similar programs may be introduced or expanded in the future, which may cause us to lose customers and revenue. Although the Free File Alliance has kept the federal government from being a direct competitor to Intuit’s tax offerings, it has fostered additional online competition and may cause us to lose significant revenue opportunities. In addition, taxpayers who formerly have paid for Intuit’s products may elect to use Intuit’s or our competitors’ free federal service instead. The current agreement with the Free File Alliance is scheduled to expire in October 2009. Although we are in negotiations with the IRS and other members of the Free File Alliance to renew this agreement there is no guarantee an agreement will be reached prior to its termination. If the IRS chose not to renew this agreement or terminated the agreement and elected to provide government software and electronic filing services to taxpayers at no charge, or if the federal government significantly altered the Free File Alliance or required the provision of government tax filing services directly to taxpayers, our revenue and profits may suffer. See the discussion on the Free File Alliance in Item 1, “Business — Competition.” We anticipate that governmental encroachment may present a continued competitive threat to our business for the foreseeable future.

The Software as a Service (SaaS) and desktop software industries are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. As we continue to grow our SaaS and other offerings, we must continue to innovate and develop new products and features to meet changing customer needs and attract and retain talented software developers. We need to continue to develop our skills, tools and capabilities to capitalize on existing and emerging technologies. We are currently in the process of updating the software platforms related to a number of our offerings. If we experience prolonged delays or unforeseen difficulties in upgrading our systems and architecture, we may not be able to develop new offerings and enhancements that we need to remain competitive.

A number of our businesses also derive a significant amount of their revenue from one-time upfront license fees and rely on customer upgrades and service offerings to generate a significant portion of their revenues. In addition, our consumer and professional tax businesses depend significantly on revenue from customers who return each year to use our updated tax preparation and filing software and services. As our existing products mature, encouraging customers to purchase product upgrades becomes more challenging unless new product releases provide features and functionality that have meaningful incremental value. If we are not able to develop and clearly demonstrate the value of new or upgraded products or services to our customers, our revenues may be harmed.

In some cases, we may expend a significant amount of resources and management attention on products or services that do not ultimately succeed in their markets. We have encountered difficulty in launching new products and services in the past. If we misjudge customer needs in the future, our new products and services may not succeed and our revenues and earnings may be harmed.

As our product and service offerings become more complex our revenue streams may become less predictable.

Our expanding range of products and services, including services delivered online, generates more varied revenue streams than our traditional desktop software businesses, and the accounting policies that apply to revenue from our newer offerings are complex. For example, as we offer online services bundled with other products, we may be required to defer a higher percentage of our product revenue into future fiscal periods. In addition, as we offer more services on a subscription basis, we recognize revenue from those services over the periods in which the services are provided. This may result in significant shifts of revenue from quarter to quarter, or from one fiscal year to the next, and may make our revenues less predictable.

Business interruption or failure of our information technology and communication systems may impair the availability of our products and services, which may damage our reputation and harm our future financial results.

As we continue to grow our online services, we become more dependent on the continuing operation and availability of our information technology and communication systems and those of our external service providers. Any damage to or failure of our systems may result in interruptions in our service, which may reduce our revenues and profits, cause us to lose customers and damage our brand. In particular, any prolonged interruptions in our online tax preparation or electronic filing services, or in any electronic filing systems operating by the government, at any time during the tax season may result in lost customers, additional refunds of customer charges, negative publicity and increased operating costs, any of which may significantly harm our business, financial condition and results of operations. Although we have implemented practices designed to maintain the availability of our online products and services and mitigate the harm of any unplanned interruptions, we do not have complete redundancy for all of our systems, and our disaster recovery planning may not account for all eventualities. Despite our efforts to maintain continuous and reliable server operations, we occasionally experience unplanned outages or technical difficulties. Due to our evolving business needs, in fiscal 2008 and 2009 we built a new data center in Washington state to support our longer term hosting requirements. We began occupying this data center in the second half of fiscal 2009. If we do not execute the transition to the new data center in an effective manner, we may experience unplanned service disruptions or unforeseen increases in cost which may harm our operating results and our business. We do not maintain real-time back-up of all our data, and in the event of significant system disruption, particularly during peak tax filing season, we may experience loss of data or processing capabilities, which may cause us to lose customers and may materially harm our reputation and our operating results.

Our business operations, data centers, information technology and communications systems are vulnerable to damage or interruption from natural disasters, malicious attacks, fire, power loss, telecommunications failures, computer viruses, computer denial of service attacks, terrorist attacks and other events beyond our control. The majority of our research and development activities, our corporate headquarters, our principal information technology systems, and other critical business operations are located near major seismic faults. We do not carry earthquake insurance for direct quake-related losses. Our future financial results may be materially harmed in the event of a major earthquake or other natural or man-made disaster.

We rely on internal systems and external systems maintained by manufacturers, distributors and service providers to take and fulfill customer orders, handle customer service requests and host certain online activities. Any interruption or failure of our internal or external systems may prevent us or our service providers from accepting and fulfilling customer orders or cause company and customer data to be unintentionally disclosed. Our continuing efforts to upgrade and expand our network security and other information systems may be costly, and problems with the design or implementation of system enhancements may harm our business and our results of operations.

The recent global economic downturn may harm our business and financial condition.

The recent global economic downturn has caused disruptions and extreme volatility in global financial markets and increased rates of default and bankruptcy, and has impacted consumer and small business spending. These macroeconomic developments may continue to negatively affect our business and financial condition. Many customers may delay or reduce technology purchases. This may result in reductions in sales of our products, slower adoption of new technologies and upgrades to existing technologies and increased price competition. Decreased consumer spending levels may also reduce credit and debit card transaction processing volumes causing reductions

in our payments revenue. Weakness in the end-user market may negatively affect the cash flow of our distributors and resellers who may, in turn, delay paying their obligations to us, which may increase our credit risk exposure and cause delays in our recognition of revenue or future sales to these customers. If economic or other factors cause financial institutions to fail or macro-economic factors affecting banks, credit unions, mortgage lenders and other financial institutions lead to cost-cutting efforts, we may lose current or potential customers or achieve less revenue per customer and our revenues may suffer. Continued consolidation of the banking and financial services industry, whether due to failures of financial institutions or other factors, may result in a smaller market for our products and services and may cause us to lose relationships with key customers. Any of these events may likely harm our business and our future financial results.

The nature of our products necessitates timely product launches and if we experience significant product quality problems or delays, it may harm our revenue, earnings and reputation.

All of our tax products and many of our non-tax products have rigid development timetables that increase the risk of errors in our products and the risk of launch delays. Our tax preparation software product development cycle is particularly challenging due to the need to incorporate unpredictable tax law and tax form changes each year and because our customers expect high levels of accuracy and a timely launch of these products to prepare and file their taxes by the tax filing deadline. Due to the complexity of our products and the condensed development cycles under which we operate, our products sometimes contain “bugs” that may unexpectedly interfere with the operation of the software. When we encounter problems we may be required to modify our code, distribute patches to customers who have already purchased the product and recall or repackage existing product inventory in our distribution channels. If we encounter development challenges or discover errors in our products late in our development cycle it may cause us to delay our product launch date. Any major defects or launch delays may lead to loss of customers and revenue, negative publicity, customer and employee dissatisfaction, reduced retailer shelf space and promotions, and increased operating expenses, such as inventory replacement costs, legal fees or payments resulting from our commitment to reimburse penalties and interest paid by customers due solely to calculation errors in our consumer tax preparation products.

Our hosting, collection, use and retention of personal customer information create risk that may harm our business.

A number of our businesses collect, use and retain large amounts of personal customer information, including credit card numbers, tax return information, bank account numbers and passwords, personal and business financial data, social security numbers and other payroll information. We may also develop new business models that use personal information, or data derived from personal information, in innovative and novel ways. In addition, we collect and maintain personal information of our employees in the ordinary course of our business. Some of this personal customer and employee information is held and some transactions are executed by third parties. In addition, as many of our products and services are Web based, the amount of data we store for our users on our servers (including personal information) has been increasing. We and our vendors use commercially available security technologies to protect transactions and personal information. We use security and business controls to limit access and use of personal information. However, a third party may be able to circumvent these security and business measures, and errors in the storage, use or transmission of personal information may result in a breach of customer or employee privacy or theft of assets, which may require notification under applicable data privacy regulations. We employ contractors, temporary and seasonal employees who may have access to the personal information of customers and employees or who may execute transactions in the normal course of their duties. While we conduct necessary and appropriate background checks of these individuals and limit access to systems and data, it is possible that one or more of these individuals may circumvent these controls, resulting in a security breach.

The ability to execute transactions and the possession and use of personal information in conducting our business subjects us to legislative and regulatory burdens that may require notification to customers or employees of a security breach, restrict our use of personal information and hinder our ability to acquire new customers or market to existing customers. As our business continues to expand to new industry segments that may be more highly regulated for privacy and data security, and to countries outside the U.S. that have more strict data protection laws, our compliance requirements and costs may increase. We have incurred — and may continue to incur - significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.

In the past we have experienced lawsuits and negative publicity relating to privacy issues and we may face similar suits in the future. A major breach of our security measures or those of third parties that execute transactions or hold and manage personal information may have serious negative consequences for our businesses, including possible fines, penalties and damages, reduced customer demand for our services, harm to our reputation and brands, further regulation and oversight by federal or state agencies, and loss of our ability to provide financial transaction services or accept and process customer credit card orders or tax returns. From time to time, we detect, or receive notices from customers or public or private agencies that they have detected, vulnerabilities in our servers, our software or third-party software components that are distributed with our products. The existence of vulnerabilities, even if they do not result in a security breach, may harm customer confidence and require substantial resources to address, and we may not be able to discover or remediate such security vulnerabilities before they are exploited. If hackers were able to circumvent our security measures, we may lose personal information. Although we have sophisticated network and application security, internal control measures, and physical security procedures to safeguard our systems, there can be no assurance that a security breach, loss or theft of personal information will not occur, which may harm our business, customer reputation and future financial results and may require us to expend significant resources to address these problems, including notification under data privacy regulations.

Our reliance on a limited number of manufacturing and distribution suppliers may harm our business.

We have chosen to outsource the majority of the manufacturing and distribution for many of our desktop software products to a single third party provider and we use a single vendor to produce and distribute our check and business forms supplies products. Although our reliance on single suppliers provides us with efficiencies and enhanced bargaining power, poor performance by these suppliers may significantly harm our business. This risk is amplified by the fact that we carry very little inventory and rely on just-in-time manufacturing processes. In particular, the loss of our manufacturing partner for retail may be disruptive to our business and may cause delay in a product launch. We seek to mitigate this risk by managing our second tier vendors and maintaining contingency plans. If we experience delays during a peak demand period or significant quality issues our business may be significantly harmed.

Our revenue and earnings are highly seasonal and our quarterly results fluctuate significantly.

Several of our businesses are highly seasonal causing significant quarterly fluctuations in our financial results. Revenue and operating results are usually strongest during the second and third fiscal quarters ending January 31 and April 30 due to our tax businesses contributing most of their revenue during those quarters and the timing of the release of our small business software products and upgrades. We experience lower revenues, and significant operating losses, in the first and fourth quarters ending October 31 and July 31. Our financial results may also fluctuate from quarter to quarter and year to year due to a variety of factors, including changes in product sales mix that affect average selling prices; product release dates; the timing of delivery of federal and state tax forms; the timing of our discontinuance of support for older product offerings; changes to our bundling strategy, such as the inclusion of upgrades with certain offerings; changes to how we communicate the availability of new functionality in the future (any of which may impact the pattern of revenue recognition); and the timing of acquisitions, divestitures, and goodwill and purchased intangible asset impairment charges.

If we are unable to develop and maintain critical third party business relationships, the business may be adversely affected.

Our growth is dependent on the strength of our business relationships and our ability to continue to develop and maintain new relationships. We rely on various business partners, including third party service providers, vendors, licensing partners, development partners, and licensees, among others, in many areas of our business. The failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to our business operations. Alternative arrangements and services may not be available to us on commercially reasonable terms or we may experience business interruptions upon a transition to an alternative partner or vendor.

In the financial institutions business, we rely on core processors and other third parties to enable our online banking and bill pay services. Consolidation among core processors or between core processors and online banking and bill-pay providers may create larger or vertically-integrated competitors that may have stronger relationships with our current or potential financial institutions clients. If these core processors fail to support any of the functionality in

our products and services or significantly raise their prices, we may lose customers and our financial results may suffer.

We sell most of our desktop software products through our retail distribution channel and a relatively small number of larger retailers and distributors generate a significant portion of our sales volume. Our principal retailers have significant bargaining leverage due to their size and available resources. Historically, some retailers have elected to offer our tax products exclusively, but we cannot guarantee that these exclusive relationships will continue in the future. Any change in principal business terms, loss of exclusivity, major disruption or termination of a relationship with these resellers, including due to bankruptcy of the resellers, may result in a significant decline in our revenues and earnings. The sourcing decisions, product display locations and promotional activities that retailers undertake may greatly impact the sales of our products. Changes in our pricing, product offerings or features, or concerns by retailers about our direct sales efforts, may cause retailers or distributors to reduce their efforts to promote our products, eliminate any exclusive placements, or stop selling our products altogether. If any of our retailers or distributors experience financial difficulties we may be unable to collect amounts that we are owed. At January 31, 2009, in the midst of the 2008 consumer tax season, amounts due from our 10 largest retailers and distributors represented approximately 51% of total gross accounts receivable.

The tax preparation industry continues to receive heightened attention from federal and state governments. New legislation, regulation, public policy considerations or litigation by the government or private entities may result in greater oversight of the tax preparation industry, restrict the types of products and services that we can offer or the prices we can charge, or otherwise cause us to change the way we operate our tax businesses or offer our tax products and services. This in turn may increase our cost of doing business and limit our revenue opportunities.

We are also required to comply with a variety of state revenue agency standards in order to successfully operate our tax preparation and electronic filing services. Changes in state-imposed requirements by one or more of the states, including the required use of specific technologies or technology standards, may significantly increase the costs of providing those services to our customers and may prevent us from delivering a quality product to our customers in a timely manner.

Our financial institutions business provides services to banks, credit unions and other institutions that are subject to extensive and complex federal and state regulation. As a result, our financial institution customers require that our products and services comply with the regulations applicable to these customers. If we are unable to comply with these regulations, we may incur significant costs and penalties, face litigation or governmental proceedings, and lose our ability to sell to these customers. Any of these adverse events may harm our future financial results and our reputation.

In addition, as we seek to grow our business, we may expand into more highly-regulated businesses or countries, which may require increased investment in compliance and auditing functions or new technologies in order to meet regulatory standards. Government authorities may enact other laws, rules or regulations that place new burdens or restrictions on our business or determine that our operations are directly subject to existing rules or regulations, such as requirements related to data collection, use, transmission, retention and processing, which may make our business more costly, less efficient or impossible to conduct, and may require us to modify our current or future products or services, which may harm our future financial results.

As we continue to grow our business internationally we face increased risk which may harm our business and financial condition. We have limited experience with operations outside the U.S. and our ability to manage our business and conduct our operations internationally requires management attention and resources and is subject to a number of risks, including difficulties in managing varying foreign operations, political or social unrest or economic instability, foreign currency restrictions and exchange rate fluctuations, higher costs associated with doing business internationally and potentially adverse tax consequences. Also, compliance with complex foreign and U.S. laws and

regulations that apply to our international operations increases our cost of doing business in international jurisdictions and may expose us or our employees to fines and penalties.

If we encounter problems with our third-party customer service and technical support providers our business and future financial results may be harmed.

We outsource a substantial portion of our customer service and technical support activities to domestic and international third-party service providers, including service providers in India and the Philippines, and we expect to continue to rely heavily on third parties in the future. This strategy provides us with lower operating costs and greater flexibility, but also presents risks to our business, including the following:

	•		In recent years India has experienced political instability and changing policies that may impact our operations. In addition, for a number of years India and Pakistan have been in conflict and an active state of war between the two countries may disrupt our services.
	•		Customers may react negatively to providing information to and receiving support from overseas organizations.
	•		We may not be able to affect the quality of support as directly as we are able to in our company-run call centers.
	•		International outsourcing has received considerable negative attention in the media, which may harm our reputation, and the U.S. government may adopt legislation that may affect how we operate. For example, the Treasury Department and the Internal Revenue Service have released regulations restricting the flow of personal information to overseas providers.
	•		We rely on a global communications infrastructure that may be interrupted in a number of ways. For example, in fiscal 2007 an earthquake in Taiwan caused temporary disruption to overseas infrastructure.

We are exposed to risks associated with credit card and payment fraud and with credit card processing.

In our payments processing service business if merchants for whom we process payment transactions are unable to pay refunds due to their customers in connection with disputed or fraudulent merchant transactions, we may be required to pay those amounts and our payments may exceed the amount of the customer reserves we have established to make such payments.

We are subject to payment card association operating rules and certification requirements, as in effect from time to time. Failure to comply with these rules or requirements may subject us to fines and higher transaction fees or cause us to lose our ability to accept credit card payments from our customers, resulting in harm to our business and future financial results.

If we fail to adequately protect our intellectual property rights, competitors may exploit our innovations, which may weaken our competitive position and reduce our revenue and earnings.

Our success depends upon our proprietary technology embodied in our offerings. We protect this proprietary technology by relying on a combination of copyright, trade secret, trademark, patent, confidentiality procedures and licensing arrangements. Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of those innovations. Given the cost of obtaining patent protection, we may choose not to patent certain innovations that later turn out to be important. There is also the possibility that, despite our efforts, the scope of protection may be insufficient or that an issued patent may be deemed invalid or unenforceable. It is possible that other companies may successfully challenge the validity or scope of our patents and that our patent portfolio, which is relatively small, may not provide us with adequate protection. Ultimately, our attempts to secure legal protection for our proprietary rights may not be adequate and our competitors may independently develop similar technologies, duplicate our products, or design around patents and other intellectual property rights. If our intellectual property protection proves inadequate we may lose our competitive advantage and our future financial results may suffer.

Third parties claiming that we infringe their proprietary rights may cause us to incur significant legal expenses and prevent us from selling our products.

As the number of products in the software industry increases and the functionality of these products further overlap, and as we acquire technology through acquisitions or licenses, we may become increasingly subject to infringement

claims, including patent, copyright, and trademark infringement claims. Litigation may be necessary to determine the validity and scope of the patent rights of others. We have received allegations of patent infringement claims in the past and may receive more claims in the future based on allegations that our products infringe upon patents held by third parties. Some of these claims are the subject of pending litigation against us and against some of our OEM customers. These claims may involve patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patents may provide little or no deterrence. The ultimate outcome of any allegation is uncertain and, regardless of outcome, any such claim, with or without merit, may be time consuming to defend, result in costly litigation, divert management’s time and attention from our business, require us to stop selling, delay shipping or redesign our products, or require us to pay monetary damages for royalty or licensing fees, or to satisfy indemnification obligations that we have with some of our customers. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims may harm our business.

Policing unauthorized use and copying of our products is difficult, expensive, and time consuming. Current U.S. laws that prohibit copying give us only limited practical protection from software piracy and the laws of many other countries provide very little protection. We frequently encounter unauthorized copies of our software being sold through online marketplaces. In addition, efforts to protect our intellectual property may be misunderstood and perceived negatively by our customers. Although we continue to evaluate and put in place technology solutions to attempt to lessen the impact of piracy and engage in efforts to educate consumers and public policy leaders on these issues and cooperate with industry groups in their efforts to combat piracy, we expect piracy to be a persistent problem that results in lost revenues and increased expenses.

Many of our products and services include intellectual property of third parties, which we license under agreements that must be renewed or renegotiated from time to time. We may not be able to obtain licenses to these third party technologies or content on reasonable terms, or at all. If we are unable to obtain the rights necessary to use this intellectual property in our products and services, we may not be able to sell the affected products, which may in turn harm our future financial results.

Some of our offerings include third-party software that is licensed under so-called “open source” licenses, some of which may include a requirement that, under certain circumstances, we make available, or grant licenses to, any modifications or derivative works we create based upon the open source software. Although we have established internal review and approval processes to mitigate these risks, we may not be sure that all open source software is submitted for approval prior to use in our products. Many of the risks associated with usage of open source may not be eliminated, and may, if not properly addressed, harm our business.

We have acquired and may continue to acquire companies, products and technologies that complement our strategic direction. Acquisitions involve significant risks and uncertainties, including:

	•		inability to successfully integrate the acquired technology and operations into our business and maintain uniform standards, controls, policies, and procedures;
	•		inability to realize synergies expected to result from an acquisition;
	•		challenges retaining the key employees, customers, resellers and other business partners of the acquired operation;
	•		the internal control environment of an acquired entity may not be consistent with our standards and may require significant time and resources to improve;
	•		expenses, including the settlement of tax contingencies, associated with the acquisition; and
	•		unidentified issues not discovered in our due diligence process, including product or service quality issues, intellectual property issues and legal contingencies.

Acquisitions and divestitures are inherently risky. Our transactions may not be successful and may, in some cases, harm our operating results or financial condition. If we use debt to fund acquisitions or for other purposes, our interest expense and leverage may increase significantly. If we issue equity securities as consideration in an acquisition, current shareholders’ percentage ownership and earnings per share may be diluted.

We have issued $1 billion in a debt offering and may incur other debt in the future, which may adversely affect our financial condition and future financial results.

In fiscal 2007 we issued $1 billion in senior unsecured notes. We have also entered into a $500 million five-year revolving credit facility. Although we have no current plans to request any advances under this credit facility, we may use the proceeds of any future borrowing for general corporate purposes or for future acquisitions or expansion of our business.

This debt may adversely affect our financial condition and future financial results by, among other things:

	•		increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;
	•		requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and
	•		limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

Our current revolving credit facility imposes restrictions on us, including restrictions on our ability to create liens on our assets and the ability of our subsidiaries to incur indebtedness, and require us to maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control. In addition, our long-term non-convertible debt includes covenants that may adversely affect our ability to incur certain liens or engage in certain types of sale and leaseback transactions. If we breach any of the covenants under our long-term debt or our revolving credit facility and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities. If our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our revolving credit facility may increase. In addition, any downgrades in our credit ratings may affect our ability to obtain additional financing in the future and may affect the terms of any such financing.

We are subject to risks associated with information disseminated through our services.

The law relating to the liability of online services companies for information carried on or disseminated through their services is often unsettled. Claims may be made against online services companies under both U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated through their services. Certain of our services include content generated by users. Although this content is not generated by us, claims of defamation or other injury may be made against us for that content. Any costs incurred as a result of this potential liability may harm our business.

If actual product returns exceed returns reserves our future financial results may be harmed.

We ship more desktop software products to our distributors and retailers than we expect them to sell, in order to reduce the risk that distributors or retailers may run out of products. This is particularly true for our Consumer Tax products, which have a short selling season and for which returns occur primarily in our fiscal third and fourth quarters. Like many software companies that sell their products through distributors and retailers, we have historically accepted significant product returns. We establish reserves against revenue for product returns in our financial statements based on estimated returns and we closely monitor product sales and inventory in the retail channel in an effort to maintain adequate reserves. In the past, returns have not differed significantly from these reserves. However, if we experience actual returns that significantly exceed reserves, it may result in lower net revenue.

Our acquisitions have resulted in significant expenses, including amortization and impairment of purchased intangible assets, charges for in-process research and development, and impairment of goodwill. Total acquisition-related costs in these categories were approximately $103 million in fiscal 2009, $92 million in fiscal 2008, and $51 million in fiscal 2007. Although under current accounting rules goodwill is not amortized, we may incur impairment charges related to the goodwill already recorded and to goodwill arising out of future acquisitions. We test the impairment of goodwill annually in our fourth fiscal quarter or more frequently if indicators of impairment arise. The timing of the formal annual test may result in charges to our statement of operations in our fourth fiscal quarter that may not have been reasonably foreseen in prior periods. At July 31, 2009, we had $1.8 billion in goodwill and $293.0 million in net purchased intangible assets on our balance sheet, both of which may be subject to impairment charges in the future. New acquisitions, and any impairment of the value of purchased assets, may have a significant negative impact on our future financial results.

At July 31, 2009, we held a total of $244.5 million in municipal auction rate securities that we valued at par. We classified $150.9 million of these securities as short-term investments and $93.6 million of these securities as long-term investments on our balance sheet at that date. Due to a decrease in liquidity in the global credit markets, in February 2008 auctions began failing for the municipal auction rate securities we held. Regularly scheduled auctions for these securities have generally continued to fail since that time. We will not be able to liquidate these investments and realize their full carrying value unless successful auctions occur, a buyer is found outside of the auction process, the issuer calls the security, the issuer repays principal over time from cash flows prior to final maturity, or the security matures according to contractual terms ranging from one to 38 years. We believe the fair values of the municipal auction rate securities we hold are approximately equal to their par values. However, if the issuers of these securities are unable to call the securities or successfully close future auctions and their credit ratings are lowered, we may be required to record future impairment charges related to these investments, which would harm our results of operations. If we are unable to find alternate means to liquidate these investments, we may not realize the value of the investments until the final maturity of the underlying securities.

In November 2008 we accepted an offer from UBS AG (UBS), one of the broker-dealers of our municipal auction rate securities, that gives us the option to sell to UBS a total of $140.9 million in municipal auction rate securities at par value at any time during a two-year period beginning June 30, 2010. The offer also gives UBS the discretion to buy any or all of these municipal auction rate securities from us at par value at any time. To date UBS has not purchased any of these securities from us. Even with this option, we may not realize the value of these investments until after June 30, 2010. We continue to have counter-party risk associated with UBS.

Our operations process a significant volume and dollar value of transactions on a daily basis, especially in our payroll and payments businesses. Due to the size and volume of transactions that we handle, effective processing systems and controls are essential to ensure that transactions are handled appropriately. Despite our efforts, it is possible that we may make errors or that funds may be misappropriated due to fraud involving our offerings. In addition to any direct damages and fines that any such problems may create, which may be substantial, the loss of customer confidence in our accuracy and controls may seriously harm our business. The systems supporting our business are comprised of multiple technology platforms that are difficult to scale. If we are unable to effectively manage our systems and processes, we may be unable to process customer data in an accurate, reliable and timely manner, which may harm our business.

Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive team, and those in technical, marketing and staff positions. Experienced personnel in the software and services industries are in high demand and competition for their talents is intense, especially in

California, where the majority of our employees are located. Although we strive to be an employer of choice, we may not be able to continue to successfully attract and retain key personnel which may cause our business to suffer.

We are frequently a party to litigation that is costly to defend and consumes the time of our management.

We are subject to various legal proceedings and claims that have arisen out of the ordinary conduct of our business and are not yet resolved and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty. Defending litigation consumes the time of our management and is expensive for Intuit. Even though we often seek insurance coverage for litigation defense costs, there is no assurance that our defense costs, which may be substantial, will be covered in all cases. In addition, by its nature, litigation is unpredictable and we may not prevail even in cases where we strongly believe a plaintiff’s case has no valid claims. If we do not prevail in litigation we may be required to pay substantial monetary damages or alter our business operations. Regardless of the outcome, litigation is expensive and consumes the time of our management and may ultimately harm our future financial results.

Unanticipated changes in our tax rates may affect our future financial results.

Our future effective tax rates may be favorably or unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or their interpretation. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There may be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our future financial results.

Our business depends on our strong reputation and the value of our brands.

Developing and maintaining awareness of our brands is critical to achieving widespread acceptance of our existing and future products and services and is an important element in attracting new customers. We believe that brand recognition will increase as competition in our markets develops. Adverse publicity (whether or not justified) relating to activities by our employees or agents may tarnish our reputation and reduce the value of our brands. Damage to our reputation and loss of brand equity may reduce demand for our products and services and thus have an adverse effect on our future financial results, as well as require additional resources to rebuild our reputation and restore the value of the brands.

ITEM 1B
UNRESOLVED STAFF COMMENTS

None.

ITEM 2
PROPERTIES

Our principal locations, their purposes and the expiration dates for the leases on facilities at those locations as of July 31, 2009 are shown in the table below. We have renewal options on many of our leases.

						Principal
				Approximate		Lease
				Square		Expiration
Location		Purpose		Feet		Dates
Mountain View and Menlo Park, California		Principal offices, corporate headquarters and headquarters for Financial Management Solutions business		792,000		2009 - 2018
San Diego, California		Headquarters for Consumer Tax business, general office space and data center		537,000		2010 - 2017
Woodland Hills, Westlake Village and Calabasas, California		Headquarters for Payments Solutions and Financial Institutions businesses and data centers		274,000		2011 - 2018
Quincy, Washington		Data center		240,000		Owned
Plano, Texas		Headquarters for Accounting Professionals business and data center		166,000		2011
Tucson, Arizona		Customer call center		136,000		2017

We also lease or own facilities in a number of other domestic locations and internationally in Canada, India, the United Kingdom and several other locations. We believe our facilities are adequate for our current and near-term needs, and that we will be able to locate additional facilities as needed. See Note 9 to the financial statements in Item 8 for more information about our lease commitments.

ITEM 3
LEGAL PROCEEDINGS

Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. We currently believe that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect our financial position, results of operations or cash flows. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit because of defense costs, negative publicity, diversion of management resources and other factors. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims could adversely affect our business.

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Intuit’s common stock is quoted on the NASDAQ Global Select Market under the symbol “INTU.” The following table shows the range of high and low sale prices reported on the NASDAQ Global Select Market for the periods indicated. The closing price of Intuit’s common stock on August 31, 2009 was $27.77.

		High				Low
Fiscal year ended July 31, 2008
First quarter		$	33.10			$	26.14
Second quarter			33.02				27.75
Third quarter			31.50				25.08
Fourth quarter			30.06				26.18
Fiscal year ended July 31, 2009
First quarter		$	32.00			$	21.76
Second quarter			26.24				20.18
Third quarter			28.32				21.07
Fourth quarter			30.01				22.76

Stockholders

As of August 31, 2009 we had approximately 800 record holders and approximately 75,000 beneficial holders of our common stock.

Dividends

Intuit has never paid any cash dividends on its common stock. We currently anticipate that we will retain all future earnings for use in our business and for repurchases under our stock repurchase programs. We do not anticipate paying any cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Stock repurchase activity during the three months ended July 31, 2009 was as follows:

										Total Number				Approximate
										of Shares				Dollar Value of
		Total Number				Average				Purchased as				Shares That May
		of Shares				Price Paid				Part of Publicly				Yet Be Purchased
Period		Purchased				per Share				Announced Plans				Under the Plans
May 1, 2009 through May 31, 2009			—			$	—				—			$	399,749,124
June 1, 2009 through June 30, 2009			1,794,900			$	27.86				1,794,900			$	349,749,933
July 1, 2009 through July 31, 2009			1,728,900			$	28.92				1,728,900			$	299,751,151
Total			3,523,800			$	28.38				3,523,800

Notes:

The graph below compares the cumulative total stockholder return on Intuit common stock for the last five full fiscal years with the cumulative total returns on the S&P 500 Index and the Morgan Stanley High Technology Index for the same period. The graph assumes that $100 was invested in Intuit common stock and in each of the other indices on July 31, 2004 and that all dividends were reinvested. Intuit has never paid cash dividends on its stock. The comparisons in the graph below are based on historical data — with Intuit common stock prices based on the closing price on the dates indicated — and are not intended to forecast the possible future performance of Intuit’s common stock.

Among Intuit Inc., The S&P 500 Index
And The Morgan Stanley Technology Index

 

 

*$100 invested on 7/31/04 in stock or index, including reinvestment of dividends. Fiscal year ending July 31.

 

Copyright© 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

 

		July 31,				July 31,				July 31,				July 31,				July 31,				July 31,
		2004				2005				2006				2007				2008				2009
Intuit Inc.		$	100.00			$	128.21			$	164.90			$	152.99			$	145.99			$	158.65
S&P 500			100.00				114.05				120.19				139.58				124.10				99.33
Morgan Stanley Technology			100.00				112.64				106.05				144.03				137.92				123.39

ITEM 6
SELECTED FINANCIAL DATA

The following tables show Intuit’s selected financial information for the past five fiscal years. The comparability of the information is affected by a variety of factors, including acquisitions and divestitures of businesses, issuance of debt, share-based compensation expense, amortization of purchased intangible assets, and repurchases of common stock under our stock repurchase programs.

On July 6, 2006 we implemented a two-for-one stock split in the form of a 100% stock dividend. All share and per share figures in the selected financial data below reflect this stock split.

We adopted Statement of Financial Accounting Standards (SFAS) 123(R), “Share-Based Payment,” on August 1, 2005 using the modified prospective transition method. Because we elected to use the modified prospective transition method, results for prior periods have not been restated to include share-based compensation expense for stock options or our Employee Stock Purchase Plan.

In February 2007 we acquired Digital Insight Corporation for a total purchase price of approximately $1.34 billion. In December 2007 we acquired Homestead Technologies Inc. for total consideration of approximately $170 million and in February 2008 we acquired Electronic Clearing House, Inc. for a total purchase price of approximately $131 million. In July 2009 we acquired PayCycle, Inc. for a total purchase price of approximately $169 million. Accordingly, we have included the results of operations for these companies in our consolidated results of operations from their respective dates of acquisition. During fiscal 2007 and fiscal 2008 we transitioned certain outsourced payroll customers in connection with a sale of assets to Automatic Data Processing, Inc. (ADP). In addition, we sold our Intuit Distribution Management Solutions business in fiscal 2008, our Intuit Information Technology Solutions business in fiscal 2006, and our Intuit Public Sector Solutions business in fiscal 2005. We accounted for these three businesses as discontinued operations and, accordingly, we have reclassified the selected financial data for all periods presented to reflect them as such. To better understand the information in the tables, investors should read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, and the financial statements and related notes in Item 8.

FIVE-YEAR SUMMARY

Consolidated Statement of Operations Data		Fiscal
(In thousands, except per share amounts)		2009				2008				2007				2006				2005
Total net revenue		$	3,182,537			$	3,070,974			$	2,672,947			$	2,293,010			$	1,993,102
Total costs and expenses			2,500,477				2,420,207				2,035,377				1,727,416				1,464,401
Operating income from continuing operations			682,060				650,767				637,570				565,594				528,701
Total share-based compensation expense included in total costs and expenses			132,778				113,238				76,313				70,340				5,489
Net income from continuing operations			447,041				450,750				443,468				380,963				377,743
Net income (loss) from discontinued operations			—				26,012				(3,465	)			36,000				3,884
Net income			447,041				476,762				440,003				416,963				381,627
Net income (loss) per common share:
Basic net income per share from continuing operations		$	1.39			$	1.37			$	1.29			$	1.10			$	1.02
Basic net income (loss) per share from discontinued operations			—				0.08				(0.01	)			0.10				0.01
Basic net income per share		$	1.39			$	1.45			$	1.28			$	1.20			$	1.03
Diluted net income per share from continuing operations		$	1.35			$	1.33			$	1.25			$	1.06			$	1.00
Diluted net income (loss) per share from discontinued operations			—				0.08				(0.01	)			0.10				0.01
Diluted net income per share		$	1.35			$	1.41			$	1.24			$	1.16			$	1.01
Consolidated Balance Sheet Data		At July 31,
(In thousands)		2009				2008				2007				2006				2005
Cash, cash equivalents and investments		$	1,347,020			$	827,833			$	1,303,671			$	1,197,200			$	994,258
Long-term investments			97,095				288,310				—				—				—
Working capital			884,033				306,324				791,823				801,056				610,935
Total assets			4,826,329				4,666,584				4,252,026				2,770,027				2,716,451
Long-term debt			998,184				997,996				997,819				—				—
Other long-term obligations			186,966				121,489				57,756				15,399				17,548
Total stockholders’ equity			2,555,799				2,072,954				2,035,013				1,738,086				1,695,499

ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:

•

Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.

•

Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.

•

Results of Operations that includes a more detailed discussion of our revenue and expenses.

•

Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance sheets and our financial commitments.

You should note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Please see the section entitled “Forward-Looking Statements and Risk Factors” at the beginning of Item 1A for important information to consider when evaluating such statements.

You should read this MD&A in conjunction with the financial statements and related notes in Item 8. In February 2007 we completed the acquisition of Digital Insight Corporation for a total purchase price of approximately $1.34 billion. In December 2007 we acquired Homestead Technologies Inc. for total consideration of approximately $170 million and in February 2008 we acquired Electronic Clearing House, Inc. (ECHO) for a total purchase price of approximately $131 million. In July 2009 we acquired PayCycle, Inc. for a total purchase price of approximately $169 million. Accordingly, we have included the results of operations for these companies in our consolidated results of operations from their respective dates of acquisition. During fiscal 2007 and fiscal 2008 we transitioned certain outsourced payroll customers in connection with a sale of assets to Automatic Data Processing, Inc. (ADP). We have also reclassified our financial statements for all periods presented to reflect our Intuit Distribution Management Solutions business as discontinued operations. See “Results of Operations — Dispositions and Discontinued Operations” later in this Item 7 for more information. Unless otherwise noted, the following discussion pertains only to our continuing operations.

In fiscal 2009 we reclassified segment results for all periods presented to reflect the continued evolution of our business. We no longer combine results for our Payroll business with results for our Payments business because management currently views these businesses separately. We also changed the name of our QuickBooks segment to Financial Management Solutions, our new Payroll segment to Employee Management Solutions, and our new Payments segment to Payments Solutions. We transferred revenue for our Point of Sale offerings from our Financial Management Solutions segment to our Payments Solutions segment to align this product group more closely with the customers they serve. Total Point of Sale revenue was less than $40 million for all periods presented. We also reclassified certain retail sales expenses from common expenses to segment income or loss, consistent with how management now views these expenses. These expenses were less than $25 million for all periods presented.

Executive Overview

This overview provides a high level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important in order to understand our financial results for fiscal 2009 as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Annual Report on Form 10-K.

Overview of Financial Results

Total net revenue for fiscal 2009 was $3.2 billion, an increase of 4% compared with fiscal 2008. The fiscal 2009 revenue increase was due to revenue growth in our Consumer Tax, Payments Solutions, Employee Management Solutions, Accounting Professionals and Financial Institutions segments, partially offset by revenue decreases in our Other Businesses and Financial Management Solutions segments. Consumer Tax revenue increased $67.0 million or 7% due to growth in TurboTax Online units, which more than offset a decrease in TurboTax desktop units.

Operating income from continuing operations of $682.1 million for fiscal 2009 increased $31.3 million or 5% compared with fiscal 2008. Fiscal 2009 revenue grew $111.5 million and total costs and expenses increased $80.2 million. Total costs and expenses for fiscal 2009 increased due to our fiscal 2008 acquisitions of Homestead and ECHO; higher advertising and other marketing expenses to support the launch and subsequent promotion of TurboTax and QuickBooks 2009; higher depreciation expense for investments in our infrastructure; higher share-based compensation expense; and a charge for the historical use of certain technology licensing rights. Decreases in total costs and expenses due to lower performance incentive payouts as well as other compensation and benefit savings due to lower staffing and lower severance charges partially offset these increases.

Net income from continuing operations of $447.0 million for fiscal 2009 decreased $3.8 million or 1% compared with fiscal 2008. In fiscal 2008 we recorded a pre-tax gain of $51.6 million on the sale of certain outsourced payroll assets; there was no comparable transaction in fiscal 2009. In addition, interest income decreased in fiscal 2009 compared with fiscal 2008 due to the impact of lower interest rates that more than offset the impact of higher invested balances.

Due to the foregoing factors, diluted net income per share from continuing operations of $1.35 in fiscal 2009 increased 2% compared with $1.33 in fiscal 2008.

In July 2009 we acquired PayCycle, Inc. for a total purchase price of approximately $169 million. PayCycle is a provider of online payroll services to small businesses and became part of our Employee Management Solutions segment.

We ended fiscal 2009 with cash, cash equivalents and investments totaling $1.3 billion, an increase of $519.2 million from July 31, 2008. Cash, cash equivalents and investments at July 31, 2009 included $150.9 in municipal auction rate securities. We did not classify any of the municipal auction rate securities we held at July 31, 2008 as cash, cash equivalents and investments. At July 31, 2009 and 2008, we also held $93.6 million and $285.3 million in municipal auction rate securities that we classified as long-term investments on our balance sheet. See “Liquidity and Capital Resources — Auction Rate Securities,” later in this Item 7 for more information. In fiscal 2009 we generated $812.4 million in cash from continuing operations and $183.6 million from the issuance of common stock under employee stock plans. During the same period we used $300.2 million in cash for the repurchase of shares of our common stock under our stock repurchase programs, $182.5 million for capital expenditures, and $187.4 million for acquisitions of businesses (primarily PayCycle) and intangible assets. At July 31, 2009, we had authorization from our Board of Directors to expend up to an additional $299.8 million for stock repurchases through May 15, 2011.

On September 11, 2009 we entered into a definitive agreement to acquire Mint Software Inc., a provider of online personal finance management services. The cash transaction is valued at approximately $170 million, including the assumption of Mint outstanding stock options. Mint will become part of our Other Businesses segment. The transaction is subject to regulatory approval and customary closing conditions. We expect the transaction to close before the end of calendar 2009.

Our QuickBooks, Consumer Tax and Accounting Professionals offerings are highly seasonal. Some of our other offerings are also seasonal, but to a lesser extent. Revenue from our QuickBooks software products tends to be highest during our second and third fiscal quarters. Sales of income tax preparation products and services are heavily concentrated in the period from November through April. In our Consumer Tax business, a greater proportion of our revenue has been occurring later in this seasonal period due in part to the growth in sales of TurboTax Online, for which revenue is recognized upon printing or electronic filing of a tax return. The seasonality of our Consumer Tax and Accounting Professionals revenue is also affected by the timing of the availability of tax forms from taxing agencies and the ability of those agencies to receive electronic tax return submissions. Delays in the availability of tax forms or the ability of taxing agencies to receive submissions can cause revenue to shift from our second fiscal quarter to our third fiscal quarter. These seasonal patterns mean that our total net revenue is usually highest during our second quarter ending January 31 and third quarter ending April 30. We typically report losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from our tax businesses is minimal while operating expenses continue at relatively consistent levels. In addition, the timing and composition of new

customer offerings that include both product and service elements can materially shift revenue between quarters. We believe the seasonality of our revenue is likely to continue in the future.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Senior management has reviewed the development and selection of these critical accounting policies and their disclosure in this Annual Report on Form 10-K with the Audit Committee of our Board of Directors.

Revenue Recognition

We derive revenue from the sale of packaged software products, license fees, software subscriptions, product support, hosting services, payroll services, merchant services, professional services, transaction fees and multiple element arrangements that may include any combination of these items. We follow the appropriate revenue recognition rules for each type of revenue. For additional information, see “Revenue Recognition” in Note 1 to the financial statements in Item 8. We generally recognize revenue when persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collectibility is probable. However, determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report. For example, for multiple element arrangements we must make assumptions and judgments in order to allocate the total price among the various elements we must deliver, to determine whether undelivered services are essential to the functionality of the delivered products and services, to determine whether vendor-specific evidence of fair value exists for each undelivered element and to determine whether and when each element has been delivered. If we were to change any of these assumptions or judgments, it could cause a material increase or decrease in the amount of revenue that we report in a particular period. Amounts for fees collected or invoiced and due relating to arrangements where revenue cannot be recognized are reflected on our balance sheet as deferred revenue and recognized when the applicable revenue recognition criteria are satisfied.

In connection with the sale of certain products, we provide a limited amount of free technical support assistance to customers. We do not defer the recognition of any revenue associated with sales of these products since the cost of providing this free technical support is insignificant. The technical support is generally provided within one year after the associated revenue is recognized and free product enhancements are minimal and infrequent. We accrue the estimated cost of providing this free support upon product shipment.

Return and Rebate Reserves

As part of our revenue recognition policy, we estimate future product returns and rebate payments and establish reserves against revenue at the time of sale based on these estimates. Our return policy allows distributors and retailers, subject to contractual limitations, to return purchased products. Product returns by distributors and retailers relate primarily to the return of excess and obsolete products. In determining our product returns reserves, we consider the volume and price mix of products in the retail channel, historical return rates for prior releases of the product, trends in retailer inventory and economic trends that might impact customer demand for our products (including the competitive environment and the timing of new releases of our products). We fully reserve for excess and obsolete products in the distribution channels.

Our rebate reserves include distributor and retailer sales incentive rebates and end-user rebates. Our estimated reserves for distributor and retailer incentive rebates are based on distributors’ and retailers’ actual performance against the terms and conditions of rebate programs, which we typically establish annually. Our reserves for end-user rebates are estimated based on the terms and conditions of the specific promotional rebate program, actual sales during the promotion and historical redemption trends by product and by type of promotional program.

In the past, actual returns and rebates have not differed significantly from the reserves that we have established. However, actual returns and rebates in any future period are inherently uncertain. If we were to change our

assumptions and estimates, our revenue reserves would change, which would impact the net revenue we report. If actual returns and rebates are significantly greater than the reserves we have established, the actual results would decrease our future reported revenue. Conversely, if actual returns and rebates are significantly less than our reserves, this would increase our future reported revenue. For example, if we had increased our fiscal 2009 returns reserves by 1% of non-consignment sales to retailers for QuickBooks, TurboTax and Quicken, our total net revenue for fiscal 2009 would have been about $3.0 million lower.

Allowance for Doubtful Accounts

We make ongoing assumptions relating to the collectibility of our accounts receivable. The accounts receivable amount on our balance sheet includes a reserve for accounts that might not be paid. In determining the amount of the reserve, we consider our historical level of credit losses. We also make judgments about the creditworthiness of significant customers based on ongoing credit evaluations, and we assess current economic trends that might impact the level of credit losses in the future. Our reserves have generally been adequate to cover our actual credit losses. However, since we cannot reliably predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate. If actual credit losses are significantly greater than the reserve we have established, that would increase our general and administrative expenses and reduce our reported net income. Conversely, if actual credit losses are significantly less than our reserve, this would eventually decrease our general and administrative expenses and increase our reported net income.

Fair Value of Investments

We estimate the fair value of our available-for-sale securities each quarter. These investments consist of cash equivalents, municipal bonds, U.S. agency securities, corporate notes and municipal auction rate securities. Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When identical or similar assets are traded in active markets, the level of judgment required to estimate their fair value is relatively low. This is generally true for our cash equivalents, municipal bonds, U.S. agency securities and corporate notes. However, significant judgment is required to estimate the fair value of assets and liabilities when observable inputs are not available. For example, we use a discounted cash flow model to estimate the fair value of our municipal auction rate securities because we have determined that the market for those securities is inactive. We based this determination on the fact that due to a decrease in liquidity in the global credit markets, regularly scheduled auctions for the municipal auction rate securities we hold have generally failed since February 2008. Some of the key inputs to our discounted cash flow model are inherently uncertain. The key inputs include projected future interest rates; the likely timing of principal repayments; the probability of full repayment; publicly available pricing data for recently issued similar securities that are not subject to auctions; and the impact of the reduced liquidity for auction rate securities. At July 31, 2009, we held a total of $244.5 million in municipal auction rate securities.

We record unrealized gains and losses on our available-for-sale securities in other comprehensive income in the equity section of our balance sheet until the security is sold or we determine that the decrease in fair value is other-than-temporary. We consider a number of factors in determining whether to recognize an impairment charge, including the reason for the decrease in fair value, the severity of the decrease in fair value, the length of time that the fair value has been less than the cost basis of the security, the financial condition and near-term prospects of the issuer, and whether we intend to sell or may be required to sell the security before anticipated recovery of our cost basis. Changes in our estimates of the fair values of our available-for-sale securities may result in material increases or decreases in our net income in the period in which the change occurs.

Business Combinations — Purchase Accounting

Under the purchase method of accounting, we allocate the purchase price of acquired companies to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. We record the excess of purchase price over the aggregate fair values as goodwill. We engage third-party appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed. These valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing purchased technology, customer lists and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying

business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.

We estimate the fair value of purchased intangible assets and other long-lived assets that have finite useful lives whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. We test for potential impairment of goodwill and other intangible assets that have indefinite useful lives annually in our fourth fiscal quarter or whenever indicators of impairment arise. The timing of the annual test may result in charges to our statement of operations in our fourth fiscal quarter that could not have been reasonably foreseen in prior periods.

In order to estimate the fair value of goodwill, we use a weighted combination of a discounted cash flow model (known as the income approach) and comparisons to publicly traded companies engaged in similar businesses (known as the market approach). The income approach requires us to use a number of assumptions, including market factors specific to the business, the amount and timing of estimated future cash flows to be generated by the business over an extended period of time, long-term growth rates for the business, and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. We evaluate cash flows at the reporting unit level and the number of reporting units that we have identified may make impairment more probable than it would be at a company with fewer reporting units and more integrated operations following acquisitions. Although the assumptions we use in our discounted cash flow model are consistent with the assumptions we use to generate our internal strategic plans and forecasts, significant judgment is required to estimate the amount and timing of future cash flows from each reporting unit and the relative risk of achieving those cash flows. When using the market approach, we make judgments about the comparability of publicly traded companies engaged in similar businesses. We base our judgments on factors such as size, growth rates, profitability, risk, and return on investment. We also make judgments when adjusting market multiples of revenue, operating income, and earnings for these companies to reflect their relative similarity to our own businesses. We had a total of $1.8 billion in goodwill on our balance sheet at July 31, 2009. See Note 4 to the financial statements in Item 8 for a summary of goodwill by reportable segment.

In order to estimate the fair value of purchased intangible assets and other long-lived assets that have finite useful lives, we estimate the present value of future cash flows from those assets. The key assumptions that we use in our discounted cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows. We also make judgments about the remaining useful lives of purchased intangible assets and other long-lived assets that have finite lives. We had a total of $293.0 million in net purchased intangible assets on our balance sheet at July 31, 2009.

Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units, we may be required to record future impairment charges for goodwill and purchased intangible assets. Impairment charges could materially decrease our future net income and result in lower asset values on our balance sheet.

At July 31, 2009, there was $240.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation plans which we will amortize to expense in the future. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 2.1 years.

We use a lattice binomial model and the assumptions shown in Note 12 to the financial statements in Item 8 to estimate the fair value of stock options granted. We estimate the expected term of options granted based on implied exercise patterns using a binomial model. We estimate the volatility of our common stock at the date of grant based on the implied volatility of publicly traded one-year and two-year options on our common stock. Our decision to use implied volatility was based upon the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility. We base the risk-free interest rate that we use in our option valuation model on the implied yield in effect at the time of option grant on constant maturity U.S. Treasury issues with equivalent remaining terms. We have never paid any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in our option valuation model. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. We amortize the fair value of options on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. We may elect to use different assumptions under our option valuation model in the future, which could materially affect our net income or loss and net income or loss per share. We value restricted stock units using the intrinsic value method. We amortize the value of restricted stock units on a straight-line basis over the restriction period.

Legal Contingencies

We are subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. We review the status of each significant matter quarterly and assess our potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we record a liability and an expense for the estimated loss. Significant judgment is required in both the determination of probability and the determination of whether an exposure is reasonably estimable. Our accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Potential legal liabilities and the revision of estimates of potential legal liabilities could have a material impact on our financial position and results of operations.

Income Taxes — Estimates of Effective Tax Rates, Deferred Taxes and Valuation Allowance

When we prepare our financial statements, we estimate our income taxes based on the various jurisdictions where we conduct business. Significant judgment is required in determining our worldwide income tax provision. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. We estimate our current tax liability and assess temporary differences that result from differing treatments of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we show on our balance sheet. We must then assess the likelihood that our deferred tax assets will be realized. To the extent we believe that realization is not likely, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we record a corresponding tax expense in our statement of operations.

At July 31, 2009, we had net deferred tax assets of $128.7 million which included a valuation allowance of $5.7 million for certain state net operating loss carryforwards. We recorded the valuation allowance to reflect uncertainties about whether we will be able to utilize some of our deferred tax assets before they expire. The valuation allowance is based on our estimates of taxable income for the jurisdictions in which we operate and the period over which our deferred tax assets will be realizable. While we have considered future taxable income in assessing the need for a valuation allowance, we could in the future be required to increase the valuation allowance to take into account additional deferred tax assets that we may be unable to realize. An increase in the valuation allowance would have an adverse impact, which could be material, on our income tax provision and net income in the period in which we record the increase.

We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not of being sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely

of being realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. We evaluate our uncertain tax positions on a quarterly basis. Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.

Results of Operations

Financial Overview

		Fiscal				Fiscal				Fiscal				2009-2008				2008-2007
(Dollars in millions, except per share amounts)		2009				2008				2007				% Change				% Change
Total net revenue		$	3,182.5			$	3,071.0			$	2,672.9				4	%			15	%
Operating income from continuing operations			682.1				650.8				637.6				5	%			2	%
Net income from continuing operations			447.0				450.8				443.5				-1	%			2	%
Diluted net income per share from continuing operations		$	1.35			$	1.33			$	1.25				2	%			6	%

Total net revenue increased $111.5 million or 4% in fiscal 2009 compared with fiscal 2008. Consumer Tax segment revenue increased $67.0 million or 7% in fiscal 2009 due to 36% growth in TurboTax Online units, which more than offset an 11% decrease in TurboTax desktop units. Payments Solutions segment revenue increased $37.4 million or 15% in fiscal 2009 due to growth in the core merchant services customer base and revenue from ECHO, partially offset by a decline in transaction processing volume per customer. Employee Management Solutions segment revenue increased $27.9 million or 8% in fiscal 2009 due to the realization of the full effect of pricing changes made in fiscal 2008. Accounting Professionals segment revenue increased $25.1 million or 8% in fiscal 2009 due to price increases and Financial Institutions revenue increased $12.5 million or 4% due to growth in Internet banking and bill-pay end users, partially offset by a decline in revenue per end user. Revenue in our Other Businesses segment decreased $45.1 million or 14% in fiscal 2009 and revenue in our Financial Management Solutions segment decreased $13.3 million or 2%. We believe that fiscal 2009 revenue in these two segments was affected by slower small business and consumer spending. See “Total Net Revenue by Business Segment” later in this Item 7 for more information.

Operating income from continuing operations for fiscal 2009 increased $31.3 million or 5% compared with fiscal 2008. The increase in operating income was due to $111.5 million in higher revenue partially offset by $80.2 million in higher costs and expenses. In fiscal 2009 total costs and expenses increased about $49 million due to our fiscal 2008 acquisitions of Homestead and ECHO; about $31 million due to higher advertising and other marketing expenses to support the launch and subsequent promotion of TurboTax 2008 and QuickBooks 2009; about $27 million due to higher depreciation expense for investments in our infrastructure; about $20 million due to higher share-based compensation expense; and $12.6 million due to a charge for the historical use of certain technology licensing rights. These increases in total costs and expenses were partially offset by decreases of about $45 million due to lower performance incentive payouts and about $33 million in compensation and benefit savings due to lower staffing levels and lower severance related charges in fiscal 2009. See “Cost of Revenue” and “Operating Expenses” later in this Item 7 for more information.

Net income from continuing operations decreased $3.8 million or 1% in fiscal 2009 compared with fiscal 2008. In fiscal 2008 we recorded a pre-tax gain of $51.6 million on the sale of certain outsourced payroll assets; there was no comparable transaction in fiscal 2009. See “Dispositions and Discontinued Operations” later in this Item 7 for more information. In addition, interest and other income decreased $25.0 million in fiscal 2009 compared with fiscal 2008. The impact of lower interest rates more than offset the impact of higher average invested balances and resulted in $18.5 million lower interest income. Due to certain discrete tax items, our effective tax rate for fiscal

2009 was 31%. Our effective tax rate for fiscal 2008 was 35%. See “Income Taxes” later in this Item 7 for more information about our effective tax rates for these periods.

Due to the foregoing factors, diluted net income per share from continuing operations of $1.35 in fiscal 2009 increased 2% compared with $1.33 in fiscal 2008.

Total Net Revenue by Business Segment

The table below and the discussion of total net revenue that follows it are organized in accordance with our seven reportable business segments. See Note 15 to the financial statements in Item 8 for descriptions of product revenue and service and other revenue for each segment.

We have reclassified segment results for all periods presented to reflect the continued evolution of our business. We no longer combine results for our Payroll operating segment with results for our Payments operating segment because management currently views these businesses separately. We also changed the name of our QuickBooks segment to Financial Management Solutions, our new Payroll segment to Employee Management Solutions, and our new Payments segment to Payments Solutions. We transferred revenue for our Point of Sale offerings from our Financial Management Solutions segment to our Payments Solutions segment to align this product group more closely with the customers they serve. Total Point of Sale revenue was less than $40 million for all periods presented. We also reclassified certain retail sales expenses from common expenses to segment income or loss, consistent with how management now views these expenses. These expenses were less than $25 million for all periods presented.

						% Total								% Total								% Total
		Fiscal				Net				Fiscal				Net				Fiscal				Net				2009-2008				2008-2007
(Dollars in millions)		2009				Revenue				2008				Revenue				2007				Revenue				% Change				% Change
Financial Management Solutions (QuickBooks)
Product revenue		$	383.0							$	445.8							$	453.8
Service and other revenue			195.8								146.3								97.4
Subtotal			578.8				18	%			592.1				19	%			551.2				20	%			-2	%			7	%
Employee Management Solutions (Payroll)
Product revenue			236.5								212.7								200.7
Service and other revenue			128.3								124.2								147.6
Subtotal			364.8				12	%			336.9				11	%			348.3				13	%			8	%			-3	%
Payments Solutions
Product revenue			28.4								32.6								39.3
Service and other revenue			262.6								221.0								164.1
Subtotal			291.0				9	%			253.6				8	%			203.4				8	%			15	%			25	%
Consumer Tax
Product revenue			256.4								311.6								300.7
Service and other revenue			740.0								617.8								512.2
Subtotal			996.4				31	%			929.4				30	%			812.9				30	%			7	%			14	%
Accounting Professionals
Product revenue			321.6								301.5								283.8
Service and other revenue			30.2								25.2								30.4
Subtotal			351.8				11	%			326.7				11	%			314.2				12	%			8	%			4	%
Financial Institutions
Product revenue			0.3								0.8								0.2
Service and other revenue			310.8								297.8								150.2
Subtotal			311.1				10	%			298.6				10	%			150.4				6	%			4	%			99	%
Other Businesses
Product revenue			157.8								191.7								168.9
Service and other revenue			130.8								142.0								123.6
Subtotal			288.6				9	%			333.7				11	%			292.5				11	%			-14	%			14	%
Total Company
Product revenue			1,384.0								1,496.7								1,447.4
Service and other revenue			1,798.5								1,574.3								1,225.5
Total net revenue		$	3,182.5				100	%		$	3,071.0				100	%		$	2,672.9				100	%			4	%			15	%

Financial Management Solutions (formerly known as QuickBooks)

Fiscal 2009 Compared with Fiscal 2008. Financial Management Solutions total net revenue decreased $13.3 million or 2% in fiscal 2009 compared with fiscal 2008. Excluding revenue from Homestead, which we acquired in December 2007, Financial Management Solutions total net revenue decreased 6% in fiscal 2009. Total QuickBooks software unit sales, including activations of our free Simple Start offering, were up 6% in fiscal 2009 compared with fiscal 2008. Revenue per QuickBooks unit was lower in fiscal 2009 due to price promotion programs in some of our sales channels. QuickBooks Online subscriptions grew 11% and active QuickBooks Enterprise Solutions customers were up 12% in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Financial Management Solutions total net revenue increased $40.9 million or 7% in fiscal 2008 compared with fiscal 2007. Excluding revenue from Homestead, which we acquired in December 2007, Financial Management Solutions total net revenue increased 5% in fiscal 2008 compared with fiscal 2007. Total QuickBooks software unit sales, including activations of our free Simple Start offering, were up slightly in fiscal 2008 compared with fiscal 2007. Revenue growth in fiscal 2008 was driven by a 14% increase in QuickBooks Online subscribers, a 22% increase in the number of active QuickBooks Enterprise Solutions customers, and 8% growth in revenue from secondary products and services sold in conjunction with QuickBooks software units.

Employee Management Solutions (formerly known as Payroll)

Fiscal 2009 Compared with Fiscal 2008. Employee Management Solutions total net revenue increased $27.9 million or 8% in fiscal 2009 compared with fiscal 2008 due predominantly to the realization of the full effect in fiscal 2009 of pricing changes made in fiscal 2008. PayCycle, which we acquired in July 2009, had a negligible effect on fiscal 2009 Employee Management Solutions revenue.

Fiscal 2008 Compared with Fiscal 2007. Employee Management Solutions total net revenue decreased $11.4 million or 3% in fiscal 2008 compared with fiscal 2007 as we completed the transition of portions of our Complete Payroll and Premier Payroll Services customer base in connection with a sale of assets to ADP. We estimate that revenue growth in this segment in fiscal 2008 compared with fiscal 2007 would have been approximately 9% when adjusted for the impact of the sale of those payroll customers.

Payments Solutions

Fiscal 2009 Compared with Fiscal 2008. Payments Solutions total net revenue increased $37.4 million or 15% in fiscal 2009 compared with fiscal 2008. Revenue in fiscal 2009 increased due to 14% growth in our core merchant services customer base and revenue from ECHO, which we acquired in February 2008. Transaction volume per customer was down about 8% in fiscal 2009 compared with fiscal 2008, reflecting an overall reduction in consumer spending associated with the current economic environment. Excluding revenue from ECHO, Payments Solutions segment revenue increased approximately 8% in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Payments Solutions total net revenue increased $50.2 million or 25% in fiscal 2008 compared with fiscal 2007 due to 18% growth in our core merchant services customer base and revenue from ECHO, which we acquired in February 2008. We estimate that revenue growth in our Payments Solutions segment in fiscal 2008 compared with fiscal 2007 would have been approximately 17% when adjusted for the impact of our acquisition of ECHO.

Consumer Tax

Fiscal 2009 Compared with Fiscal 2008. Consumer Tax total net revenue increased $67.0 million or 7% in fiscal 2009 compared with fiscal 2008. The fiscal 2009 revenue increase was due to 36% growth in federal TurboTax Online units, which more than offset an 11% decrease in federal TurboTax desktop units. We included federal electronic filing services with our TurboTax desktop software for the first time in the 2008 tax year. Net of related price increases, we estimate that this decision resulted in a reduction of about $25 million in Consumer Tax revenue for fiscal 2009.

Fiscal 2008 Compared with Fiscal 2007. Consumer Tax total net revenue increased $116.5 million or 14% in fiscal 2008 compared with fiscal 2007. The fiscal 2008 revenue increase was due to 17% growth in total federal TurboTax units, which was driven by 37% growth in TurboTax Online units. TurboTax desktop units were flat in fiscal 2008 compared with fiscal 2007.

Accounting Professionals

Fiscal 2009 Compared with Fiscal 2008. Accounting Professionals total net revenue increased $25.1 million or 8% in fiscal 2009 compared with fiscal 2008 due to price increases.

Fiscal 2008 Compared with Fiscal 2007. Accounting Professionals total net revenue increased $12.5 million or 4% in fiscal 2008 compared with fiscal 2007. We discontinued our ProSeries Express product line in fiscal 2008, which we estimate resulted in a loss of five percentage points of growth for the Accounting Professionals segment in fiscal 2008 compared with fiscal 2007.

Financial Institutions

Fiscal 2009 Compared with Fiscal 2008. Financial Institutions total net revenue increased $12.5 million or 4% in fiscal 2009 compared with fiscal 2008. Internet banking end users increased 3% and bill-pay end users were up 20% in fiscal 2009. Lower revenue per user partially offset growth in the Internet banking and bill-pay customer bases.

Fiscal 2008 Compared with Fiscal 2007. Financial Institutions total net revenue increased $148.2 million to $298.6 million in fiscal 2008 compared with fiscal 2007 due mainly to revenue from Digital Insight, which we acquired in February 2007. In fiscal 2008 Internet banking end users grew 10% and bill-pay end users grew 16%.

Other Businesses

Fiscal 2009 Compared with Fiscal 2008. Other Businesses total net revenue decreased $45.1 million or 14% in fiscal 2009 compared with fiscal 2008. Quicken sales were down 15% in fiscal 2009 due to the overall reduction in consumer spending. In addition, the stronger U.S. dollar contributed to a decline in Canadian revenue and revenue from our business in the UK, lowering Other Businesses segment revenue growth by approximately seven percentage points in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Other Businesses total net revenue increased $41.2 million or 14% in fiscal 2008 compared with fiscal 2007. In fiscal 2008 revenue from our businesses in Canada and the United Kingdom increased 28%, revenue from our Intuit Real Estate Solutions business grew 17%, and Quicken revenue was flat compared with fiscal 2007. The weaker U.S. dollar contributed to Canadian revenue growth, accounting for approximately five percentage points of Other Businesses segment revenue growth in fiscal 2008 compared with fiscal 2007.

Cost of Revenue

						% of								% of								% of
		Fiscal				Related				Fiscal				Related				Fiscal				Related
(Dollars in millions)		2009				Revenue				2008				Revenue				2007				Revenue
Cost of product revenue		$	157.2				11	%		$	154.1				10	%		$	169.1				12	%
Cost of service and other revenue			458.5				25	%			414.1				26	%			309.4				25	%
Amortization of purchased intangible assets			61.2				n/a				56.0				n/a				30.9				n/a
Total cost of revenue		$	676.9				21	%		$	624.2				20	%		$	509.4				19	%

Our cost of revenue has three components: (1) cost of product revenue, which includes the direct costs of manufacturing and shipping our desktop software products; (2) cost of service and other revenue, which reflects direct costs associated with providing services, including data center costs related to delivering Internet-based services, and costs associated with revenue sharing and online transactions revenue; and (3) amortization of purchased intangible assets, which represents the cost of amortizing developed technologies that we have obtained through acquisitions over their useful lives.

Fiscal 2009 Compared with Fiscal 2008. Cost of product revenue as a percentage of product revenue increased slightly to 11% in fiscal 2009 from 10% in fiscal 2008 due to product mix. Cost of service and other revenue as a percentage of service and other revenue decreased slightly to 25% in fiscal 2009 from 26% in fiscal 2008 due to an increase of $122.2 million in revenue from TurboTax Online and consumer electronic tax filing services, which have relatively lower costs of service revenue compared with our other service offerings. Partially offsetting this benefit, fiscal 2009 cost of service and other revenue included a $12.6 million charge for the historical use of certain technology licensing rights that we acquired in May 2009.

Amortization of purchased intangible assets increased in fiscal 2009 compared with fiscal 2008 due primarily to the amortization of Homestead and ECHO purchased intangible assets, which we acquired in fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Cost of product revenue as a percentage of product revenue decreased to 10% in fiscal 2008 from 12% in fiscal 2007 due to cost efficiencies achieved for our QuickBooks 2008 and Consumer Tax product lines. Cost of service and other revenue as a percentage of service and other revenue increased slightly to 26% in fiscal 2008 from 25% in fiscal 2007. The impact of our acquisition of Digital Insight, which has relatively higher costs of service revenue, was partially offset by the impact of $105.6 million growth in revenue from TurboTax Online and consumer electronic tax filing services, which have relatively lower costs of service revenue compared with our other service offerings.

Amortization of purchased intangible assets increased in fiscal 2008 compared with fiscal 2007 due primarily to the amortization of Digital Insight purchased intangible assets, which we acquired in February 2007.

						% of								% of								% of
						Total								Total								Total
		Fiscal				Net				Fiscal				Net				Fiscal				Net
(Dollars in millions)		2009				Revenue				2008				Revenue				2007				Revenue
Selling and marketing		$	927.2				29	%		$	859.6				28	%		$	742.4				28	%
Research and development			566.2				18	%			605.8				20	%			472.5				17	%
General and administrative			288.1				9	%			295.0				10	%			291.1				11	%
Acquisition-related charges			42.1				1	%			35.5				1	%			20.0				1	%
Total operating expenses		$	1,823.6				57	%		$	1,795.9				59	%		$	1,526.0				57	%

Fiscal 2009 Compared with Fiscal 2008. Total operating expenses as a percentage of total net revenue decreased to 57% in fiscal 2009 from 59% in fiscal 2008 due to $111.5 million higher revenue partially offset by $27.6 million higher total operating expenses in fiscal 2009. Total operating expenses in fiscal 2009 included an increase of about $32 million for the operating expenses of acquired businesses; an increase of about $31 million for advertising and other marketing expenses to support the launch and subsequent promotion of TurboTax 2008 and QuickBooks 2009; an increase of about $27 million due to higher depreciation expense for investments in our infrastructure; and an increase of about $18 million due to higher share-based compensation expense. Share-based compensation expense was higher in fiscal 2009 compared with fiscal 2008 due to our broad use of restricted stock units in addition to stock options. These increases were partially offset by decreases of about $45 million due to lower performance

incentive payouts and about $33 million in compensation and benefit savings due to lower staffing levels and lower severance related charges in fiscal 2009.

Acquisition-related charges increased in fiscal 2009 compared with fiscal 2008 primarily due to the amortization of Homestead and ECHO purchased intangible assets, which we acquired in fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Total operating expenses as a percentage of total net revenue increased to 59% in fiscal 2008 from 57% in fiscal 2007. Total operating expenses in dollars increased about $270 million in fiscal 2008, approximately $109 million of which was due to our acquisitions of Digital Insight, Homestead and ECHO and approximately $37 million of which was due to higher share-based compensation expense. Share-based compensation expense was higher in fiscal 2008 compared with fiscal 2007 due to our broad use of restricted stock units in addition to stock options. We also recorded a $23 million restructuring charge in the fourth quarter of fiscal 2008 in connection with a reallocation of resources to key growth businesses.

Including Digital Insight, Homestead, ECHO, share-based compensation expense and the restructuring charge, about half of the increase in total operating expenses in dollars for fiscal 2008 was due to higher research and development expenses. During this period, we continued to invest in research and development for existing offerings as well as for new offerings. Almost 45% of the fiscal 2008 increase in total operating expenses in dollars was due to higher selling and marketing expenses. Of the total increase in selling and marketing expenses in dollars for this period about a third was due to our acquisition of Digital Insight, whose selling costs are relatively higher compared with our other businesses because they sell their services to financial institutions through a direct sales force. About 20% of the fiscal 2008 increase in selling and marketing expenses in dollars was due to higher advertising and other marketing expenses to support our Consumer Tax offerings. Excluding the impact of the increase in share-based compensation expense, general and administrative expenses declined about $5 million in fiscal 2008 compared with fiscal 2007.

Acquisition-related charges increased in fiscal 2008 compared with fiscal 2007 primarily due to the amortization of Digital Insight purchased intangible assets, which we acquired in February 2007.

Segment Operating Income (Loss)

Segment operating income or loss is segment net revenue less segment cost of revenue and operating expenses. Segment expenses do not include certain costs, such as corporate selling and marketing, product development, and general and administrative expenses and share-based compensation expenses, which are not allocated to specific segments. These unallocated costs totaled $516.8 million in fiscal 2009, $543.0 million in fiscal 2008 and $486.4 million in fiscal 2007. Segment expenses also do not include amortization of purchased intangible assets and acquisition-related charges. See Note 15 to the financial statements in Item 8 for reconciliations of total segment operating income to operating income from continuing operations for each fiscal year presented.

						% of								% of								% of
		Fiscal				Related				Fiscal				Related				Fiscal				Related
(Dollars in millions)		2009				Revenue				2008				Revenue				2007				Revenue
Financial Management Solutions (QuickBooks)		$	113.3				20	%		$	169.7				29	%		$	169.1				31	%
Employee Management Solutions (Payroll)			207.6				57	%			166.3				49	%			164.3				47	%
Payments Solutions			31.6				11	%			42.8				17	%			49.9				25	%
Consumer Tax			628.7				63	%			587.7				63	%			501.7				62	%
Accounting Professionals			186.0				53	%			162.6				50	%			154.4				49	%
Financial Institutions			69.4				22	%			57.0				19	%			38.8				26	%
Other Businesses			65.6				23	%			99.2				30	%			96.7				33	%
Total segment operating income		$	1,302.2				41	%		$	1,285.3				42	%		$	1,174.9				44	%

Financial Management Solutions (formerly known as QuickBooks)

Fiscal 2009 Compared with Fiscal 2008. Financial Management Solutions segment operating income as a percentage of related revenue decreased to 20% in fiscal 2009 from 29% in fiscal 2008. Financial Management Solutions revenue was $13.3 million lower in fiscal 2009 while total costs and expenses increased. Selling and marketing expenses increased approximately $41 million in fiscal 2009, including about $13 million due to our fiscal 2008 acquisition of Homestead and about $15 million due to higher advertising and other marketing expenses to support the launch and subsequent promotion of QuickBooks 2009. Product development expenses increased approximately $7 million in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Financial Management Solutions segment operating income as a percentage of related revenue decreased to 29% in fiscal 2008 from 31% in fiscal 2007. Financial Management Solutions revenue grew $40.9 million in fiscal 2008 compared with fiscal 2007, including revenue from Homestead. Cost of revenue increased approximately $4 million as cost efficiencies achieved for our QuickBooks 2008 product line partially offset higher costs associated with QuickBooks services. Including Homestead, selling and marketing expenses increased approximately $17 million, product development expenses increased approximately $15 million and general and administrative expenses increased approximately $5 million in fiscal 2008 compared with fiscal 2007.

Employee Management Solutions (formerly known as Payroll)

Fiscal 2009 Compared with Fiscal 2008. Employee Management Solutions segment operating income as a percentage of related revenue increased to 57% in fiscal 2009 from 49% in fiscal 2008. Segment revenue grew $27.9 million in fiscal 2009 compared with fiscal 2008 while costs and expenses decreased approximately $13 million due to about $22 million in lower Small Business Group common cost allocations partially offset by about $9 million in charges for asset write-downs and consolidation of workforces that resulted from our July 2009 acquisition of PayCycle.

Fiscal 2008 Compared with Fiscal 2007. Employee Management Solutions segment operating income as a percentage of related revenue increased to 49% in fiscal 2008 from 47% in fiscal 2007. Segment revenue decreased $11.4 million in fiscal 2008 compared with fiscal 2007. During fiscal 2008 we continued to transition certain full service payroll customers, which have relatively higher costs of revenue, to ADP. Higher gross margins in fiscal 2008 were partially offset by higher expenses, including an increase of approximately $6 million for product development expenses.

Payments Solutions

Fiscal 2009 Compared with Fiscal 2008. Payments Solutions segment operating income as a percentage of related revenue decreased to 11% in fiscal 2009 from 17% in fiscal 2008. Segment revenue grew $37.4 million in fiscal 2009 compared with fiscal 2008 while costs and expenses increased about $49 million. In fiscal 2009 total segment expense increased about $15 million due to our February 2008 acquisition of ECHO; about $11 million due to higher cost of revenue in the core merchant services business; about $7 million due to higher sales and marketing expenses in the core merchant services business; about $4 million due to higher product development expenses in the core merchant services business; and about $4 million due to higher depreciation from infrastructure investments.

Fiscal 2008 Compared with Fiscal 2007. Payments Solutions segment operating income as a percentage of related revenue decreased to 17% in fiscal 2008 from 25% in fiscal 2007. Segment revenue increased $50.2 million in fiscal 2008 compared with fiscal 2007 while costs and expenses increased about $16 million due to our February 2007 acquisition of ECHO and about $10 million for infrastructure and lease termination costs.

Consumer Tax

Fiscal 2009 Compared with Fiscal 2008. Consumer Tax segment operating income as a percentage of related revenue was flat at 63% in fiscal 2009 and fiscal 2008. The $67.0 million growth in Consumer Tax revenue in fiscal 2009 was partially offset by an increase of about $16 million in advertising and other marketing expenses to support

the launch and subsequent promotion of TurboTax 2008 and an increase of about $7 million in research and development expenses.

Fiscal 2008 Compared with Fiscal 2007. Consumer Tax segment operating income as a percentage of related revenue increased slightly to 63% in fiscal 2008 from 62% in fiscal 2007. The $116.5 million growth in Consumer Tax revenue in fiscal 2008 was partially offset by higher expenses, including increases of approximately $25 million for selling and marketing expenses (including higher radio, television and online advertising expenses as well as higher direct marketing expenses) and approximately $12 million for product development expenses. Lower cost of revenue partially offset the increases in selling and marketing expenses and product development expenses.

Accounting Professionals

Fiscal 2009 Compared with Fiscal 2008. Accounting Professionals segment operating income as a percentage of related revenue increased to 53% in fiscal 2009 from 50% in fiscal 2008. Accounting Professionals revenue increased $25.1 million while costs and expenses were relatively stable in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Accounting Professionals segment operating income as a percentage of related revenue increased slightly to 50% in fiscal 2008 from 49% in fiscal 2007. Accounting Professionals revenue increased $12.5 million while costs and expenses were relatively stable in fiscal 2008 compared with fiscal 2007.

Financial Institutions

Fiscal 2009 Compared with Fiscal 2008. Financial Institutions segment operating income as a percentage of related revenue increased to 22% in fiscal 2009 from 19% in fiscal 2008. Financial Institutions revenue increased $12.5 million while costs and expenses were relatively stable in fiscal 2009 compared with fiscal 2008.

Fiscal 2008 Compared with Fiscal 2007. Financial Institutions segment operating income as a percentage of related revenue decreased to 19% in fiscal 2008 from 26% in fiscal 2007. The fiscal 2008 decrease in segment operating income was due to our February 2007 acquisition of Digital Insight, which has higher costs and expenses, including relatively higher costs of service revenue and higher selling expenses, than the Intuit financial institutions business that existed prior to the acquisition.

Other Businesses

Fiscal 2009 Compared with Fiscal 2008. Other Businesses segment operating income as a percentage of related revenue decreased to 23% in fiscal 2009 from 30% in fiscal 2008 due to the decrease in segment revenue in fiscal 2009. While revenue from our businesses in Canada and the UK was lower in fiscal 2009 by approximately $23 million due to the stronger U.S. dollar, total costs and expenses for this segment were also lower by approximately $13 million due to the impact of foreign exchange rates.

Fiscal 2008 Compared with Fiscal 2007. Other Businesses segment operating income as a percentage of related revenue decreased to 30% in fiscal 2008 from 33% in fiscal 2007. About a quarter of the $41.2 million in fiscal 2008 revenue growth in this segment came from our Intuit Real Estate Solutions business, which sells its products and services through a direct sales force and therefore has a higher cost structure than the other businesses in this segment. While revenue from our business in Canada was higher in fiscal 2008 due in part to the weaker U.S. dollar, total costs and expenses for this business also increased due to the impact of foreign exchange rates. In addition, fiscal 2008 selling and marketing expenses in our business in Canada increased in support of our latest QuickBooks and consumer tax offerings.

Non-Operating Income and Expenses

Interest Expense

In March 2007 we issued $1 billion in senior notes. Interest expense of $51.2 million for fiscal 2009, $52.3 million for fiscal 2008 and $27.1 million for fiscal 2007 consisted primarily of interest on $500 million in principal amount of the senior notes at 5.40% and interest on $500 million in principal amount of the senior notes at 5.75%. The

senior notes are due in March 2012 and March 2017 and are redeemable by Intuit at any time, subject to a make-whole premium. See Note 9 to the financial statements in Item 8 for more information.

Interest and Other Income

		Fiscal				Fiscal				Fiscal
(In millions)		2009				2008				2007
Interest income		$	20.5			$	39.0			$	45.0
Net losses on executive deferred compensation plan assets			(5.9	)			(3.4	)			(1.0	)
Quicken Loans royalties and fees			7.5				7.5				9.3
Gain on sale of assets			—				2.7				—
Net foreign exchange gain (loss)			(0.6	)			0.5				(0.1	)
Other			—				0.2				(0.5	)
Total interest and other income		$	21.5			$	46.5			$	52.7

Interest and other income consists primarily of interest income. The impact of lower interest rates more than offset the impact of higher average invested balances and resulted in lower interest income in fiscal 2009 compared with fiscal 2008. Lower interest rates and lower average invested balances resulted in lower interest income in fiscal 2008 compared with fiscal 2007. We record gains and losses associated with executive deferred compensation plan assets in interest and other income and gains and losses associated with the related liabilities in operating expense. The amounts recorded in operating expense generally offset the amounts recorded in interest and other income. Total interest and other income for all periods presented included royalties and fees from trademark license and distribution agreements that we entered into when we sold our Quicken Loans mortgage business in July 2002.

Income Taxes

Effective Tax Rate

Our effective tax rate for fiscal 2009 was approximately 31%. Excluding discrete tax benefits primarily related to a favorable agreement we entered into with a tax authority and the retroactive reinstatement of the federal research and experimentation credit, our effective tax rate for that period was approximately 35% and did not differ significantly from the federal statutory rate of 35%. State income taxes were partially offset primarily by the benefit we received from federal and state research and experimentation credits, the domestic production activities deduction, and tax exempt interest income.

Our effective tax rate for fiscal 2008 was 35% and did not differ significantly from the federal statutory rate of 35%. State income taxes were offset primarily by the benefit we received from tax exempt interest income, the domestic production activities deduction, and federal and state research and experimentation credits.

Our effective tax rate for fiscal 2007 was 36% and did not differ significantly from the federal statutory rate of 35%. State income taxes were partially offset by the benefit we received from tax exempt interest income, federal and state research and experimentation credits and the domestic production activities deduction. In addition, in fiscal 2007 we benefited from the retroactive extension of the federal research and experimentation credit.

In January 2009 we entered into a favorable agreement with a state tax authority with respect to certain tax years including years ended prior to fiscal 2009. As a result of this agreement, we recorded a discrete tax benefit of $18.0 million during the twelve months ended July 31, 2009.

In October 2008 changes in federal tax law resulted in the reinstatement of the federal research and experimentation credit through December 31, 2009 that was retroactive to January 1, 2008. In December 2006 changes in federal tax law resulted in the reinstatement of the federal research and experimentation credit through December 31, 2007 that was retroactive to January 1, 2006. We recorded discrete tax benefits of approximately $6.9 million and $3.7 million for the retroactive amounts related to fiscal years 2008 and 2006 during the twelve months ended July 31, 2009 and 2007.

See Note 11 to the financial statements in Item 8 for more information about our effective tax rates.

Tax Carryforwards

We acquired PayCycle in fiscal 2009 and ECHO and Homestead in fiscal 2008. See Note 6 to the financial statements in Item 8. These companies had federal net operating loss carryforwards at their respective dates of acquisition that totaled approximately $126 million. We have recorded the tax effects of these carryforwards, which together totaled approximately $44 million, as deferred tax assets at the respective dates of acquisition. The carryforwards do not result in an income tax provision benefit, but they reduce income taxes payable and cash paid for income taxes as we utilize them. At July 31, 2009, we had total federal net operating loss carryforwards of $104.0 million that will expire starting in fiscal 2019.

Net Deferred Tax Assets

At July 31, 2009, we had net deferred tax assets of $128.7 million which included a valuation allowance of $5.7 million for certain state net operating loss carryforwards. We recorded the valuation allowance to reflect uncertainties about whether we will be able to utilize some of our deferred tax assets before they expire. While we believe our current valuation allowance is sufficient, we could in the future be required to increase the valuation allowance to take into account additional deferred tax assets that we may be unable to realize. We assess the need for an adjustment to the valuation allowance on a quarterly basis. The assessment is based on our estimates of future sources of taxable income for the jurisdictions in which we operate and the periods over which our deferred tax assets will be realizable. See Note 11 to the financial statements in Item 8 for more information.

Dispositions and Discontinued Operations

During fiscal 2008 and 2007 we sold the assets and businesses described below. See Note 7 to the financial statements in Item 8 for a more complete description of these dispositions and discontinued operations and for a summary of the impact that discontinued operations have had on our statements of operations for those fiscal years.

Intuit Distribution Management Solutions Discontinued Operations

In August 2007 we sold our Intuit Distribution Management Solutions (IDMS) business for approximately $100 million in cash and recorded a net gain on disposal of $27.5 million. IDMS was part of our Other Businesses segment. We have accounted for IDMS as a discontinued operation and segregated its operating results from continuing operations in our statements of operations for all periods prior to the sale. Revenue from IDMS was $1.9 million in fiscal 2008 and $52.0 million in fiscal 2007.

Sale of Outsourced Payroll Assets

In March 2007 we sold certain assets related to our Complete Payroll and Premier Payroll Service businesses to ADP. The final purchase price was contingent upon the number of customers that transitioned to ADP pursuant to the purchase agreement over a period of approximately one year from the date of sale. We recorded pre-tax gains of $51.6 million in fiscal 2008 and $31.7 million in fiscal 2007 in our statement of operations for customers who transitioned to ADP during those periods. We received a total purchase price of $93.6 million and recorded a total pre-tax gain of $83.2 million from the inception of this transaction through its completion in the third quarter of fiscal 2008. The assets were part of our Employee Management Solutions segment.

Liquidity and Capital Resources

Overview

At July 31, 2009, our cash, cash equivalents and investments totaled $1.3 billion, an increase of $519.2 million from July 31, 2008 due to the factors described in “Statements of Cash Flows” below. Cash, cash equivalents and investments at July 31, 2009 included $150.9 in municipal auction rate securities. We did not classify any of the municipal auction rate securities we held at July 31, 2008 as cash, cash equivalents and investments. At July 31,

2009 and 2008, we also held $93.6 million and $285.3 million in municipal auction rate securities that we classified as long-term investments on our balance sheet. See “Auction Rate Securities” below for more information. Our primary source of liquidity has been cash from operations, which entails the collection of accounts receivable for products and services. Our primary uses of cash have been for research and development programs, selling and marketing activities, capital projects, acquisitions of businesses, debt service costs and repurchases of common stock.

In March 2007 we issued five-year and ten-year senior unsecured notes totaling $1 billion in connection with our acquisition of Digital Insight. We also have a $500 million unsecured revolving line of credit facility that is described later in this Item 7. To date we have not borrowed under the facility.

The following table summarizes selected measures of our liquidity and capital resources at the dates indicated:

		July 31,				July 31,				$				%
(Dollars in millions)		2009				2008				Change				Change
Cash, cash equivalents and investments		$	1,347.0			$	827.8			$	519.2				63	%
Long-term investments			97.1				288.3				(191.2	)			(66	%)
Long-term debt			998.2				998.0				0.2				0	%
Working capital			884.0				306.3				577.7				189	%
Ratio of current assets to current liabilities			1.8	: 1			1.2	: 1

Auction Rate Securities

At July 31, 2009, we held a total of $244.5 million in municipal auction rate securities. Based on the maturities of the underlying securities and the put option described below, we classified $150.9 million of these securities as short-term investments and $93.6 million of these securities as long-term investments on our balance sheet at that date. All of the municipal auction rate securities we held at July 31, 2009 were rated A or better by the major credit rating agencies and 86% were collateralized by student loans guaranteed by the U.S. Department of Education. These securities are long-term debt instruments that are intended to provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined intervals, typically every 35 days. Due to a decrease in liquidity in the global credit markets, in February 2008 auctions began failing for the municipal auction rate securities we held. Regularly scheduled auctions for these securities have generally continued to fail since that time. When these auctions initially failed, higher interest rates for many of the securities went into effect in accordance with the terms of the prospectus for each security. As of July 31, 2009, we had received all interest payments in accordance with the contractual terms of these securities. During fiscal 2009 issuers redeemed at par value $40.8 million of municipal auction rate securities that we held.

In August 2008 the broker-dealers for our municipal auction rate securities announced settlements under which they may provide liquidity solutions, or purchase, the auction rate securities held by their institutional clients. On November 4, 2008 we accepted an offer from UBS AG (UBS), one of the broker-dealers for our municipal auction rate securities, that gives us the option to sell UBS a total of $140.9 million in municipal auction rate securities at par value at any time during a two-year period beginning June 30, 2010. The offer also gives UBS the discretion to buy any or all of these municipal auction rate securities from us at par value at any time. To date UBS has not purchased any of these securities from us. We currently intend to exercise our option to sell UBS all of these municipal auction rate securities at par value in accordance with the terms of the offer within the next twelve months. We continue to have counter-party risk associated with UBS.

Based on our expected operating cash flows and our other sources of cash, we do not believe that the reduction in liquidity of our municipal auction rate securities will have a material impact on our overall ability to meet our liquidity needs.

Statements of Cash Flows

The following table summarizes selected items from our statements of cash flows for fiscal 2009, 2008 and 2007. See the financial statements in Item 8 for complete statements of cash flows for those periods.

		Fiscal				Fiscal				Fiscal
(In millions)		2009				2008				2007
Net cash provided by operating activities of continuing operations		$	812.4			$	830.2			$	726.8
Net income from continuing operations			447.0				477.5				441.1
Depreciation			149.1				116.6				94.2
Amortization of intangible assets			125.6				99.9				64.4
Share-based compensation			132.8				113.3				77.3
Net cash used in investing activities of continuing operations			(432.4	)			(86.1	)			(1,412.5	)
Acquisitions of businesses and intangible assets, net of cash acquired			(187.4	)			(264.5	)			(1,271.8	)
Net (purchases) sales of available-for-sale debt securities			(66.7	)			347.9				59.8
Purchases of property and equipment			(182.5	)			(306.1	)			(153.2	)
Proceeds from sales of assets and divestitures of businesses			—				132.0				54.9
Net cash provided by (used in) financing activities			(110.3	)			(586.5	)			733.9
Issuance of long-term debt, net of discounts			—				—				997.8
Purchase of treasury stock			(300.2	)			(800.0	)			(506.8	)
Net proceeds from issuance of common stock under employee stock plans			183.6				196.9				211.4
Net increase in cash and cash equivalents			265.6				158.1				75.6