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Microsoft's Shift in Personal Finance Software Market Strategy

Strategic Insights

— 2 min read

The potential acquisition of Intuit Inc. by Microsoft Corporation has failed due to Justice Department opposition, leading to a significant change in Microsoft's approach to the personal finance software market. With Intuit's Quicken program holding an 80% share of the market, Microsoft must now focus on its own Money program, which ranks third with a 4% share. Meanwhile, Nationsbank and BankAmerica have acquired Meca Software Inc., producers of the No. 2-ranked Managing Your Money program, in a deal valued at $35 million. The acquisition is expected to bolster the banks' presence in the market, creating a competitive landscape with three major players: Microsoft, Intuit, and the newly formed Meca subsidiary.

Key Takeaways:

  • Microsoft's failure to acquire Intuit has forced the company to prioritize its own Money program, which will see a new version (Version 4) released soon.
  • Meca Software Inc.'s Managing Your Money program, acquired by Nationsbank and BankAmerica, will now be available to retail customers and other banks as an independent subsidiary.
  • Intuit's Quicken program remains the leading personal finance software with a 90% market share, but the company's ability to expand its position in the market has been significantly impacted by the failed acquisition.
  • The failed acquisition has created a complex landscape with multiple players vying for dominance in the personal finance software market.
  • Microsoft's attempted acquisition was deemed a strategic move to enter the financial services market, but the company's lack of influence in this area will now hinder its growth.
  • According to Richard K. Crone, director of KPMG Peat Marwick's Center for Electronic Banking, the market potential for personal finance managers like Quicken is near its saturation point without an online bank connection.
  • Scott D. Cook, Intuit's chairman, emphasized that banks have fears about entering digital banking due to the risks and unknowns associated with the technology.
  • Microsoft's chairman and chief executive, William H. Gates, previously referred to banks as "dinosaur species," sparking concerns about the company's intentions in the financial services market.
  • Microsoft's strong resources and influence make it a formidable competitor, but it lacks the strategic advantage of owning a customer interface, which Intuit had gained through its ties with banks.

Statistics:

  • 80% of the personal finance software market is held by Quicken, produced by Intuit Inc. (_[1]_).
  • 4% of the market share is held by Microsoft Money, with a new version (Version 4) expected soon (_[2]_).
  • $35 million: the value of Nationsbank and BankAmerica's acquisition of Meca Software Inc. (_[3]_).
  • 90%: the estimated market saturation point for personal finance managers like Quicken without an online bank connection (_[4]_).
  • $6 billion: Microsoft's cash reserves, which would enable the company to acquire a small bank and process customer transactions (_[5]_).
  • $40: the typical price of Quicken, in contrast to Computer Associates' Simply Money program, which is sold for $9.95 with shipping and handling included (_[6]_).

Sources:

[1] "Quicken's Market Share Tops 80 Percent" - [no date]

[2] "Microsoft Prepared to Release Version 4 of Money" - [no date]

[3] "Nationsbank and BankAmerica Acquire Meca Software" - May 10

[4] Richard K. Crone, director of KPMG Peat Marwick's Center for Electronic Banking

[5] Microsoft Corporation

[6] Computer Associates

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