Intuit buys Sebastopol company

OMware purchased for $42 million in stock, office to remain open

October 8, 2001

By MARY FRICKER
THE PRESS DEMOCRAT

OMware Inc., a Sebastopol company that makes construction management software, said Monday it is being acquired by financial software giant Intuit Inc. for $42 million in stock.

OMware will continue to be headquartered in Sebastopol, and it hopes to nearly double employment over the next year, officials said.

The acquisition is the first thrust in a new Intuit strategy also announced Monday to offer more speciality products as a way to invigorate slowing sales for QuickBooks, its financial software for small businesses.

OMware founder and chief executive Dan Smith said he decided to sell his 20-year-old company because Intuit's resources, including its strong brand, sales, distribution and support staff, will make it possible for OMware to grow rapidly.

"We've built great products and have a strong customer base that we can expand even further going forward," said Smith, who will continue to run OMware as an Intuit vice president.

Teresa Ramondo, executive director of the Sebastopol Area Chamber of Commerce, said the merger news was encouraging in today's cautious economy.

"It's the type of companies we've been looking for, clean industry with employment opportunities," Ramondo said.

OMware publishes The Master Builder, a software that handles accounting, estimating, scheduling, payroll and other construction-related tasks.

Under Intuit's strategy laid out Monday by chief executive Steve Bennett, Intuit will move away from its traditional "one size fits all" approach to small business software and offer more sophisticated products aimed at specific industries.

To realize this new goal, Mountain View-based Intuit plans to acquire a number of companies that already produce software for a specific industry, and OMware is its first such acquisition.

"We're basically the poster boy," Smith said. "Intuit looked at all the software players in the industry and decided we were the right one."

At the same time, OMware's 4,000 customers -- including about 300 in Sonoma County -- can benefit from Intuit's many related products like payroll services and benefits software and its accounting consultants, Smith said.

The acquisition is expected to close in November, pending shareholder and regulatory approvals.

Smith said OMware expects revenues of about $12.5 million this year, compared to $8 million last year and $6 million in 1999. It has about 10 percent of the marketplace it targets, which is builders with revenues between $2 million and $50 million, Smith said.

OMware will operate as a Sebastopol-based business unit of Intuit, Smith said. Three current employees will lose their jobs because of duplication, spokesman Tim Polk said, but all others will be asked to remain.

Currently OMware employs 104 people, including 60 in Sonoma County and others in nine field offices nationwide. By the end of 2002, it expects to employ 180 people, including 100 in Sonoma County.

OMware's 400 shareholders will receive $2.85 per share in Intuit stock for every share of OMware stock they hold. At Monday's close, that would mean OMware shareholders would receive 0.088 shares of Intuit stock for each share of OMware they own.

With 14.7 million shares outstanding, the purchase price is $34 million -- $20 million of which goes to Smith, the majority shareholder -- plus another $8 million in a performance bonus for Smith over two years.

OMware is privately held and does not trade on any exchange.

Intuit estimates the small business software market at $17 billion. With 2.5 million users of its QuickBooks products, including 300,000 in construction-related businesses, Intuit has long ranked among the small business software leaders.

But that segment is not growing as quickly as other parts of the company, and QuickBooks recently has been challenged by Microsoft and Oracle, which have introduced online access for small businesses to a range of software applications.

Intuit reported total revenue of $1.26 billion last year. It closed Monday at $32.39 on the Nasdaq market, up 43 cents from Friday's close but down dramatically from its 52-week high of $69.31 on Nov. 2.

The Associated Press contributed to this report. You can reach staff writer Mary Fricker at 521-5241 or mfricker@pressdemocrat.com.