MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  


RESULTS OF OPERATIONS

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 general and administrative expenses that are not allocated to specific segments. In addition, segment expenses do not include acquisition-related costs, which include acquisition-related charges, goodwill and purchased intangible asset impairment charges, amortization of purchased software and charges for purchased research and development. Segment expenses also do not include realized net gains or losses on marketable securities and other investments, and interest and other income. See Note 11 to the financial statements for reconciliations of total segment operating income to income from operations for each fiscal year presented.

(Dollars in millions) FISCAL
2002		   % TOTAL NET
REVENUE		   FISCAL
2003		   % TOTAL NET
REVENUE		   FISCAL
2004		   % TOTAL NET
REVENUE		  2002-2003
  % CHANGE		  2003-2004
  % CHANGE

QuickBooks-Related 		$ 207.8     45 % $ 247.6     45 % $ 289.0     44 %   19 %   17 %

Intuit-Branded Small Business 		  (29.6 )   (34 %)   (0.2 )   -     11.7     4 %   -99 %   NM  

Consumer Tax 		  218.0     62 %   271.6     64 %   320.3     65 %   25 %   18 %

Professional Tax 		  121.9     54 %   141.4     58 %   138.5     55 %   16 %   -2 %

Other Businesses 		  38.5     20 %   57.8     30 %   66.0     33 %   50 %   14 %

Total segment operating income 		  $ 556.6         42 %     $ 718.2         44 %     $ 825.5         44 %       29 %       15 %  

QuickBooks-Related

Fiscal 2004 Compared with Fiscal 2003. The increase in QuickBooks-Related segment operating income in fiscal 2004 compared with fiscal 2003 was primarily due to 18% higher revenue that included strong growth in our high-margin DIY payroll business. In addition, fiscal 2004 operating income for this segment included operating income for Innovative Merchant Solutions, which we acquired in the first quarter of fiscal 2004. These factors were partially offset by increases in spending for QuickBooks product development, technical support, marketing programs and direct sales personnel and infrastructure.

Fiscal 2003 Compared with Fiscal 2002. The increase in QuickBooks-Related segment operating income in fiscal 2003 compared with fiscal 2002 was primarily due to 20% higher revenue that included strong growth in our high-margin DIY payroll business. These factors were partially offset by increases in spending for product development, marketing, sales and technical support for industry-specific versions of QuickBooks that launched late in fiscal 2002 and throughout fiscal 2003.
Intuit-Branded Small Business
Fiscal 2004 Compared with Fiscal 2003. Our Intuit-Branded Small Business segment had operating income in fiscal 2004 after it broke even in fiscal 2003 because revenue for this segment grew 14% while we held costs steady in our information technology and industry solutions businesses. Partially offsetting these improvements, outsourced payroll operating income was lower in fiscal 2004 because we incurred expenses for additional sales and service personnel during the first half of the year that were not completely offset by increased revenue.

Fiscal 2003 Compared with Fiscal 2002. Intuit-Branded Small Business broke even in fiscal 2003 after experiencing an operating loss in fiscal 2002. The primary reasons for the improvement in operating margin were growth in our outsourced payroll business and our acquisition of Intuit Information Technology Solutions in the first quarter of fiscal 2003.
Consumer Tax
Fiscal 2004 Compared with Fiscal 2003. Consumer Tax segment operating income growth in fiscal 2004 was slightly above revenue growth for that period because gross margin improvements due to higher average selling prices and growing high-margin service revenues were only partially offset by additional costs incurred for national television and radio advertising in fiscal 2004.

Fiscal 2003 Compared with Fiscal 2002. Consumer Tax segment operating income growth in fiscal 2003 was above revenue growth for that period as improvements in average selling prices were partially offset by additional costs incurred for higher partner royalties and infrastructure.
Professional Tax
Fiscal 2004 Compared with Fiscal 2003. Professional Tax segment operating income declined slightly on a 3% revenue increase in fiscal 2004 compared with fiscal 2003. Segment operating income did not grow in fiscal 2004 because of increased spending on product development and customer service.

Fiscal 2003 Compared with Fiscal 2002. Professional Tax segment operating income grew in fiscal 2003 compared with fiscal 2002 due to streamlining of training and materials costs that produced higher gross margins on 8% revenue growth. Operating expenses for this segment remained relatively flat in fiscal 2003 due to staffing efficiencies achieved in customer service.
Other Businesses
Fiscal 2004 Compared with Fiscal 2003. Other Businesses segment operating income grew faster than revenue due primarily to Quicken revenue increases on relatively flat costs and our exit from the online brokerage business in the first quarter of fiscal 2004. Partially offsetting the Quicken improvements, Canadian operating income was down in fiscal 2004.

Fiscal 2003 Compared with Fiscal 2002. Other Businesses segment operating income grew during fiscal 2003 compared with fiscal 2002 as a result of reduced spending in our Quicken online advertising business and reduction of other Quicken operating expenses as operational efficiencies were introduced. Canadian operating income was also slightly higher in fiscal 2003.