NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  


11. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for the way in which public companies disclose certain information about operating segments in their financial reports. Consistent with SFAS 131, we have defined five reportable segments, described below, based on factors such as how we manage our operations and how our chief operating decision maker views results. We define the chief operating decision maker as the office of the chief executive officer, our chief financial officer and our Board of Directors.

    In the fourth quarter of fiscal 2004 we revised our reportable segments to reflect the way we currently manage and view our business. We combined our fiscal 2003 QuickBooks segment with the businesses from our fiscal 2003 Small Business Products and Services segment that relate to and support QuickBooks to form the fiscal 2004 segment called QuickBooks-Related. We also combined our outsourced payroll and information technology businesses with our fiscal 2003 Vertical Business Management Solutions segment to form the fiscal 2004 segment called Intuit-Branded Small Business. We made no changes to our Consumer Tax, Professional Tax and Other Businesses segments. We have reclassified previously reported fiscal 2003 and 2002 segment results to be consistent with the fiscal 2004 presentation.

    We reclassified a total of $28.1 million for certain fiscal 2003 electronic filing revenue in our Consumer Tax and Professional Tax segments from product revenue to service revenue to be consistent with our fiscal 2004 presentation. Total fiscal 2003 revenue for each of these segments did not change as a result of these reclassifications.

    QuickBooks-Related product revenue is derived primarily from QuickBooks desktop software products; QuickBooks Do-It-Yourself Payroll, or DIY, which offers payroll tax tables, forms and electronic tax payment and filing on a subscription basis to small businesses that prepare their own payrolls; and financial supplies such as paper checks, envelopes and invoices. QuickBooks-Related service revenue is derived primarily from QuickBooks Online Edition, QuickBooks support plans and merchant services. Other revenue for this segment consists primarily of royalties from small business online services.

    Intuit-Branded Small Business product revenue is derived primarily from business management software for information technology and four selected industries: wholesale durable goods; residential, commercial and corporate property management; construction; and nonprofit organizations, universities and government agencies. In August 2004 management formally approved a plan to sell our Intuit Public Sector Solutions business. Intuit-Branded Small Business service revenue is derived from technical support, consulting and training services for those software products and from outsourced payroll services. Service revenue for this segment also includes interest earned on funds held for payroll customers.

    Consumer Tax product revenue is derived primarily from TurboTax federal and state consumer desktop tax return preparation software. Consumer Tax service revenue is derived primarily from TurboTax for the Web online tax return preparation services and consumer electronic filing services.

    Professional Tax product revenue is derived primarily from ProSeries and Lacerte professional tax preparation software products. Professional Tax service revenue consists of electronic filing and training services.

    Other Businesses consist primarily of Quicken and Canada. Quicken product revenue is derived primarily from Quicken desktop software products. Quicken other revenue consists primarily of fees from consumer online transactions and from Quicken-branded credit card and bill payment offerings that we provide through our partners. We exited the online advertising business in the fourth quarter of fiscal 2004. In Canada, product revenue is derived primarily from localized versions of QuickBooks and Quicken as well as QuickTax and TaxWiz consumer desktop tax return preparation software and ProFile professional tax preparation products. Service revenue in Canada consists primarily of revenue from software maintenance contracts sold with QuickBooks.

    All reportable segments except Intuit-Branded Small Business and Other Businesses operate solely in the United States. All segments sell primarily to customers located in the United States. International total net revenue was less than 5% of consolidated total net revenue for all periods presented.

    Corporate includes costs such as corporate general and administrative expenses that are not allocated to specific segments. Corporate also includes reconciling items such as acquisition-related costs (which include acquisition-related charges, impairment of goodwill and purchased intangible assets, amortization of purchased software and charges for purchased research and development), realized net gains or losses on marketable securities and other investments, and interest and other income.

    The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Except for goodwill and purchased intangible assets, we do not generally track assets by reportable segment and, consequently, we do not disclose assets by reportable segment.

The following tables show our financial results by reportable segment for fiscal 2002, 2003 and 2004.

FISCAL 2002 (In thousands) QUICKBOOKS
RELATED		 INTUIT-BRANDED
SMALL BUSINESS		 CONSUMER
TAX		 PROFESSIONAL
TAX		 OTHER
BUSINESSES		 CORPORATE CONSOLIDATED
Product revenue     $ 396,552           $ 9,125         $ 219,403           $ 219,252           $ 129,463           $ -           $ 973,795      
Service revenue   50,116     77,612     128,354     6,495     7,359     -     269,936  
Other revenue   13,440     219     3,340     -     51,498     -     68,497  
    Total net revenue   460,108     86,956     351,097     225,747     188,320     -     1,312,228  
Segment operating income (loss)   207,828     (29,608 )   217,997     121,940     38,447     -     556,604  
Common expenses   -     -     -     -     -     (283,129 )   (283,129 )
    Subtotal   207,828     (29,608 )   217,997     121,940     38,447     (283,129 )   273,475  
Amortization of purchased software   -     -     -     -     -     (7,159 )   (7,159 )
Charge for purchased research and development -     -     -     -     -     (2,151 )   (2,151 )
Acquisition-related charges -     -     -     -     -     (159,395 )   (159,395 )
Loss on impairment of goodwill and
purchased intangible assets		 -     -     -     -     -     (27,270 )   (27,270 )
Loss on impairment of long-lived asset -     -     -     -     -     (27,000 )   (27,000 )
Interest and other income -     -     -     -     -     27,276     27,276  
Realized net loss on marketable securities -     -     -     -     -     (15,535 )   (15,535 )
Net gain on divestiture -     -     -     -     -     8,308     8,308  
Income (loss) from continuing operations
before income taxes		 $ 207,828   $ (29,608 ) $ 217,997   $ 121,940   $ 38,447   $ (486,055 ) $ 70,549  
FISCAL 2003 (In thousands) QUICKBOOKS
RELATED		 INTUIT-BRANDED
SMALL BUSINESS		 CONSUMER
TAX		 PROFESSIONAL
TAX		 OTHER
BUSINESSES		 CORPORATE CONSOLIDATED
Product revenue $ 465,159   $ 62,989   $ 231,096   $ 223,797   $ 141,242   $ -   $ 1,124,283  
Service revenue   70,511     173,370     189,183     19,622     4,522     -     457,208  
Other revenue   16,965     3,554     2,618     -     46,115     -     69,252  
    Total net revenue   552,635     239,913     422,897     243,419     191,879     -     1,650,743  
Segment operating income (loss)   247,624     (213 )   271,587     141,343     57,840     -     718,181  
Common expenses   -     -     -     -     -     (318,347 )   (318,347 )
    Subtotal   247,624     (213 )   271,587     141,343     57,840     (318,347 )   399,834  
Amortization of purchased software   -     -     -     -     -     (13,796 )   (13,796 )
Charge for purchased research and development -     -     -     -     -     (8,859 )   (8,859 )
Acquisition-related charges   -     -     -     -     -     (33,947 )   (33,947 )
Interest and other income   -     -     -     -     -     38,694     38,694  
Realized net gain on marketable securities   -     -     -     -     -     10,912     10,912  
Income (loss) from continuing operations
before income taxes		 $ 247,624   $ (213 ) $ 271,587   $ 141,343   $ 57,840   $ (325,343 ) $ 392,838  
FISCAL 2004 (In thousands) QUICKBOOKS
RELATED		 INTUIT-BRANDED
SMALL BUSINESS		 CONSUMER
TAX		 PROFESSIONAL
TAX		 OTHER
BUSINESSES		 CORPORATE CONSOLIDATED
Product revenue $ 534,052   $ 72,250   $ 231,730   $ 226,121   $ 148,209   $ -   $ 1,212,362  
Service revenue   97,161     195,038     257,883     25,773     7,826     -     583,681  
Other revenue   22,701     5,093     367     -     43,459     -     71,620  
    Total net revenue   653,914     272,381     489,980     251,894     199,494     -     1,867,663  
Segment operating income (loss)   288,974     11,695     320,314     138,460     66,022     -     825,465  
Common expenses   -     -     -     -     -     (348,546 )   (348,546 )
    Subtotal   288,974     11,695     320,314     138,460     66,022     (348,546 )   476,919  
Amortization of purchased software   -     -     -     -     -     (13,456 )   (13,456 )
Acquisition-related charges   -     -     -     -     -     (24,472 )   (24,472 )
Loss on impairment of goodwill and
purchased intangible assets		   -     -     -     -     -     (18,664 )   (18,664 )
Interest and other income   -     -     -     -     -     30,844     30,844  
Realized net gain on marketable securities   -     -     -     -     -     1,729     1,729  
Income (loss) from continuing operations
before income taxes		 $ 288,974   $ 11,695   $ 320,314   $ 138,460   $ 66,022   $ (372,565 ) $ 452,900