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H&R Block: Getting Internet Religion

This is the year that even the staunchest brick-and-mortar companies go on the Web. Actually, I have been receiving a variety of e-mails from readers who want to know if there are some investment opportunities, as stodgy companies get invigorated by dot-com magic.

Yesterday, one reader asked if H&R Block (HRB) fits the category. The company has recently launched its cutting-edge online tax prep service.

In fact, the site has been so popular that it crashed (no, this was not the handiwork of roaming hackers). The site will likely be down for several days. In the meantime, consumers can download the software program TaxCut instead.

In all, the company expects to handled 650,000 returns over the Net for this year's tax season. The company's tremendous brand and big list of happy customers makes the online venture a slam dunk. H&R Block has 10,000 offices around the globe and served 18.9 million customers in 1999 -- making it the world's biggest tax preparer.

The company also realizes that there are many cross-selling opportunities. For example, on the hrblock.com site, users can get mortgage loans (this is powered by E-LOAN). Also, H&R Block purchased the online discount brokerage firm Olde and customers can now do online trading. In a sense, H&R Block is transforming its destination site into something like E*TRADE.

The fact is, though, that much of the company's business will come from people walking into the myriad of physical storefronts across America. If anything, H&R Block's foray onto the Net is a necessity. It is something that Wall Street expects. It will likely result in some incremental efficiencies and perhaps more revenues -- but certainly not enough to substantially jump-start the growth-rate of the company.

What's more, H&R Block is facing much competition. One of the fiercest is Quicken, which owns the popular TurboTax. There are also several companies offering free online tax services, like FreeTaxPrep.com.

No doubt, the H&R Block Web site is great. For the most part, it provides the platform for most people to carry-out their financial needs. Unfortunately, it will likely not be enough to give much juice to the stock.



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