Pearson Education Eyes Electronic Products For K-12 Growth In 2002

Pearson Education Eyes Electronic Products For K-12 Growth In 2002 – Brief Article

Projecting no growth for its K-12 textbook business in 2002, Pearson Education is banking on growth in testing, early childhood programs and software from NCS Pearson.

The company, which vies with McGraw-Hill for the top spot among U.S. K-12 publishers, is cautiously optimistic about school spending in the coming year as states and school districts contend with lower tax revenue and tightened budgets. “States are having trouble with their tax receipts, and therefore, are cutting their budgets,” said Pearson plc chief executive Marjorie Scardino. “But they’re not so much cutting in education yet.”

Pearson is counting on seeing more contribution from NCS Pearson, which thus far has not realized the K-12 promise anticipated when Pearson spent $2.5 billion to buy National Computer Systems in September 2000.

With new federal requirements for more state testing and interest in online testing and scoring, in particular, NCS Pearson, which grew its testing business 18% in 2001, is projecting 17% growth this year. NCS Pearson is almost exclusively an administrator and scorer of tests, but Pearson plans to beef up its test content development capabilities, Scardino said, which would pit it directly against the three largest test developers: Harcourt Educational Measurement, CTB/McGraw-Hill and Houghton Mifflin’s Riverside Publishing.

NCS Pearson is heading into 2002 with several large testing contracts: In December, Florida awarded it a three-year $105 million contract to administer its grade three-10 state exams. Earlier in the year, NCS won a $26 million, five-year contract with Georgia to develop and administer Web-based exams in eight high school disciplines; a $1 million, one-year renewable contract to administer statewide Web-based high school exit exams in Virginia; and a subcontract to handle packaging, distribution and data analysis for a three-year $50 million contract in California won by Educational Testing Service to provide the state’s high school exit exam.

NCS Pearson also plans this month to launch NCS4Schools, its K-12 class management system trumpeted a year ago for release this July. However, general rollout won’t be until the fall, and Pearson does not expect it to generate revenue until 2003.

One reason for the delay was the company’s decision to shift the business model from a license for use on local area networks to a subscription model and hosting service through an application service provider model. “This market will and should move to ASP,” said Pearson Education chief executive Peter Jovanovich. “We won’t see one big sale, but all will be recurring revenue.” Another reason for the delay is schools’ reluctance to commit to the costly investment in these management systems.

Also on the agenda, Scardino said, is building up Pearson’s early childhood learning businesses based on its electronic Waterford early learning products.

And, she said, the Learning Network, Pearson’s consumer education portal, is on track to break even at the end of 2003. The network was reworked during 2001 to focus on supporting Pearson Education’s K-12 publishing business.

In 2001, the Learning Network had a loss of 77 million pounds, more than half the parent corporation’s losses from its Internet enterprises. However, that is down about 50% from 2000, and Pearson anticipates reducing it by about 30 million pounds in 2002 with its break-even target in late 2003.

Contact: Pearson Education can be reached at (201) 236-7000 or at www.pearsoneducation.com.

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