Big education company miscalculated in its investment in a digital curriculum
Pearson PLC, the world’s largest education company, made a major miscalculation on the Common Core academic standards, expecting a windfall that failed to materialize as it headed into a downward spiral in sales, stock price and staff.
The company’s Common Core strategy ran into trouble on two fronts: It struggled to develop and deliver new digital courses on time, as the academic standards themselves faced a political backlash in which several states pulled out.
Pearson’s strategy included a digital curriculum for the common academic standards approved by most U.S. states starting in 2010, and a vigorous pursuit of standardized testing contracts that backfired. Those were among several factors that hurt the U.K.-based Pearson, exacerbating a decline in U.S. college textbook sales that company executives say is the primary culprit for its problems.
Pearson’s share price has declined 32% over three years and sales have fallen in three of the past four. It has laid off thousands of employees. Investment analysts have predicted that Chief Executive John Fallon could be replaced if the situation doesn’t turn around.
Mr. Fallon, in a recent interview with The Wall Street Journal, said Pearson will eventually make money on its Common Core courses and is heading for recovery. “We are testing the patience of our shareholders, and we have to get on and deliver,” he said.
Reduced college enrollment and the closure of some for-profit colleges in the U.S. have cut college textbook sales, Pearson’s largest North American revenue stream. Those problems and others reduced Pearson’s profits by $338 million a year, “which for a company of our size is a lot to absorb,” Mr. Fallon said.
http://www.wsj.com/articles/pearsons-bet-on-common-core-fails-to-pay-off-1479830401