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Six analysts and top management from twelve sector firms examine the education sector in this special 85-page Education Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info465.htm.

TWST: To a certain extent, is this being driven by the fact that more people are working from home these days?

Mr. Sutton: One of the biggest themes that we can point to gets into the whole concept of distributed employees. The government, as an example, sees some of the risk of having employees in one specific location. The Pentagon, unfortunately, was a very good example of that. The government is actually one of the segments driving this whole theme. We see a lot of changes happening in the landscape of the future employee. For example, we believe that, ultimately, benefits will be driven by the employee, not the employer. In other words, similar to how you can now take your 401(k) and your life insurance, or other insurances, with you as you leave an organization, we think the entirety of the benefit package will be employee-driven. That makes an employee more of an independent contractor, less of an employee — the result being an environment where work is done from a variety of locations by a variety of employee-contractors.

TWST: What is the next group we should move on to?

Mr. Sutton: The e-learning segment is interesting because it’s really broken down into a few different areas. One is content, another is the infrastructure (that would be a learning management system, for example), and then there is a new area that really isn’t represented by any public companies as a pure play. That would be the learning content management market. First, on the content side, content is broken down into a few different areas. There is custom content, technical skills content, often called IT content, and there are soft skills or business skills. From a custom content perspective, the only company that is considered something of a pure play in custom content would be DigitalThink (Nasdaq:DTHK), which is a company we do not cover today. The issue that has existed with custom content is how to create a scalable model from a custom content business. You have to realize that two-thirds of a company’s content is generally housed internally and needs to be repurposed for Web efforts. So there is a fairly significant opportunity. The question is, when you’re working in a business that is creation of content and requires a lot of people, how do you make that a scalable model? We don’t think anybody has successfully gone there yet.

TWST: Who are the buyers of DigitalThink software?

Mr. Sutton: It’s primarily the Fortune 500-sized companies that are looking to repurpose a lot of their traditional content. One of their large customers is Charles Schwab, which uses them to educate their customers in terms of why they would want to have a broker.

TWST: And the buyer of those companies I assume would be local education systems?

Mr. Sutton: True, although we’re seeing more and more decisions made at the district and even the state level. Good examples would be the State of California, the State of Texas, the State of Georgia, the State of Maine, and the State of Michigan, which have all recently made some statewide decisions.

1) Education Industry - In an in-depth (11,600 words) Analyst Roundtable, Peter L. Martin, Senior Vice President at Jefferies & Company, Inc., Gerald R. Odening, Managing Director at J.P. Morgan H&Q and Jeffrey M. Silber, Senior Vice President at Gerard Klauer Mattison & Company, Inc. examine the outlook for the sector including enrollments in higher education, regulatory issues and share specific stock recommendations.

2) Educational Publishing & Service Companies - In an in-depth (4,700 words) Analyst Interview, Peter Appert, Managing Director at Deutsche Banc Alex. Brown, Inc., examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Education Stocks - In an in-depth (4,000 words) Analyst Interview, Greg W. Cappelli, Managing Director at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

4) Knowledge Technologies - In an in-depth (4,700 words) Analyst Interview, George Sutton, Managing Director at RBC Capital Markets, examines the outlook for the sector and shares specific stock recommendations.

5) The TWST confidential Off-The-Record survey of management performance at eighteen sector firms asked market insiders about the ability of management teams to create shareholder value.

6) CEO interviews (average 2,500 words). Top management of twelve sector firms examine the outlook for their firm and the sector.