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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: Let’s start with some background on the evolution of Knowledge Technologies. How did we get from education services, through e-learning to Knowledge Technologies?

Mr. Sutton: Knowledge Technologies is a theme that we effectively created, so I’m not sure it’s a broad thought process yet. We took what we thought was a narrow definition, e-learning, which is focused specifically on the training function within an organization, and really tried to understand how the buyer ultimately will purchase for their organization. We think we are seeing a migration toward the concept of the employee life cycle. If you think about the three pieces of that, you get into recruiting, training, retention of the employee, and that gets into the whole life cycle. There are technologies that you can wrap around all of those different functions, and that is what we would define as Knowledge Technologies.

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 are some of the other companies that you would like to highlight?

Mr. Sutton: Within the infrastructure space there are two public companies, both of which had very difficult third quarters, and as a result have seen their stocks come in quite a bit, but we think they represent very interesting investments in the space. One of those would be Saba Software (Nasdaq:SABA). Saba has moved away from being just a learning management system company, which is the infrastructure piece that we talk about. It has moved more broadly into the human capital management arena, which would include competency management, performance management, and other areas that get into that whole employee life cycle concept we talked about.

TWST: What would your overall message be to investors who are looking at this emerging sector?

Mr. Sutton: I think patience is a virtue. We certainly get excited when we see the new technologies and how they might be delivered to both the corporate and the K-12 market. Certainly the corporate market moves a little more quickly. But I think the expectations sometimes get well ahead of the realities, and too many companies have been created too quickly As a result, we’re going through a bit of a consolidation period. So we think ultimately this is going to be a very large, very successful market, and patience and a little bit of extra work in finding the right companies to put money in will make a lot of sense for long-term investors.

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.