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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 off with a review of what has happened to the education stocks since we last spoke, back in January of 2001.

Mr. Cappelli: Interestingly, after an 80% move in the stocks in our coverage universe during 2000, the stocks were up another 25% to 30% through the midpoint of the year. The education companies had a terrific run, and we think that was a function of continued worries regarding the general economy and the strength of these education companies’ performance in good times and bad. Obviously, many of the issues that drove investor sentiment away from technology and the cyclicals caused a rotation into this group. In late August, that changed. There was quite a selloff in the postsecondary group led by Corinthian Colleges (Nasdaq:COCO), which reported its June quarter only meeting expectations for the first time since coming public in early 1999. The company also reported a blip in their bad debt expense, which concerned investors. This, along with some troubles that DeVry (NYSE:DV) is having in terms of their enrollment growth (which is now only expected to be flat this quarter, versus expectations of anywhere from 7%-10%), weighed on the group. So those things have caused this group to sell off to where the CSFB Education Index is up approximately 5% year to date. That’s still not bad when you consider that the other indexes are down considerably.

TWST: How would you distinguish Corinthian?

Mr. Cappelli: I would distinguish them as a very rapidly growing company with a similar strategy to Career Ed (Nasdaq:CECO). It has acquired undermanaged schools that have been troubled, perhaps with high default rates or problems within the schools; they have actually taken those schools and done a very, very nice job of fixing them, of getting them back on their feet, and employing a similar strategy to Career Ed. One distinguishing factor is that they have a larger presence in non-degree-granting programs than some of the other companies. In addition, they are big in the area of health care, which we think is paying off given its non-cyclical nature and demand through favorable demographic trends. So they’re really known for their focus on healthcare IT business. Those are Corinthian’s primary areas and the healthcare piece is something that’s pretty unique to Corinthian and distinguishes them from the broader group.

TWST: Are they the only company that does this?

Mr. Cappelli: No, they’re not, but they have much more of a presence in health care than the other companies. Going forward that’s probably an advantage. As people are living longer, as we become more and more focused on health care, that area should continue to be a stable grower. I would not be surprised to see other companies also get into this area.

TWST: Is there any area that could be potentially a worry with regard to Corinthian?

Mr. Cappelli: Their bad debt expense in the June quarter spiked up to levels that we thought were above where they should be. That’s why the stock sold off. Now, this past quarter they were able to get that down a little bit, and our diligence suggests that it’s going to come down even more going forward while they maintain their level of growth. So I think that’s a positive catalyst for this company and this stock, but it’s certainly something to keep an eye on.

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.