For Subscribers

Get the complete article now!

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: What is the outlook for 2002? Could these stocks be regarded as something of a safe haven if the economy fails to recover on schedule?

Mr. Cappelli: Without a doubt. Primarily for most of the postsecondary companies, I think the fundamentals remain strongly in place. That means we're seeing good demand from both working adults and high school grads who want to earn more by getting a college degree versus not getting a degree. I think we have continued to see excellent pricing power this year, anywhere from 5%-7%, primarily due to the fact that state schools and private schools are raising their tuition by at least that much. I think that on a broad basis there is good demand for postsecondary career-based education, which positions companies in this space well for 2002.

TWST: Let's talk about the programs that are going to be most in demand in 2002 and 2003. Which will be most in demand?

Mr. Cappelli: I think that first and foremost, we continue to see very good demand in business, finance, and marketing, as well as broadly in the business skills area. Second, there is clearly still demand, even though it's not as strong as it was in IT. Our diligence suggests that there is still good demand in the area of networking and visual communications. We continue to get data that suggests that, from a career-based perspective, there is still good demand in the lower-level entry positions. I think culinary continues to be an area where there is solid demand as well. Of course, health care is a content area that tends to be less cyclical and posts solid growth due to strong demographic trends.

TWST: What about e-learning that’s targeted toward K-12? That’s another segment of the industry, isn’t it?

Mr. Cappelli: It is, and it’s really based on a different type of spending. As an example, part of Riverdeep’s (Nasdaq:RVDP) business is to sell content into the schools — reading, writing and math in an online format. Obviously, that buying decision is very different from the buying decisions associated with corporate training, but it is certainly something that is gaining traction with teachers, parents and children.

TWST: Is the buying decision made by the individual school or by the school district?

Mr. Cappelli: It actually can be either.

TWST: Are there any companies that you would recommend in this sector?

Mr. Cappelli: Specifically in the e-learning K-12 area, our top pick would be Riverdeep.

TWST: Are there any schools besides Edison that investors can look at in the K-12 segment?

Mr. Cappelli: None that are public companies right now. There are some private companies that are out there, but from a public company standpoint, Edison is really the clear leader.

TWST: Do you expect to see any of these private companies become public?

Mr. Cappelli: Yes, I think eventually we’ll see that.

TWST: And what would you do with Edison today ahead of the Philadelphia contract?

Mr. Cappelli: We would buy the stock.

TWST: One last question: what are some of the questions that investors ask you most frequently about the education sector?

Mr. Cappelli: The questions vary from segment to segment. In corporate training, the questions are: do these companies have the right product?; do they have the right content?; and are they able to provide a broad enough array of products and services to large corporations to be a viable buying decision going forward?

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.