Atlanta, GA – Scibility Media – 11/20/2014.
K12 Inc. (NYSE:LRN), which enticed the world with appealing virtual schooling concept did not pass out with flying colors. In fact, it is facing harsh criticisms for the unexpected outcomes and aggressive marketing push. The largest operator of online public schools in the U.S. is showing red on the report card as it loses faith of some true believers, lost some management contracts and stands on the verge of school shutdowns in five states this year alone. Resultantly, the share price of K12 Inc. (NYSE:LRN) has nose-dived by two-thirds since September 2013.
Virtual Schooling Concept
K12 caught the frenzy of homeschooling families as it allowed students to follow academic routine online right from their basements. President George W. Bush and Barack Obama also favored the online platform and lobbied for laws permitting their adoption. The company came to the rescue of athletes and students in remote areas or those recovering from accidents and illness to allow them to pursue their school course without any hurdle. The barrier free education helped K12 Inc.(NYSE:LRN) to grow rapidly across 33 states and District of Columbia. The enrollment at K12 led charter schools grew four-fold during 2008-2013 to 120,000. Also, the company was able to increase its revenue from $226 million to $920 million during this time.
Then What Went Wrong?
The question that hits at the instant is what went so wrong with K12 Inc. (NYSE:LRN). There are too many weak points of the company that are eventually uncovering over the time. The first and foremost of which is the scanty pass out percentage. Just one-third of the students enrolled under K12 program were academically admissible during the year 2012-13, while a large percentage of students performed below the state average.
The ‘Open for all’ based enrollment system led to the admission of more of low-income students and those who underperformed at regular schools. This has come contrary to the expectations of reaching out to digitally savvy group. The mismanagement K12 Inc. (NYSE:LRN) has even forced its former managing director, Houston Tucker, to open up his thoughts as he said that the institution prioritizes profit over education.
In addition to this, the company is already said to have settled $6.75 million litigation case in 2013 from a former employee, who alleged K12 of aggressive marketing tactics. The recruitment malpractices at the company came into light during 2013 investment conference, when hedge fund manager Whitney Tilson said that he is short on its stock. More intriguing is K12’s two lost contracts from Agora and Colorado Virtual Academy and shutdown fear in Tennessee, Michigan, and Massachusetts. Off late, the Securities Exchange Commission has also instructed K12 Inc. (NYSE:LRN) to make its student attrition rates and scores transparent to public, thereby, creating a negative mood around the company.
DeVry’s Right Approach
Like in any other case, the failure or success of online education platforms too is dependent on its management’s vision. Unlike K12 Inc (LRN), it seems that DeVry Education Group Inc (NYSE:DV) has taken all the right measures to bank upon the opportunities present in the online education sector. Foreseeing the wide disparity in demand and supply present in nursing and medical field, the group has already invested into the respective education fields. Aging is a natural process and as more percentage of the U.S. population approach their grey years, DeVry Education Group Inc (NYSE:DV) aims to create a pool of nurses and physicians, just at the right time. Looking at the enormous growth potential that these two sectors have in future, DeVry is undoubtedly on the right spot.
Further, a report from Wells Fargo throws light on the aggressively increasing tuition costs at public and private colleges. The report projects that tuition costs will soar to $177,784 and $394,719 by the year 2020 at public and private universities respectively. Thus as the regular courses become unaffordable, it is expected that more of middle-income group American will turn to online education. In this case, DeVry Education Group Inc (NYSE:DV) is expected to have an upper hand on the basis of a range of courses available on its platform.
An Important Message For Sibling Group Holdings
The vast dissimilarity between K12 Inc. (NYSE:LRN) and DeVry Education Group Inc (NYSE:DV) should help Sibling Group Holdings Inc (OTCMKTS:SIBE), another online education provider, to position itself in the market. Sibling Group should also aim to address the growing educational needs of the American population through laying down a robust curriculum. The foresightedness of DeVry Education should inspire Sibling Group to meet the demand of qualified professionals in soon-to-be blooming sectors of the economy like that of healthcare.
Another agenda that should be prioritized by Sibling Group Holdings Inc (OTCMKTS:SIBE) is that of student achievement. Traditional educators have been taking shield of below-average performance by students as the basis of resisting online education. Therefore, improved learning outcomes are one factor that could set the company apart from others. The new tools and techniques provided by online platform will prove meaningful only if it translates into improved student scores and lower attrition rates. The focus of Sibling Holdings should be on the quality of education and should not be solely driven by profit motives.
Since the competition in the sector is restricted to few players, therefore, scores and student achievement will be a major yardstick to qualify one as a future lead runner. Moreover, Sibling Group should take steps to include one and all under its courses and should not be restricted to a narrower group of underperformers.
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