By a number of recent accounts, the prospects for companies doing business with schools in the United States have brightened recently, with state and local governments slowly climbing out of gloomy doldrums of the “Great Recession” and its extended aftermath. But one of the biggest names in education, Pearson, recently described its own, recent performance in less favorable terms, saying its financial results had been “weaker than expected,” particularly in North America.
In a trading update released in advance of a fuller report on its 2013 earnings next month, Pearson said that “cyclical, policy-related, and structural pressures” had squeezed its education publishing business.
That news rattled investors, prompting a subsequent 8 percent drop last week in Pearson’s shares.
Why did Pearson run into trouble?
The London-based company, which works in about 70 nations and has an estimated 45,000 employees, said state budget pressures had not helped Pearson financially, and that the “transition to the common core” had affected its school businesses. Enrollments in Pearson’s “career college” sector also were weak, the company said.
Brendan O’Grady, a Pearson spokesman, said in an e-mail that while financial conditions in U.S. states are beginning to rebound, spending hasn’t fully recovered. (Roughly 90 percent of spending on K-12 education in the United States flows from either the state or local, rather than the federal, level).
Many states and schools are scrambling to find materials that they believe will help students prepare for the Common Core State Standards, and the tests aligned to them, as EdWeek has reported.
But O’Grady said that some states and districts might be waiting until the standards and tests are more firmly established before they invest extensively in various testing products, learning technologies, and other resources.
John Fallon, Pearson’s CEO, said in the trading update that the company had made “good progress on our strategic goals in 2013,” but expects challenging conditions in 2014. The company will have to work to control costs and make sound investments during that time, he said.
The company remains “confident about our growth prospects in 2015 and beyond,” Fallon said. “Pearson will emerge from this transitional phase as a stronger, faster-growing company, better able to tackle some of the biggest problems in global education.”
One area where Pearson says it’s doing well: emerging international education markets, especially in South Africa and China.
See our recent story about education companies from the U.S. and other nations scrambling to stake out a place in China. Pearson already has some 6,000 employees in the world’s most populous country, where there’s strong demand from students and families for tutoring and other supplemental services outside of the traditional, government-run education system.