A Class Act

By Robyn Taylor Parets, Investor's Business Daily

A little more than 20 years ago, university professor John Sperling decided he wanted to start a new kind of educational system to cater specifically to working adults. Sperling was a professor at San Jose State University at that time, when adults over the age of 24 made up a little more than 25% of the total student population. But Sperling had a strong feeling that this statistic would grow dramatically over the next two decades. He went with his gut feeling and started Apollo Group, Inc.

Through its subsidiaries, the University of Phoenix and the Institute for Professional Development, Apollo is now one of the nation's largest providers of adult education. "The economy is forcing people to renew their skills, and sometimes the only way to avoid layoffs is to continue their education," Sperling said. Apollo Group's total enrollment exceeds 36,000 students, and educational programs are offered at more than 70 campuses and learning centers in 25 states, Puerto Rico and London. Phoenix-based Apollo Group operates University of Phoenix -- now the nation's sixth-largest private, accredited university -- in ten states, and expects to gain approval to enter Florida and Oregon within the next few months, Sperling said. The company also is evaluating locations in Washington, Tennessee, Pennsylvania and British Columbia.

In some states, like Massachusetts, New Jersey and New York, it's not easy to get licenses to operate a university. That's where the Institute for Professional Development comes in, he said. IPD works with accredited universities to implement and market adult education programs. The company has 15 IPD programs under contract. It's a great arrangement for both institutions, Sperling said. "We do the marketing and research for other colleges and we split the tuition dollars 50-50," he said. Because Apollo Group addresses a growing niche market -- education for working adults -- the company has enjoyed rapid growth. Same-school enrollment has grown at a rate of 20% to 25% a year. Sales and earnings have increased as well. For the May 31 third quarter, earnings were up 48% to $5 million, or 34 cents a share, compared with $2.3 million, or 23 cents during the same period a year ago. On a pro forma basis, assuming the company's initial public offering occurred at the beginning of 1994, earnings per share were up 112% to 34 cents, compared with 16 cents a share. Revenue was up 33% to $45.5 million.

But running University of Phoenix and IPD was only the beginning for this company's growth. Apollo Group, which also has entered partnerships with several corporations to offer education to employees, just announced the largest deal between a university and private enterprise to date. Last week, the company announced it had formed a partnership with AT&T Corp. to provide graduate and undergraduate degrees and learning programs to AT&T's 200,000 employees worldwide. Under the agreement, University of Phoenix also can award program credit for certain courses that have been completed through the AT&T School of Business, which provides more than 300 programs for AT&T managers. AT&T employees will have the option of taking courses at any of University of Phoenix's 42 locations. Students also may choose the directed study option, which requires them to complete course work independently and communicate with professors by telephone, modem, fax or mail. "If this works out well, we'll do everything we can to showcase the relationship and replicate it (with other corporate partnerships)," Sperling said.

Another option for AT&T students, as well as any other students, is Apollo Group's Online education program, which was launched in 1989. Based in San Francisco, Online gives students who travel or do not have a lot of time another way to further their education, said Sperling. The approximately 1,200 Online students can access and download course work through the Internet or the CompuServe on-line service. Online sells specific software to its students that enables them to log on every day. "They need to log on five days out of seven or they are considered absent," said Sperling. Nonetheless, the program has been extremely successful because students have the flexibility to log on at any hour. "The completion rate at Online is higher than it is on the ground. Ninety-two percent will complete programs and 60% will complete their degrees," he said.


This article can be found on page A6 of the October 17, 1995 edition of Investor's Business Daily.

Reprinted, by permission, from Newsmakers, (C) 1995 Investor's Business Daily.