Kaplan, a pioneer in education services and division of The Washington Post Company (WPO), recently announced measures to tame the sluggishness prevailing over its higher education segment.
The measures include streamlining general and administrative operations, leading to the removal of administrative infrastructure and implementation of cost-effective operational constitution at its Higher Education division.
Further, the structural change will aid in optimum allocation of resources, thus helping the company to retain and improve scholar services while bringing educational novelty. The company will shift major centralized services to the Kaplan College/Kaplan Career Institute campuses and KaplanUniversity. However, some centralized services will also be shifted to Kaplan Inc.
Moreover, Jeffrey Conlon, Chief Executive Officer of Kaplan Higher Education and Beth Hollenberg, President of Kaplan Higher Education Campuses (KHEC) will be replaced by Lionel Lenz and John Lock, respectively.
Kaplan Higher Education (KHE) has long been grappling with sluggish performance and declining revenues. The company registered an 18% and 3% decline in its revenue in the past two quarters. Further, the education division’s revenue fell 10% during the first quarter of 2011 with new student enrollments dropping 48% during the period, thus adding concerns to management.
Further, Kaplan Higher Education faces stiff competition from traditional colleges as well as other for-profit schools. The company’s cable television system faces intense competition from other forms of video program delivery systems, including DBS services, telephone companies and the Internet.
In the recent years, Kaplan gained strength from both rapid internal growth and acquisitions. These acquisitions include education businesses in overseas markets (Canada, Ireland, Australia and China). We think Washington Post will continue with the acquisition spree while focusing on profitability.
Currently, we maintain our long-term ‘Neutral’ recommendation on the stock. Moreover, The Washington Post, which faces stiff competition from The New York Times Company (NYT), holds a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating.
