Plato Learning, Inc.

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Plato Learning, Inc.

10801 Nesbitt Avenue South
Bloomington, Minnesota 55437
Telephone: (952) 832-1000
Toll Free: (800) 869-2000
Fax: (952) 832-1200
Web site:

Public Company
Incorporated: 1989 as The Roach Organization, Inc.
Employees: 376
Sales: $56.11 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: TUTR
NAIC: 511199 All Other Publishers

Plato Learning, Inc. is a developer of interactive, computer-based educational and training products for the K-12 and adult markets. The companys courseware, which includes instruction in reading, writing, math, science, life skills, and career skills, is marketed to school systems, colleges, job-training programs, the military, and correctional facilities, as well as to corporations and individual consumers. Its courses are delivered to users via local area networks, intranets, CD-ROMS, or the Internet.

1960s-70s: Roots in Academia

The company that is today called Plato Learning traces its roots back to the University of Illinois. In the early 1960s, at that universitys Urbana campus, electrical engineering professor Don Bitzer and physics professor Chalmers Sherwin became intrigued by the idea of using computers for teaching. Operating on grant money from the National Science Foundation, the two men designed and developed the nations first computer-based education system, which they called PLATOan acronym for Programmed Logic for Automatic Teaching Operations. PLATO was a time-sharing program, which meant that multiple users with individual terminals were networked to a central mainframe, allowing for simultaneous use of the system.

The PLATO system soon captured the attention of William Norris, the innovative and progressive leader of Control Data Corp. Norris and a group of associates had founded Control Data in 1957 to design and build extremely powerful, highspeed computersincluding the worlds first supercomputer designed by Seymour Cray. The company, headquartered in Bloomington, Minneapolis, had rapidly diversified into other aspects of the computing industry, designing and producing software and peripheral equipment. When Norris learned about the University of Illinoiss research in computer-based learning, he gave the program one of Control Datas large, powerful computers. He also arranged for his company to test the PLATO programs as they were developed.

PLATO continued to evolve throughout the 1960s and 1970s. Whereas the original system could support only a single classroom of users, in the early 1970s PLATO was migrated to a larger-scale mainframe environment that allowed for hundreds of simultaneous users. In addition, in 1973 the system was enhanced by a communications system called Notes. Noteswhich allowed students to communicate with each other, both one-to-one and in groupswas the forerunner to todays electronic communities.

In 1976, Control Data obtained the rights to the PLATO system, with plans to sell it to elementary and secondary schools. Such sales failed to materialize, however; at the time, most public and private schools lacked the resources and education necessary to purchase and implement the program. Control Data turned its focus to the adult literacy, remedial learning, job welfare, and job training markets, investing millions of dollars in PLATO to build up the necessary curricula for these new customers. The change in focus produced slightly better results, but still the system never really took off as Norris had hoped.

Late 1980s: Enter Bill Roach

In September of 1989, Control Data sold its training and education groupand along with it, the PLATO systemto William R. Roach. By that time, the business consisted of not only PLATO Education Services, providing K-12 computer-based curricula, but also PLATO Professional Testing & Certification Services, which provided certification services to the real estate, securities, and other industries. Also included was an aviation training business, which provided computer-based training courses to pilots, maintenance staff, and flight crews of commercial airlines and the military.

Platos new owner, Roach, had previously been president of Applied Learning International, a subsidiary of National Education Corp. Resigning from Applied Learning in 1988, he formed his own company, Edu Corp., to acquire training and education companies. When he purchased the Control Data group for $20 million, he created a subsidiary of Edu Corp. to house it. The subsidiary was called The Roach Organization.

Despite the fact that Control Data had failed to make a go of the PLATO system, Roach had high hopes for it. In an April 1990 interview with the Minneapolis Star-Tribune, he said, We expect to nearly double revenues in our first year, and were looking for a strong profit as well. Roach believed that PLATOs sluggish sales under Control Data resulted simply from a lack of proper marketing. His opinion was not without a basis; Control Data had failed to make good connections with its customer base. When Roach bought PLATO, many potential customerslacking accurate, current information on the productwrongly believed that the system was outmoded and outstripped by more modern applications. For example, many believed that the system still ran on a mainframe when in actuality, it had been delivered on PCs, via local area networks, since 1986.

However, The Roach Organization most emphatically did not show a strong profit in its first year; rather, it lost some $12 million. This resulted primarily from Roachs decision to invest heavily in the K-12 segment of the businessa move designed to shift the company away from adult literacy and remedial programs and back toward programs that could be integrated into standard school curriculum. This approach was both a huge challenge and a huge opportunity, since PLATO was by no means widely accepted in the mainstream school market. In 1990, the system was installed in only 50 schools.

In 1992, it began to appear that Roachs strategy had been the right one. The company posted a net profit of $3.9 million for that year, even in the face of a severe decline in the testing and certification segment of the business. That same year, the company went public, changing its name to TRO Learning Inc.

Mid-1990s: Difficult Years

Selling off its lagging testing business, TRO continued to be profitable in 1993. The company posted earnings of $4.6 millionup 18 percent from the previous year. Encouraged by its success, TRO continued to invest in upgrading the PLATO courseware. The years between 1992 and 1995 were spent redesigning its core curricula. Major changes included a range of instructional improvements; a new user interface with graphics-based function buttons; and new graphics and animation designed to both appeal to the target audience and contribute to learning objectives.

But the mid-1990s ushered in new troubles for the company. Since 1990, the commercial airlines industryone of TROs main customershad been suffering a near-devastating downturn, racking up billions in losses industrywide. Many carriers filed for bankruptcy protection while others cut thousands of jobs in an effort just to stay afloat. As the losses in the airline industry trickled down to its tiers of suppliers, TRO felt the impact. Revenues generated by its aviation training business dropped precipitouslyand the companys net earnings followed suit. By 1996, profits were down to $980,000, and in 1997, the company suffered a $20 million loss.

Roach knew drastic measures were in order. One of the first steps he took was to call in helpin the form of John Murray, the head of TROs UK operation. Murray had been with TRO since Roach formed it; prior to that, he had headed up Control Data Corp.s London-based training service. When Roach asked him to move to the United States, and subsequently appointed him senior vice-president of operations, it marked the beginning of a restructuring for TRO.

The company made a number of changes over the course of 1997 and 1998, many of them designed to revamp its sales and support operations. By weeding out redundant systems and making better use of order-processing technologies, it was able to reduce its marketing and sales staff by approximately 19 percent. It cut its support staff even more deeply, eliminating around 25 percent of those positions. The company also began offering clients a new fee-based service and support program, which included training, installation, and technical support for the PLATO products. This created a new $2.5 million income stream.

A more drastic restructuring measure came in the fall of 1998, when TRO sold its aviation training business to the United Kingdom-based VEGA Group. This left the company with a single focus: the PLATO education system.

Company Perspectives:

PLATO Learning builds technology-based learning environments that give: Teachers the capacity to personalize instruction for every learner on demand, anytime, anywhere; Communities the confidence their students are fully engaged in real learning, with accountability, measurable performance, and real results; and Students the excitement of learning, motivation for personal growth, and the necessary foundation on which to build a productive life and good citizenship.

In addition to cost-cutting measures, TROwhich had previously delivered its courses primarily though local area networks or CD-ROMsbegan angling for a piece of the growing online learning market. In the spring of 1997, the company partnered with BC TEL Interactive, a British telephone company, to distribute PLATO courseware via the Internet to students in British Columbia. The agreement provided for not just a distribution channel, but a sales channel as well; BC TEL account managers were commissioned to actively market the courseware as part of their Internet service offerings. In late 1997, the company signed a similar agreement with BellSouth, providing for sales and delivery of PLATO courses on the Internet in the nine-state BellSouth service area. Under the arrangement, customerseither individuals or schoolscould purchase courses online through BellSouths Education Gateway site and have them immediately downloaded or shipped in CD-ROM form.

Late 1990s: Turnaround

By the end of fiscal 1998, the company began to show signs of turning around. Demand for the PLATO system had increased, with sales of courseware and related services climbing to $39.4 millionup $8.8 million, or nearly 30 percent, in just three years. The company also managed to post a profit of $3 milliona not insignificant feat, given the previous years $20 million loss.

Sales continued to increase in 1999, growing to $44.1 million by year-end. The steady growth was partially attributable to a series of strategic partnerships that provided new sales channels. For example, in late 1999, the company partnered with Sylvan Learning Centers to provide PLATO courses throughout the more than 750 Sylvan learning centers. It also partnered with the Provo, Utah-based Brain Garden, a direct seller of nutritional and educational products. The agreement allowed Brain Garden to market PLATO software through its sales network.

Other sales initiatives focused on a newly introduced product: single-topic PLATO courses. The initial single-topic library contained 66 titles, each of which could be purchased individually and delivered either over the Internet or in CD-ROM form. Previously TRO had sold its courseware as entire, integrated curricula. The single-topic courses broadened the companys pool of potential customers considerably, to include individual users who needed reinforcement only in certain academic areas, as well as small, rural school markets who lacked the financing or capability to implement entire curricula. To market these new courses, TRO allied with, a portal site and online catalog dedicated to lifelong learning and education. Simultaneously, the company developed its own e-commerce site through which to direct-sell its single-topic offerings.

The company ended the 1900s on a high note by winning the largest courseware agreement in its history. The deal, finalized in December of 1999, contracted TRO to provide curriculum, along with ten years of professional services, to all the schools in Glasgow, Scotland. One of a consortium of companiesincluding equipment providers and telecommunications companieschosen to build the Glasgow network, TRO expected its part of the project to be worth approximately $6 million.

Moving into the New Century

TRO kicked off 2000 with two major announcementsthe first involving a change in identity, and the second a change in leadership. On January 5, 2000, the company announced that it would be changing its name to PLATO Learning, to more fully leverage the reputation and recognition of its long-held brand name. Just days later, the soon-to-be-renamed TRO announced the appointment of John Murray to the position of president and chief operating officer. Ten months later, he was also appointed CEO as William Roach retired completely from the day-to-day operations of the company.

More changes were in the offing. In July 2000, PLATO Learning made its first acquisition, buying the Paradise, California-based CyberEd, Inc. for $4.8 million. CyberEd was a provider of science courseware for high schools. With the acquisition, PLATO added approximately 45 new science titles to its library of single-topic courses. The company also planned to integrated CyberEds course materials into its comprehensive PLATO curricula.

By the end of 2000, PLATO was installed in approximately 5,000 schoolsand it was preparing to make a move that would increase its presence by almost one-third. In January 2001, the company announced that it was acquiring Wasatch Interactive Learning Corporation, a Salt Lake City provider of computer-based curricula for K-8 education. Wasatchs products were used in more than 1,500 U.S. schools. It also carried a line of supplementary courseware for the adult education market. When the acquisition was completed in April, the combined companies had more than 10,000 education clients.

Looking Ahead

Midway through the first year of the new century, it appeared that PLATO had positioned itself for future growth and success. With its acquisitions finalized and its expanded customer base solidly in place, the company was turning its focus to what John Murray believed would be the next big thing in computer-delivered education: online, subscription-based products. PLATO had already begun preparing to capture a share of that emerging market. Early in 2001, it had released a web applications platform and simulated test systemproducts that allowed all of the companys content to be delivered online in a web browser curriculum manager. The company planned to begin offering those two new products to school districts on a subscription basis in order to begin building a subscription-based revenue stream.

Key Dates:

University of Illinois faculty introduce the PLATO system.
Control Data acquires the rights to PLATO and begins marketing it.
The PLATO system is deliverable over local area networks, rather than being mainframe-based.
William Roach and partners acquire Control Datas Training and Education Groupwhich includes PLATOfrom Control Data, and they form The Roach Organization.
Company goes public, changes its name to TRO Learning.
TRO sells the professional testing segment of the business.
TRO sells its aviation training business, leaving it with only the PLATO product.
TRO changes its name to PLATO Learning, appoints John Murray president and CEO, and acquires CyberEd, Inc.
The company acquires Wasatch Interactive.

The company anticipated that it would remain focused on the K-12 market in the short-term future. In a February 2001 interview with The Wall Street Transcript, John Murray said that the companys plan for the ensuing 18 to 24 months was to continue to sell our core products to the same core markets. As part of its effort to do so more effectively and on a larger scale, in August 2001 PLATO formed a strategic sales group dedicated to pursuing large contracts with states and with the nations biggest school districts.

Principal Subsidiaries

Lab One Canada Inc.; ExamOne World Wide, Inc.; Systematic Business Services, Inc.

Principal Competitors

Hooper Holmes, Inc.; Laboratory Corporation of America Holdings; Quest Diagnostics Incorporated; American Bio Medica Corporation; ChoicePoint Inc.; Employee Information Services, Inc.; Kroll Laboratory Specialists, Inc.; Medtox Scientific, Inc.; PharmChem, Inc.; Psychemedics Corporation.

Further Reading

Cruz, Sherri, Plato a Happy Not-Com, Minneapolis Star-Tribune, October 9, 2000, p. ID.

John Murrary, Plato Learning, CEO Interview, The Wall Street Transcript, February 19, 2001.

Youngblood, Dick, Life after CDC: Plato Finds Profit, Minneapolis Star-Tribune, April 2, 1990, p. ID.

, TRO Learning Right Itself, Finds Earning Curve, Minneapolis Star-Tribune, July 4, 1999, p. 3D.

Shawna Brynildssen

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Plato Learning, Inc.

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