The Players: London-based education publisher Pearson plc; and Chancery Software Ltd. and PowerSchool (formerly owned by Apple Inc.), developers of software tools that allow schools to manage student data.

The Plan: Pearson is expanding its presence in student information systems, while at the same time exploring innovative ways to deliver content. The acquisitions of Chancery and PowerSchool in May support both efforts. The companies offer Web-based products that track student attendance, grades and test scores, and allow teachers to analyze data and compile reports. Pearson plans to fold Chancery and PowerSchool, the No. 1 and No. 3 SIS companies in the U.S., respectively, into a single company, Pearson School Systems. Acquiring PowerSchool from Apple will also expand Pearson's ability to develop educational content for playback on iPods. Pearson textbooks are already available via the iPod mini to students in California through a partnership with Apple.

The Context: Pearson, owner of The Financial Times and the Penguin Group publishing house, had revenue of just under £4.1 billion ($7.5 billion) in 2005, with more than 60% of sales coming from institutional education. The company is looking to enhance its education business by developing new mediums to deploy content and expanding its presence in testing. This year alone, Pearson has acquired the professional testing service Promissor and the teacher certification-testing administrator National Evaluation Systems, in addition to Chancery and PowerSchool.

The Risks: SIS -- along with curriculum content and assessment -- is part of a three-pronged education strategy for Pearson. Technology products, including SIS software, generated sales that were 9% above market growth in 2005. SIS is expected to keep growing, but repeal by a new administration of the No Child Left Behind law in the U.S., which requires considerable testing and tracking of student performance, could hurt sales. There's also plenty of competition in SIS from companies including McGraw-Hill Digital Learning, Riverside Publishing Co.'s EduSoft and SchoolNet Inc.

The Reward: Pearson should benefit from growth in the SIS and assessment sectors as long as No Child Left Behind remains intact. And its R&D arm, Pearson School Technology, along with its continuing relationship with Apple, should serve it well as demand increases from teachers for innovative ways to deliver content.

What's Next: Pearson isn't saying whether additional acquisitions in the SIS space may be on the horizon, but its relationship with Apple could mean more iPod content. One obvious possibility would be using the new iPod video function. -- Phineas Lambert

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