Blackboard Plans to Acquire Course-Management Rival WebCT in a Deal Worth $180-Million

By DAN CARNEVALE

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Information Technology
Blackboard plans to acquire course-management rival WebCT in a deal worth $180-million

Information Technology
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Blackboard Inc. said Wednesday that it plans to buy its longtime course-management software rival, WebCT Inc., in a $180-million deal that would make the new corporation the Goliath of its market.

If the deal goes through, the companies would together have more than 3,700 clients, among them nonprofit and for-profit colleges, elementary and secondary schools, corporations, and government agencies.

Matthew S. Pittinsky, chairman of Blackboard, said in an interview at the company's offices after the announcement that the merger had always seemed inevitable, given the two companies' similar missions and products. "There have been conversations on and off since the beginning," he said. "We've always felt these two companies belong together."

Both boards of directors have already approved the deal, but it still needs the approval of regulators. Mr. Pittinsky said he expects the company to complete the merger, under the Blackboard name, around the end of the year. Some details about the deal are available on Blackboard's Web site.

Both companies offer products that allow students to do course work online, whether as part of an on-campus class or through a distance-education program. The software also helps faculty members manage their courses.

Mr. Pittinsky said the company would not phase out WebCT's products or lay off its workers, at least in the short term. The WebCT technology will continue to be produced, supported, and enhanced, he said, all under the WebCT name.

Eventually, though, the company plans to create a common architecture for both products. That will make it easier for others to create add-ons to customize Blackboard's offerings, Mr. Pittinsky said.

In 2002, Blackboard acquired another content-management software provider, Prometheus (The Chronicle, January 25, 2002). Last year Blackboard became a publicly-traded company, with an initial public offering of $14 per share that raised an estimated $75-million. The stock, which trades on the Nasdaq exchange under the ticker symbol BBBB, closed on Wednesday at a value of $22.92. The merger announcement was made just as the markets closed.

WebCT is privately held.

In the 2004 fiscal year, Blackboard had $111.4-million in revenue and WebCT had $38.4-million in revenue. Both companies said that 90 percent of their customers that year had renewed their contracts.

Carol A. Vallone, president of WebCT, said the course-management market should benefit from the merger. "We see it as an opportunity to fast-forward a really hot e-learning industry," she said in a telephone interview. "It provides us with a robust opportunity to expand globally."

Ms. Vallone said she had a contract to stay with the company as a consultant for at least a year, to help with the merger. After that, she said, company officials will decide whether she should stay on.

Education-technology analysts say the new Blackboard will be far and away the dominant player in the market.

"They really are two powerhouses," said Catherine F. Burdt, lead analyst for postsecondary solutions for Eduventures Inc., a market-research company based in Boston. "This company will come together to create a big powerhouse."

But that doesn't necessarily mean Blackboard will squash all its competition, she said. Another software company, eCollege, is still a big player in course management, and there are several smaller competitors, including Angel, Desire2Learn, and Intralearn, she said. "They'll now only have to keep their eye on one big competitor," she said.

Plus, she said, open-source options, such as Sakai and Moodle, are gaining popularity.

Oakleigh Thorne, chairman and chief executive officer of eCollege, offered the same assessment. He said some Blackboard and WebCT clients may not be happy that the two largest providers in the market are joining forces. That may prompt colleges to look for other options.

"There's going to be a lot more opportunities for us," Mr. Thorne said. "We don't see it as a scary Goliath at all."

Mr. Pittinsky said Blackboard would use the merger as a chance to expand. He hopes to find more opportunities for the company internationally, for instance. WebCT already has a significant number of clients in foreign countries.

"They will double our international presence," Mr. Pittinsky said. "They'll give us critical mass in some countries, and they'll give us presence in other countries."

In addition, Mr. Pittinsky hopes Blackboard can now penetrate further into the K-12 market, because school districts often look to higher education for guidance into course-management purchases.

But Ms. Burdt said that expanding Blackboard's sales to secondary schools may be difficult, given that many school districts are operating on tight budgets.

Overall, Ms. Burdt said, the merger should not come as a surprise. The use of technology in education has become more mainstream, prompting a market shakeout, she said. "This was a move in a mature market," Ms. Burdt said. "Mature markets, you tend to see consolidation."

But Mr. Pittinsky said the market for course-management systems still has a lot of growing to do. Blackboard and WebCT needed to merge in order to prepare for whatever challenges lay ahead, he said.

"We're both pioneers of e-learning, and e-learning is still in a very early stage of its development," Mr. Pittinsky said. "There's a yearning, I think, by faculty members to go to that next level."

• New Courseware Feature Will Make It Easier for Instructors to Secure Copyright Permissions (10/12/2005)

• Sakai Project Offers an Alternative to Commercial Course-Management Programs (9/24/2004)

• Open Source in Higher Education: a Sampling (9/24/2004)

• Blackboard Begins Selling Stock to the Public; Share Price Jumps (6/21/2004)

• Course-Management Outfits Still Seek Elusive Profits (7/12/2002)

• Blackboard Will Acquire a Competitor, Prometheus, From George Washington U. (1/25/2002)

• 3 Companies That Sell Course Software Say They Are Raking in Money (11/16/2001)

Opinion:

• The Next Wave: Liberation Technology (1/30/2004)