Marrying Season

As though Saba/Centra wasn't enough excitement, on Oct. 12, Washington, D.C.-based Blackboard, a provider of enterprise software and services to the education sector, announced that it would acquire WebCT, a Lynnfield, Mass.-based competitor, for $180 million.

The combined companies will operate under the Blackboard name and brand with corporate headquarters in Washington, but operations will continue in WebCT's facilities in Massachusetts and Canada. Michael Chasen will continue to serve as president and CEO. Expected to close late this year, or early next, the deal comes just a week after Redwood Shores, Calif.-based learning management system provider Saba announced its plans to acquire Centra Software, an LMS and collaborative learning provider in Lexington, Mass.

The acquisition seemed only natural given the two companies' common goals and shared space in the learning market, says Tim Hill, senior vice president, worldwide marketing for Blackboard. "When you can combine forces with a competitor, you can double the size of your development team, so you can innovate the technology, offer more value for your clients, and build a community of practice," he explains. "There were a lot of synergies between the companies, the people, the fact that we ran into them all the time." Hill says, for instance, that the two companies already attend the same industry association meetings and work with the same research firms and standards boards.

But the companies also vary enough to complement each other, says Hill. Blackboard is larger, but WebCT has international offices in countries such as Finland and Japan, that Blackboard would like to expand into. "They have a quality product, and stellar reputation for client support that we thought complemented our size, breadth and depth of products beautifully," he says. "The acquisition] helps us round out [Blackboard's offerings] and have the best in breed technology."

Blackboard would like to develop a new "standards-based product suite that will incorporate the best elements of Blackboard's and WebCT's solutions," he says, explaining that the company has not yet decided when this joint offering might hit the market.

WebCT is about half the size of Blackboard in content management system (CMS) revenue, number of licenses, sales force and employee count, equity research analyst Cornelia Weggen writes in the Oct. 17 "Education Services" newsletter of Milwaukee-based Robert W. Baird & Co., an investment firm that watches corporate education stocks. In addition, WebCT will contribute 514 overseas clients to Blackboard, doubling the number of the company's international customers and revenues.

WebCT products, including customer support, will remain available, but will sell under the Blackboard brand label, says Hill. "We want to continue to grow the Blackboard brand because it's very expensive to support two brands, and it's much easier to support multiple product lines because you derive revenue from those product lines," he points out. The two companies' user conferences will also eventually be combined, though Hill says no timeline has been established yet for making the change.

The acquisition comes at a fortuitous time for Blackboard, just as it confronts a new competitor in the form of the Sakai Project, an open-source CMS project resulting from a consortium of approximately 80 institutions led by the University of Michigan, Indiana University, Stanford, and the Massachusetts Institute of Technology, with backing from the Mellon Foundation, Weggen notes in "Education Services." The Sakai project has so far launched three major software releases, and plans two new releases a year. Baird expects the next release, due out in November, to be comparable to Blackboard's solution. "We expect inroads for Sakai to be made primarily among larger, research-oriented institutions looking to move away from home-grown systems but wanting to maintain control over CMS features and function," Weggen writes.

She stresses, however, that Blackboard should, at least for the time being, remain competitive against Sakai. "While we believe Blackboard could lose some existing and potential customers, we believe a material exodus is highly unlikely. Switching costs are high, and Blackboard customers tend to be satisfied and loyal," she explains. Moreover, Weggen points out that Blackboard will likely be able to adopt and co-opt Sakai innovations, so that customers will probably end up flocking to whichever provider offers them the best price. —M.W.