The County’s Trade and Tech Schools Grapple With the Economic Downturn
The economic slowdown that began last year in the technology sector is posing a severe test for for-profit technical schools that had been riding the expanding tech bubble in the ’90s.
The second-largest Orange County-based technical education company, New Horizons Worldwide Inc., has been particularly hard hit.
The franchiser of New Horizons Computer Learning Centers and the largest independent provider of computer training last month lowered its current-quarter revenue forecast from $44 million to $39 million. New Horizons Chief Executive Bob McMillan has reported a significant drop-off in revenues following the Sept. 11 terrorist attacks. Company officials said the falloff reflects a significant decline in demand from corporate clients, which account for 80% of New Horizons’ revenue.
The company’s training centers offer a broad range of courses for several of the major software vendors, including Microsoft, Novell, Lotus, Cisco, Linux, Adobe, Aldus, Apple Computer, Sun Microsystems and Unix. New Horizons has the largest network of Microsoft and Novell certified tech education centers in the world.
The company’s share price, which peaked at 18.70 in June, has since fallen to around 10 last week,though that’s still higher than its year-ago share price of 8.30.
The company has laid off nearly 200 of its employees nationwide this year, with some of those cuts coming since Sept. 11. Most of the layoffs were spread throughout the company’s 29 locations nationwide, but a few dozen jobs were lost in OC.
The company also recently moved from its former Santa Ana headquarters into new space at Stadium Gateway in Anaheim near Edison International Field. The new space has 83,000 square feet, compared with the 60,000 square feet the company had in Santa Ana.
But in moving to the leased Anaheim space, the company abandoned plans to build a new headquarters in Santa Ana, and it sold a 7.8-acre parcel it had acquired for that purpose.
Another local high-tech-oriented for-profit school, Quick Start Intelligence, reported that last year’s burst of the dot-com bubble has hurt its enrollment.
“Business is down 20% to 30% over last year,” said Steve Dosier, Quick Start’s vice president sales and marketing. “Last month we did show a slight uptick over the previous October,that followed sporadic cancellations following Sept. 11, where a lot of people had to stay on the job.”
Quick Start’s projected enrollment this year is about 7,500, down from 10,000 last year. The school offers courses in programming and computer networking.
Apart from Irvine, Quick Start also has schools in Santa Clara, San Francisco, Woodland Hills and Los Angeles.
Another Southland school, Los Angeles-based Learning Tree International Inc., also has reported steady declines in revenue this year compared with last.
“During the two weeks after the attacks, the disruption to our courses in the U.S. reduced our revenues by about $2.3 million,” said Learning Tree Chief Executive David Collins.
The company last month said disruptions to its business caused by the Sept. 11 attacks would reduce its September quarter revenues, but that its rate of new enrollments had since rebounded.
In contrast to the distress of many other for-profit school operators, Santa Ana-based Corinthian Colleges Inc. has reported little effect thus far from the economic downturn.
Corinthian’s schools offer a range of classes besides computer and software training, including curricula in medical assisting, electronics and business. Corinthian also offers a variety of master’s, bachelor’s and associate’s degrees and diploma programs. Only about 15% of its students are in classes related to high-tech fields, according to Corinthian Chief Executive David Moore.
Moore said hard times often have a counter-cyclical effect upon education in general.
“During hard times people tend to look at going back to school to improve their skill sets in case something goes wrong with their current jobs, or they want to maintain jobs they already have,” Moore said.
The school, which owns 60 colleges nationwide,17 in California,last month reported record fiscal first-quarter revenue of $73.7 million, up 42.3% from last year’s first-quarter figure of $51.8 million, and the company beat analysts’ estimates.
The company also said it expects to sustain 20% to 25% revenue growth in the next several years, and forecast revenue for fiscal 2002 to grow by 28% to 31%.
The company’s stock price last week was hovering around 37, down from a peak of 52.85 on Aug. 30 (when the company warned) but still well above its year-ago position around the 24 level.
Corinthian also reported record enrollment for this academic year, with 28,372 students, a gain of 31.6% from the same time last year. Moore attributed the enrollment gains to investments made last year in distance education, new programs, acquisitions and new branch campuses.
“Many of the IT programs we’re running focus on training people to set up and run networks for all types of companies,” he said. “So we’re below the radar screen for most of the dot-com-related activities and we weren’t affected by last year’s meltdown.”
Moore said Corinthian isn’t looking to proportionally grow or shrink its high-tech offerings.
“For now, we’re comfortable with the job prospects our IT graduates are finding once they graduate,” he said. n
