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  • homeboyzz homeboyzz Dec 14, 1998 9:41 AM Flag

    stroy from post

    UOL Publishing Is Still Recovering From a
    Disastrous Decision to Raise Rates By Shannon Henry
    Washington Post Staff Writer

    The Dec.1 announcement
    smacked of immediacy: "[Michael]Anderson,
    UOL's Senior Vice President of Publishing, will replace
    Carl Tyson, who has resigned his operating and board
    positions, effective today, to pursue other
    But the management upheaval at UOL Publishing Inc. of
    McLean had been months in the making, tracing back to
    what chief executive Nat Kannan says was a bad pricing
    decision in 1997 by Tyson that sent the company's stock
    plummeting and forced the cancellation of a secondary
    The shake-up offers insight into how
    precarious the world of Internet business still is.

    "In high-tech you only get one strike," said Kannan,
    adding that the average life cycle of a tech company
    president is 18 to 24 months. That's because
    experimentation is vital in the super-time-compressed Internet
    market, but measures of success are still very

    "You see how easily they're considered a hero or not,"
    Kannan said.
    Kannan and Tyson, who was president,
    both said the departure was
    amicable and the
    decision mutual, best for the company and the

    individual. "I thought the investors might be happier with
    leadership," said Tyson, 49, who had been
    with the company for three years.

    UOL, which
    sells educational software, went public in 1996 and was
    enjoying encouraging revenue figures and stock prices. So,
    in 1997 Tyson decided that if UOL's corporate and
    university customers were happily paying $50,000 upfront for
    use of UOL's World Wide Web-based educational
    software, plus an extra fee of $50 to $200 for each course
    actually used, future customers would pony up $100,000 to
    create their own "virtual campus."

    Not exactly.
    The company's decision to double the price was
    disastrous. New customers didn't bite, analysts downgraded
    the stock and UOL's market valuation plunged by about
    65 percent.

    "The demand came to a screeching
    halt," Kannan said.

    Since then, UOL has been
    trying to pull itself out of a slump, with some success:
    Revenue will finish up $5 million to an estimated $15
    million this year and Kannan said he expects UOL to be
    profitable in 1999. Under the newer pricing system, more of
    a subscription model, a corporate or university
    customer pays by the month only for the number of courses
    used, with a minimum monthly price of $5,000

    Kannan said the company has grown 30 percent each of the
    last two
    quarters. UOL now sells courses that are
    used by 60,000 students each month, up from 12,000
    students a year ago. Clients include Johnson & Johnson,
    Lucent Technologies Inc. and George Mason


    Being a public company, beholden to investors and
    watched by analysts, made the company's difficulties all
    the more obvious. UOL executives learned much from
    the experience. "If you set expectations, people will
    punish you if you don't meet those expectations," Tyson

    Ulric Weil, an analyst with Friedman, Billings, Ramsey
    Group Inc., which took UOL public in 1996, said Tyson
    clearly made mistakes. "[Tyson] had no prior Web
    publishing experience. That turned out to be a major
    weakness," Weil said.

    However, Weil thinks UOL still
    has a shot at success, and that the right leadership
    can turn the company around. "They're operating in a
    very fertile space," he said.

    for rest of
    story go to post or SI

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