Friday, March 25, 2011

Chatting with John Baker about the future of D2L

Last week I had the opportunity to chat with John Baker, CEO of D2L for 30 minutes or so. I was telling him how I am frequently contacted by various people about two main questions:

1) my experiences over the past 7.5+ years as a D2L client (now ended, unless an unemployed person can still be a "client").

2) my opinions about the future of D2L, especially from an investment perspective. In particular, these questions tend to fall into two main categories:
=> a) do I think D2L is going to sell out to the highest bidder (this Q has been around for all of those 7.5+ yrs.), and
=> b) is D2L preparing to issue an IPO (initial public offering of stock) and go public?

John and I talked at length about these things. I told him that the speculation about an IPO seemed to be especially hot right now. He told me that this is not something that they have even talked about, and that he has no interest in even looking at that possibility at this time.

For a company like D2L, going public would serve to crush their corporate culture, IMO. They currently only have themselves to answer to, and that seems to work quite well for them. Stockholders, meeting Wall Street expectations, constant pressure on revenue growth and earning growth - who needs it, right?

Either selling out or going public would certainly serve the purpose of cashing in on their position in the LMS market, but that's about all it would do. If the D2L decision makers were interested in either of these options, they would most likely have already done so or at least be on the verge of doing so. But I'm very certain that they are quite happy in their own skins right now. I believe him when he tells me that they are not considering either one of those options.

Speaking about Wall Street expectations, has anyone checked lately to see the size of the short interest in Blackboard? The short interest represents the number (and %) of shares that have been sold short - which means that the investor doesn't actually own the stock, but they are expecting/hoping/gambling that the price of the shares will do down. Since Feb. 2010, the # of shares sold short has increased rather steadily from 7.67 million to the current level of 13.48 million, which represents 45% of the float in Blackboard. Ouch. You've gotta wonder what that feels like to have so many people betting against you.

Just for reference, Microsoft is looking at short interest of just over 1%, as is CISCO. Even Yahoo only has a short interest of 4.8% of float, and they can't get out of their own way in screwing up everything they touch. One more point of reference. As I write this, Blackboard is in the top 5 for the largest short positions on the NASDAQ (as % of float).

How is that related to D2L? Probably in several ways, but in particular I'll just say that D2L doesn't have to worry about this kind of stuff while they remain a private company. I personally believe that this is one reason why D2L has remained focused on education and educators. They don't have to deal with all the Wall Street distractions. They should keep it that way.

(CC attribution image by rightee)

Tuesday, March 01, 2011

LMS for Sale - But Probably Not D2L

An LMS company with a code name of LPO Co. is for sale, according to the Wavepoint website. I'm pretty sure that it's not the London Philharmonic Orchestra LMS, and I'm also pretty sure that it isn't Desire2Learn.

There are always rumors (okay, often, not always) about whether D2L owners are going to take the money and run. At first blush, I think it's pretty easy to see why some people might jump to the conclusion that D2L is the unnamed company on this website, based on some of the sales info related to the mystery company, such as:

  • "a private North American based technology firm" (notice they don't say a U.S. company, so Canada comes to mind, and D2L is privately held).
  • "a leading provider of Learning Management System (LMS) technology with prestigious clients" (D2L is generally considered to be the #2 LMS company (at least size-wise) and all of their user base considers themselves to be prestigious, of course).
  • " Since 2001, LPO Co. has had on average an annual growth rate of 40%" (that sounds like a lot of growth, which D2L has had, and sounds like about the right year for that growth to have started).
  • "expand their markets internationally with offices now established in 3 other countries" (yep, D2L has offices in Canada, the U.S., and Australia)
  • "one of the fastest growing companies in North America in the learning management sector" (that statement probably applies to D2L)
  • "has developed an award winning learning management system" (yes, but everybody can win an award these days, doesn't make you special).
  • "Proven scalable and robust solutions – deployed in some of the largest global networks" (well, D2L is deployed in some of the largest higher ed installations - not sure if that means the same thing).
  • "Adherence to AICC, SCORM and IMS standards" (although just about anybody can say that sort of thing, apparently)
I'm guessing that many people look at some of those statements and immediately think of D2L. I'm also guessing that they're wrong about that. Here's why I don't think D2L is disguised as LPO Co.
  • Just on general principles. I don't think D2L would be shopping itself in this manner. Doesn't make sense and probably not a good strategy to attract the right buyer.
  • Just playing the odds - as Wavepoint says, the LMS market is "made up of more than 60 different providers." Chances are good that it is someone else (but who?).
  • "has developed partnerships with a number of internationally recognized technology and HR companies that act as resellers." To my knowledge, nobody is a reseller of D2L.
  • "Approximately 4 million registered users of its learning management system." This one should be pretty easy to verify, but I think they have a much larger user base than 4 million. There are 400,000+ user accounts just within Minnesota.
  • All of us in higher ed tend to think about the LMS market of consisting of the 6-8 companies who tend to have the market cornered in higher ed. This listing sounds like one of those corporate training LMS solutions - there are many out there, but most of us don't know much about them.
Rather than add to this list right now (heading into a meeting) - how about a little crowd-sourcing in the comments for this post? Why do you believe or not believe that LPO equals D2L?

Photo (CC-by) Marcin Wichary