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Published in Print: June 21, 2000, as Edison Schools Joins With IBM In Technology Alliance

Edison Schools Joins With IBM In Technology Alliance

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Edison Schools Inc., the nation's largest for-profit manager of public schools, is switching from the multicolored Apple to Big Blue.

Edison has tapped the International Business Machines Corp. for a five-year contract to provide personal computers for classrooms, teachers' desks, and students' homes. IBM, based in Armonk, N.Y., will also manage Edison's computer networks and will work with the education company to develop a new kind of computing device for use by students.

Since opening its first schools in 1995, Edison has used machines from Apple Computer Inc.

"IBM is committed to working with us to develop a new model of personal computer for school use," Christopher Whittle, Edison's president and chief executive officer, said in an interview at the company's headquarters here last week. "We'll be the first large-scale buyer."

At least four major technology companies vied for the contract, Mr. Whittle said, although he declined to identify the losers. And while officials of the two companies could not confirm the figure, the contract is believed to be worth some $350 million to IBM over five years.

One reason Edison was looking for a new technology arrangement is that it is growing at a healthy pace. The company announced last week that enrollment in Edison schools would increase from 38,000 students in 79 schools in 16 states this year to at least 57,000 students in 108 schools in 21 states next year.

Edison also projects that its revenues for the next school and fiscal year will reach $350 million, from $225 million this school year. The company, which raised $122.4 million in an initial public offering of stock last November, has yet to turn a profit. It had a loss of $6.1 million for the three months that ended in March, and a loss of $27.8 million for the nine months that ended then.

Christopher Whittle

Some of Edison's growth in schools and enrollment will come from deals that have already been announced. For example, the company has signed its largest contract to date, with the Dallas school district, under which Edison will run seven Dallas schools serving some 6,500 students next fall. The contract calls for as many as 16,750 students in five years.

Edison also has new contracts to run three schools in Baltimore that have been declared failing by the state of Maryland; charter schools in Pennsylvania and New York, its first contracts in those states; and its first "whole-district partnership," in which Edison will manage all three schools in the 1,800-student Inkster, Mich., school district.

Generation Next

The growth was a driver in Edison's desire to form an alliance with a technology company, Mr. Whittle said. The company's curriculum model relies heavily on technology, with at least four computers in every classroom and a personal computer provided free for every student's home. Parents must demonstrate their competency in basic computing and are encouraged to communicate with their children's teachers through electronic mail.

Edison spends roughly $500 per school year per child on technology, compared with about $100 for the average public school child. Mr. Whittle said his company has concluded that there must be a more efficient way to make computers available to all children without attempting to wire all classrooms and constantly upgrade hardware and software.

Thus, as part of its deal with Edison, IBM will collaborate with the company in the hope of developing the next-generation model for student computers.

Mr. Whittle believes such computers will have to meet at least two or three criteria: They must be relatively inexpensive, portable, and wireless. Students are more in motion than the average business person using the latest laptop computers, he said. Whatever IBM comes up with through working with Edison will likely be offered for sale to other schools.

Sean Rush, the general manager of IBM's global education division, said the new device could resemble a laptop or take some other form.

"Edison has a very aggressive posture with regard to technology in schools," he said. "It will be interesting to work with a model that looks at not only technology in schools, but also at bringing it into the home."

In the short term, all new Edison schools will have IBM hardware, and older company schools will all eventually be weaned from Apple computers. A spokeswoman for Apple declined to comment.

IBM will also take over management of Edison's computer systems, such as network servers and other infrastructure.

"This is the biggest single portion of our capital spending, so it represents a huge financial decision for us," Mr. Whittle said.

Vol. 19, Issue 41, Page 9

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