On Oct. 12, 2005, Blackboard (http://www.blackboard.com) and WebCT (http://www.webct.com), the two leading providers of course management software for e-learning services to the education market, announced plans to merge their companies. The merger is expected to be finalized later this year or early next year, provided the companies pass regulatory and other approvals. The combined company will be named Blackboard and will be led by Blackboard's current president and CEO, Michael Chasen. According to the company's announcement, "members of WebCT's executive team will remain with the combined company and join Blackboard's existing executive management team." Carol Vallone, WebCT's CEO, will continue with the combined company as a consultant for at least a year, focusing on client relations and strategy. Until the merger is complete, each company will continue to operate independently.
Blackboard became a publicly traded company (ticker symbol BBBB) in 2004. The purchase of WebCT, a privately held company, involves a reported cash transaction of approximately $180 million. The actual closing price will depend on WebCT's cash on hand at merger time and is expected to reduce the price to approximately $154 million, according to a Blackboard statement. In the 2004 fiscal year, Blackboard had $111.4 million in revenue; WebCT had $38.4 million.
The acquisition will create the largest e-learning company in the field with more than 3,700 customers, including colleges and universities and corporate and government clients. The merged company will be headquartered in Washington, D.C. The combined company would have approximately 800 employees in seven offices in the U.S., Canada, and abroad. The merger requires regulatory approval, which is expected either later this year or early in 2006. In 2002, Blackboard purchased another rival content management software provider—Prometheus. But, with this purchase of WebCT, Blackboard clearly will dominate the market that offers products to support students doing course work online, whether as part of an on-campus class or through a distance education program. The programs also allow faculty to manage their courses. The joint company announcement stated: "We believe that this merger will have a positive impact on the global e-Learning community and on the individual clients of both companies. By leveraging the best of Blackboard and WebCT, we believe we can improve the online learning experience for educators and students worldwide. As a single company, we will bring together some of the brightest, most experienced talent in the e-Learning industry, and we will be uniquely positioned to share and deliver proven best practices to the combined client base. Most importantly, the combined Blackboard and WebCT community of practice will represent the largest and most comprehensive network of e-Learning practitioners and academic publishing partners in the world. We will work diligently to bring this community together to broaden access to shared expertise, reusable technologies, faculty and developer networks, and to promote exemplary course programs."
According to Matthew Pittinsky, co-founder and chair of Blackboard, the combined company will not phase out the WebCT products nor lay off its workers, at least not in the short term. He indicated that the WebCT technology will continue to be produced, supported, and enhanced under the WebCT name. The new expanded Blackboard company will eventually create a common architecture for both products, which would make it easier for others to create add-ons to customize Blackboard's offerings. Over time, the company hopes to incorporate the best features and usability characteristics from the two product lines into a new, standards-based product set. The changes will allow "the existing product lines to interoperate with one another as well as provide a means for clients and partners of both Blackboard and WebCT to share their content, applications, innovations and experiences with the global client community," according to Pittinsky. Blackboard would use the merger as a chance to expand and find more opportunities for the company (for instance, internationally). WebCT already has a significant number of clients in foreign countries. "They will double our international presence," Pittinsky said. "They'll give us critical mass in some countries, and they'll give us presence in other countries."
Both companies also claim they "are particularly optimistic about the impact this will have on our publisher relationship. A united company will provide publishers with an opportunity to more efficiently distribute content. This will be further enhanced by the single set of standards, which will help spur development and further growth of an already substantial developer community. For publishers that are already working with both Blackboard and WebCT, the combined company will provide the opportunity to concentrate your efforts and focus on valuable educational innovations. For publishers that currently have relationships with only one company, the combination will open new doors and increase the addressable market for the partner products or services. As we work together to support this new community, we will maintain each company's level of commitment to the current relationships. We hope to maintain an active dialogue as we seek to improve our current joint solutions and begin designing for the future."
The merger clearly makes the new Blackboard the dominant player in the market. In 2004, many customers of Blackboard and WebCT received rather sizable cost increases to renew their software licenses. Questioners of the merger are concerned that decreased competition may mean increased costs to customers. The merger doesn't necessarily mean the new Blackboard will squash all competition, however. Another software company, eCollege.com (http://www.ecollege.com), is still a big player in course management, and there are several smaller competitors, such as ANGEL Learning (http://www.angellearning.com), Desire2Learn (http://www.desire2learn.com), and IntraLearn Software Corp. (http://www.intralearn.com), as well as open-source options, such as the Sakai Project (http://www.sakaiproject.org) and Moodle (http://moodle.org).
Oakleigh Thorne, chairman and chief executive officer of eCollege, offered the same assessment in an interview he granted The Chronicle of Higher Education. He said some Blackboard and WebCT clients may not be happy the two largest providers in the market are joining forces. That may prompt colleges to look for other options. "[There are] going to be a lot more opportunities for us," Mr. Thorne said. "We don't see it as a scary Goliath at all."