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Sperling tapped Bishop to start the online program

Sperling tapped Bishop to start the online program

Sperling tapped Bishop to start the online program

At that point, most people didn’t even have email, but there was an electronic communication service called Prodigy that techies and business people were starting to use. Bishop developed an online MBA program and targeted the growing community of Prodigy users. She took out what she calls a “teeny, tiny ad” on Prodigy. “I think we received like 200,000 requests for information in a week,” she says, laughing. “And we were, of course, sending out [information] in the mail.”

Sperling also created a parent company called the Apollo Group that would allow him to expand his business. In 1994, he decided to take the Apollo Group public.

The security operations center at the University of Phoenix headquarters in Phoenix, Ariz., where employees monitor the university’s worldwide computer systems. (Photo: Emily Hanford)

“Apollo was a rocket ship of a stock,” says Trace payday pawn Bedford NH Urdan, an equity analyst at Wells Fargo Securities who covers the for-profit education sector.

The capital from Wall Street allowed the University of Phoenix to grow quickly. Within five years of going public, the school had more than 100,000 students. Enrollment was growing by more than 25 percent a year.

Seeing the success of the University of Phoenix, several other for-profit colleges went public during the 1990s, too. Many of them were small trade schools that had been around for decades — even longer. The University of Phoenix proved higher education could be big business. Phoenix and other for-profits rode a huge wave propelled by the rising demand for higher education and one of the greatest bull markets in U.S. stock market history.

Once it went public, the University of Phoenix was under intense pressure from investors to keep growing. “The management team now faced the iron law of the quarter,” writes Sperling in his memoir. “Every quarter, the company must meet or beat analysts’ expectations, or the stock tanks.” Wall Street wanted bottom line growth of 30 to 35 percent per year, he writes, “no excuses accepted.”

To grow, Sperling expanded the school’s online degree programs and built campuses in more states and also overseas. By the year 2000, Apollo stock had increased in value by 1,700 percent since its IPO. It was the nation’s largest and fastest-growing private university, with operations in 35 states and a growing population of students from all over the world taking classes online. John Sperling was a billionaire.

The University of Phoenix Changes Direction

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In 2004, Apollo stock hit an all-time high of nearly $100 a share. And then the company’s business started slowing.

“Part of it was that they had really been serving a baby boomer audience, and the baby boomer was starting to age out of the market where going back to school was even relevant,” explains Wells Fargo equity analyst Trace Urdan. “So they decided that they needed a product for Generation Y, the children of the baby boomers.”

The University of Phoenix believed what that generation needed was associate’s degrees. These degrees — which typically cost less and take less time to earn — had been gaining in popularity as more people began to pursue postsecondary education. Phoenix created a new college called Axia that offered associate’s degrees online. The degrees were priced so that students could cover the full cost using just government grants and loans. “And they enrolled a lot of students,” says Urdan.

An investigation by the U

Most of the students who started in the online associate’s degree program ended up dropping out. S. Senate’s Health, Education, Labor and Pensions Committee, chaired by Democrat Tom Harkin, found that in 2008 and 2009 more than 177,000 people enrolled in the online associate’s degree program. A year later, 66 percent of them had left.

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