It's Official: News Corporation Is Looking to Sell Amplify

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Amplify

The nail is in the coffin for Amplify. In its earnings report for fiscal Q4 2015 released today, News Corporation announced it has “initiated a strategic review of its Digital Education segment.” Specifically:

In the fourth quarter of fiscal 2015, the Company determined it would cease actively marketing Amplify’s Access products to new customers; however, it will continue to provide service and support to its existing customers. Additionally, the Company is reviewing strategic alternatives with respect to Amplify’s remaining digital education businesses. This change in Amplify’s strategy and related outlook resulted in a reduction in expected future cash flows for the business.

Amplify Access is the name of the tablet division, which has largely failed to gain traction in the education device market. In February 2015, the head of that division departed, signaling a major reshuffling of personnel and product priorities.

The Digital Education division saw $24 million in revenues from April to June 2015, up from $18 million during the same period in 2014. The division cut EBITDA losses from $53 million to $24 million during this period, respectively, from 2014 to 2015. For the full fiscal 2015 (ending June 30), revenues increased to $109 million, a 24 percent improvement over the previous year. EBITDA losses decreased by $100 million to $93 million for the fiscal year.

Cutting losses won’t be enough for News Corp. to keep Amplify. On the company’s earnings call, Chief Financial Officer Bedi Singh admitted the the market for digital curriculum has been “disappointing” and “much slower to develop than we expected.” He adds: “We are at advanced stages of reviewing strategic alternatives at Amplify.”

Chief executive Robert Thomson offered a much clearer direction on Amplify’s future: “You can take from our messaging today that we are in the final phase of negotiations with potential acquirers.”

News Corporation paid $390 million to acquire Wireless Generation in 2010, and has invested upwards of $1 billion into Amplify.

UPDATE (4:35PM PT)

In an email obtained by EdSurge, Amplify CEO Joel Klein confirmed that the digital education division will indeed be changing hands:

We are in active conversations with an outside investor regarding the potential sale of Amplify. We expect that this lead investor would be backed by Amplify’s management team, some of whom also plan to participate in the investment.

Klein also reflected on the challenges Amplify faced in getting schools and districts to adopt its tools, starting with the tablet:

What is now very clear to us is that it is time to cease marketing the Amplify Tablet. This was not an easy decision, because Amplify designed a compelling tablet for classroom education. No one put as much thought and know-how into how teachers can work in a one-to-one classroom. But the market has moved in a different direction.

While we will continue to provide our existing tablet customers with service and support, we will no longer accept new tablet customers. This move will allow us to focus our efforts on the growth and success of our digital curriculum and assessment products.

But even the digital curriculum products, covering English Language Arts, math and science, struggled to gain a foothold. Klein acknowledges

...sales haven’t moved as fast as we initially hoped. Too many districts across the country struggle with basic issues like sufficient internet connectivity. And change management in many places has been more difficult than many had anticipated.

Klein appears to suggest that Amplify's tools were, ultimately, too cool for school:

In my view, Amplify’s work has been so innovative and transformative that we’ve been ahead of the market. That, in part, helps explain what has happened with our tablet business. And it has played a role in the adoption of our digital curriculum.
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