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Pearson stock takes a dive after rebuke by LA Unified

Craig Clough | April 17, 2015

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Pearson stock-2Things went from bad to worse for publishing giant Pearson yesterday, as its stock took a dive following the news Wednesday that LA Unified announced plans to seek a refund for thousands of Apple iPads pre-loaded with Pearson educational software that the district said was ineffective.

Pearson was the single worst performer on the Financial Times Stock Exchange Thursday and suffered its worst loss since February 2014, according to Market Watch. The stock dropped four percent after LA Unified issued a letter that it was “extremely dissatisfied” with the Pearson content and wanted a full refund potentially worth tens of millions.

The Pearson-loaded iPads were part of what was once a grand initiative of LAUSD’s former Superintendent John Deasy, who set out to use $1.3 billion of bond money to get an iPad into the hands of every student and teacher in the district. The program, part of the now defunct Common Core Technology Project, was to purchase $500 million worth of devices and spend $800 million on Internet capability upgrades at schools.

The plan now lies in ruins and surrounded by controversy, including a grand jury investigation and a SEC inquiry. LA Unified to date has purchased roughly 43,000 of the Pearson-loaded iPads, which came at a cost $768 per device. 

In its letter to Pearson, LA Unified estimates that only 5 percent of its students have been able to consistently access the Pearson software, and currently only two schools out of 69 with the devices are using the Pearson content.

Although unanimously approved by the LA Unified school board in 2013, support for the program began to erode as its pilot program was rolled out. The issues included the ineffective Pearson software, students easily deactivating the devices’ content filters and difficulties with distributing and tracking the iPads.

In 2014, emails were revealed between Deasy, his deputy, Apple and Pearson, raising questions about the bidding process, leading Deasy to cancel the contract with Apple and restart the bid in August. Deasy resigned in October under pressure in part due to the email controversy. In December, the FBI seized files related to the program’s bidding process as part of a grand jury investigation.

Deasy’s replacement, Ramon Cortines, cancelled that iPad program shortly after the FBI investigation was made public, saying the district cannot afford a 1-to-1 program of getting every student and teacher a tablet device. It has however continued to purchase iPads for classroom use and standardized testing.

Pearson, however, is standing by its product. Spokesperson Stacy Skelly told the Los Angeles Times the company is “proud of our long history working with LAUSD and our significant investment in this groundbreaking initiative to transform instructional practices and raise expectations for all students… we stand by the quality of our performance.”

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