Apollo Group, Inc.

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Apollo Group, Inc.

4615 E. Elwood Street
Phoenix, Arizona 85040
U.S.A.
(602) 966-5394
(800) 990-APOL (990-2765)
Fax: (602) 968-1159
Web site: http://www.apollogrp.com>

Public Company
Incorporated: 1981
Employees: 5,319
Sales: $283.5 million (1996)
Stock Exchanges: NASDAQ
Ticker Symbol: APOL
SICs: 8221 Colleges, Universities & Professional Schools; 6719 Offices of Holding Companies, Not Elsewhere Classified

Apollo Group, Inc. is one of the largest providers of higher education programs for working adults in the United States. Through its wholly owned subsidiaries the University of Phoenix, the Institute for Professional Development, and Western International University, the Apollo Group teaching/learning model by 1998 had been successfully replicated at 110 campuses and learning centers in 32 states, Puerto Rico, and London. The company cooperates and interacts with businesses and governmental agencies in offering programs designed to meet their specific needs either by modifying existing programs or, in some cases, by developing customized programs which are held at the employers’ offices or on-site at military bases. Some education partnerships have included companies such as AT&T and Ingram Micro.

Founded for Working Adults: The 1970s

Apollo Group, Inc. was founded in 1973 in response to a gradual shift in higher education demographics from a student population dominated by youth to one in which approximately half the students are adults and over 80 percent of whom work full-time.

The University of Phoenix (UOP) was founded in 1976 by Dr. John G. Sperling, now chairman and CEO of Apollo Group, as the first accredited for-profit university in the United States with the sole mission of identifying and meeting the educational needs of working adult students. The idea for UOP started earlier than that though. Sperling received his undergraduate degree from Reed College and a doctorate in economic history from Kings College at Cambridge University before becoming a fully tenured humanities professor at San Jose State University in the early 1970s with a grant to study a means by which to deal with delinquency rates in one of San Jose’s rougher neighborhoods. In his interactions with the police department and other public officials, Sperling discovered that they wanted educational programs which would help them do their jobs better, improve their skills, and give them new skills for advancement. He approached his university, San Jose State, with a request to support an adult degree program. When they refused, he quit to start his own for-profit business offering adult, degree-granting programs at colleges and universities.

Sperling received his first contract from the University of San Francisco and signed up 500 students in 1973, his first year of operation. By his third year, he had added two more colleges and 2,000 students, earning over $200,000 on revenues of nearly $2 million. The existing education bureaucracy was apparently put out by the competition. The Western Association of Schools and Colleges was outraged that a for-profit entity was so successfully cutting into the markets of competing colleges and universities. Shortly thereafter, the accrediting association told Sperling’s three schools that they could either end their contracts with him or lose their accreditation and suddenly Sperling was without clients.

Fed up with the political maintenance of dealing with other schools, Sperling leased office space in downtown Phoenix, Arizona, in 1976 and decided to start his own university. The North Central Association of Colleges and Schools, Arizona’s regional accreditor, inspected Sperling’s operation and accredited the program. UOP opened in 1976 with a class of eight students and celebrated its 20th anniversary in 1996 with an enrollment of more than 38,000 students. By then it was boasting a net income estimated at $30 million on revenues of $282 million; was the second largest regionally accredited private institution of higher education in the United States; had one of the nation’s largest business schools; offered bachelor’s and master’s degree programs in business, management, computer information systems, education, and health care; and had 51 campuses and learning centers located in Arizona, California, Colorado, Florida, Hawaii, Louisiana, Michigan, Nevada, New Mexico, Utah, and Puerto Rico.

Established in 1973, the Institute for Professional Development (IPD) assists colleges and universities in the design, development, implementation, and continuing administration of higher education programs designed specifically for working adults. IPD’s higher education management consulting services enable traditional colleges to establish viable and profitable programs serving working adults. Nineteen ninety-six saw more than 12,000 students enrolled in IPD-assisted programs at 18 regionally accredited private colleges and universities throughout the United States at 38 campuses and learning centers in 20 states from Texas to Massachusetts and was primarily in the Midwest, South, and East, including a new opening in Stamford, Connecticut, in 1997.

Shift Towards Off-Campus Learning, 1990s

While most students utilize the classroom setting for their educational experience, the demand and need for flexibility and alternatives in educational delivery exists so, in 1989, the company began distance learning modality by offering its educational programs throughout the world via UOP’s Distance and Online Education and CPEInternet, their computerized educational delivery system, joining the growing trend of distance learning. As late as 1993, less than 93 “cyberschools” existed. However, by 1997, according to an Arizona-based company called InterEd, there were some 762 cyberschools and approximately half of the over 2,000 four-year colleges and universities in the United States had online classes available, including Washington State University, Pullman; California State University, Dominguez Hills, and Duke University’s Fuqua School of Business’s Global Executive M.B.A. Program, and vocational schools such as National Technological University (Fort Collins, Colorado); New York Institute of Technology’s On-Line Campus (Central Islip, New York), and New School for Social Research (New York, New York). Also in 1997, it was estimated that over one million students took classes online, compared to 13 million who attended on-campus classes and that this number would triple in the next few years. The University of Phoenix Center for Distance Education (CDE) is able to deliver degree programs to students anywhere in the world if they have access to phone, fax, or postal communications through Directed Study. Course work is completed through independent study while interacting with the instructor via fax, phone, e-mail, or their fax/voice messaging.

From September 1991 through August 1996, UOP opened 26 campuses and learning centers and IPD established 13 campuses and learning centers with its client institutions. The company also adopted a plan in March 1992 to discontinue the operations of its technical training schools and these operations were phased out from March 1992 through 1993.

In September 1995, Apollo Group acquired certain assets of Western International University. Western International University was created as a private nonprofit educational institution and was accredited by The North Central Association of Colleges and Schools and was also incorporated in 1978. Apollo Group created a new wholly owned subsidiary called Western International University (WIU). By 1996, WIU had 1,200 working adult students at campuses and learning centers in Arizona and London; a large portion of their students came from more than 40 different countries to learn English as a Second Language and continue on to pursue a degree in higher education. WIU’s mission was to provide the educational foundation needed to prepare its students to achieve their full potential in a dynamic and complex global marketplace; the university offered undergraduate and graduate degree programs at four campuses and learning centers in Phoenix, Fort Huachuca, and Douglas, Arizona; and London, England.

Starting with 68 campuses and learning centers in August 1995, Apollo Group grew to 85 one year later and enrollment more than doubled from 21,163 to 46,935, with campuses from San Diego to New Orleans, Honolulu to Guaynabo, Puerto Rico. The Institute for Professional Development increased the number of contracts it held with private universities from 15 to 18, with 83 percent of these contracts extending beyond the year 2000.

1997 and Beyond

By mid-1997, the company opened nine new UOP learning centers in Los Alamos, New Mexico; Phoenix; the 32nd Street Naval Base in San Diego; Rancho Bernardo, Stockton, Ontario, Pleasanton, and Pasadena, California; and Las Vegas; IPD opened a new learning center for Albertus Magnus College in Stanford, Connecticut; and the company had plans to open several additional campuses and learning centers and to expand its product offerings to address increased market demands.

Company Perspectives

Apollo Group is uniquely positioned to meet the significant market opportunity created as more occupations become education-intensive, and as members of the workforce capitalize on the income premium available to them with higher levels of education. Augmenting its current offerings with future strategic growth into larger state markets, Apollo Group will solidify its position as one of the nation’s largest providers of higher education.

In April 1998 the company authorized a three-for-two split of its common stock. Two months later, Apollo announced that it would open—through its University of Phoenix subsidiary—two new campuses in Oklahoma as well as one in Vancouver, British Columbia. In addition, the company gained state licen-sure in Maryland and was pursuing approval from the North Central Association of Colleges and Schools prior to opening a location in that state. Such expansion augured well for Apollo, which by then was serving some 66,000 degree-seeking students and continually positioning itself as a leading provider of higher education for working adults.