Pearson PLC—owner of the Financial Times, The Economist magazine, Penguin Books, and other major media outlets—is paying $2.5 billion to buy National Computer Systems Inc. (NCS), the largest processor of K-12 student assessment tests in the United States.

The deal, which was announced July 31, marks a further step in Pearson’s efforts to move beyond its traditional strengths in print media to profit from the growing emphasis on internet-based learning. The company also counts Computer Curriculum Corporation and the FamilyEducation Network as recent acquisitions.

NCS, based in Eden Prairie, Minn., provides software and internet-based services for the collection and interpretation of educational data, an increasingly lucrative business in today’s standards-driven climate. The company employs nearly 5,000 people and posted an operating profit of $70 million last year, with revenues of $630 million.

London-based Pearson said the deal will help it become a leading provider of education services, with strengths in online learning and assessment for U.S. schools and professional accreditation.

“Together, we can create the ‘intelligent classroom,’ where teaching is customized so that each child learns in his own way, at his own speed, with constant assessment, feedback, and help,” said Pearson Chief Executive Officer Marjorie Scardino.

Though some are wary of Pearson’s recent aggressiveness, at least one analyst sees the deal as a plus for education.

“I think the buyout is a positive thing for the education market, because it confirms the potential of the market. That has been questioned by a lot of bigger corporations in the past, and I think Pearson getting involved in education will be healthy for the industry,” said Peter Grunwald, president of the market research firm Grunwald Associates.

“The reality is that a lot of large multinational companies still see the potential of education in [public relations] terms. What Pearson is doing is pointing a way for other companies to see that education is an important technology market, as well as the key to the family market. What a lot of companies don’t yet realize is that many parents make their technology decisions based on education.”

Recent troubles

But the announcement comes on the heels of recent problems for NCS.

More than 47,000 Minnesota students received incorrect scores on the math portion of a state standardized test they took in February and April. Nearly 8,000 of those students mistakenly were told they failed the test—and as many as 336 high school seniors might wrongly have been barred from graduating in the spring.

The Minnesota Basic Standards Test measures skills that students should have learned by eighth grade and is designed to ensure that all high school graduates have a minimum competency. Most students pass the test on their first try.

The testing division of NCS, which has agreed to fix the errors immediately and contact the students whose scores were incorrect, admits it made the mistakes. Officials from the company said six questions on the answer key were wrong.

NCS President David Smith said the errors appear to be the result of mistakes by two employees who did not follow quality-control procedures. One mistake purportedly happened when workers formatted the test on a computer and changed the order of some questions. One answer key was corrected to match the changes, but not the other. The second error happened when employees did not check the test, Smith said.

“I can’t imagine a more horrible mistake that NCS could have made. And I can’t fathom anything that NCS could have done that could have caused more harm to students,” State Education Commissioner Christine Jax said.

“We made errors in scoring the graduation exams. There’s no doubt about it. Those mistakes kept some students from graduating,” Smith said. “We messed up. We’re here to own up to our mistakes and to apologize for the problems it’s caused students, parents, teachers, and administrators in Minnesota.”

Jax promised that correct scores and an apology from the company would be mailed to all affected students by Aug. 21.

Jax added that she will host a public graduation ceremony—paid for entirely by NCS—for any student who did not graduate because of the errors. The company also has offered $1,000 in tuition aid to students who failed to graduate due to the errors.

NCS also has had problems meeting deadlines in Arizona, Florida, and Michigan.

A portion of the final scores for the Florida Comprehensive Assessment Test were released two weeks after this year’s contractual deadline, with the other half coming nearly a month late to Florida schools.

In Michigan, NCS was late in sending final scores both this year and last year, with 15 percent of the returned science scores marked incorrectly, a spokesman from the state Department of Education told the Florida Times-Union.

And in Arizona, the company incorrectly scored a question on a math test, affecting the scores of nearly 12,000 students.

States holding educational contracts with NCS include Alabama, Arizona, Florida, Georgia, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, North Carolina, New Jersey, Ohio, Virginia, Washington, and West Virginia.

U.S. Sen. Paul Wellstone, D-Minn., said the mistake in Minnesota proves “we just have too much over-reliance on standardized tests in Minnesota and in the country.” Wellstone has introduced a bill calling on states and school districts to measure achievement in multiple ways.

Minnesota pays $2.9 million per year to NCS for testing services, but the Department of Children, Families, and Learning has yet to decide whether NCS will be awarded next year’s state testing contract.

According to Rachel Tschida, director of communication for the department, the buyout by Pearson certainly will be one of the factors the state takes into consideration when it selects a company to provide testing to its schools.

“We’re told by NCS that the buyout won’t change anything, but so far we are just not far enough into the process to say how we will decide,” said Tschida, who added that she expects the decision will be made by Oct. 1.

According to Maggie Knack, a spokeswoman for NCS, the buyout has absolutely no connection with the company’s recent problems.

“We weren’t shopping to sell the company. We were approached very seriously by Pearson after our CEO announced his retirement in May. This is going to be a very nice marriage,” she said, adding that the company expects its services to stay the same or improve as a result of the acquisition.

Knack also explained that Pearson is undeterred by the recent problem in Minnesota: “They understand the testing business, and they know that things can happen. It certainly has not interfered with acquisition intentions. It’s just too bad that [the problem] has interfered with the announcement of the buyout.”

Knack said NCS expects the transaction with Pearson to close sometime in September.

The chairman of a Minnesota Senate education committee conducted a hearing July 31 to find out more about the scoring errors on the state Basic Standards math tests. According to a committee spokesperson, no action was decided upon at the meeting, and members expected to meet again on the subject at the end of the August.

National Computer Systems

Pearson PLC

Minnesota Department of Children, Families, and Learning

Computer Curriculum Corporation

Family Education Network

Grunwald Associates