The chief executive of PLATO Learning, one of the nation’s leading educational technology companies, stepped down Nov. 17, leaving ed-tech insiders to question what his abrupt departure will mean for the company’s 20,000-plus school customers.

After meeting with the company’s board of directors Wednesday, John Murray, who served as president, chairman, and chief executive officer of the company since he took the helm in 1994, agreed to relinquish all three titles and his seat on the company’s board, effectively cutting all ties between himself and the Bloomington, Minn.-based firm.

Current Plato board member and former NCS Pearson boss David Smith has assumed Murray’s duties as interim CEO, a position encompassing the duties of president as well, until a replacement is found. Board member Thomas Hudson has taken over as interim chairman. Murray reportedly will stay on as a consultant during the transition.

The move comes just one week after the company’s chief financial officer tendered his resignation and PLATO executives announced the educational software provider would miss its earnings targets for the fourth quarter and fiscal year. The company is set to release its quarterly earnings Dec. 2, according to executives.

But sluggish earnings haven’t been the only thorn in PLATO’s side recently. Ethical questions also have been raised about the company’s aggressive courtship of school districts, including its apparent ties to at least one high-level district employee.

In September, The Baltimore Sun reported the company provided Prince George’s County, Md., Public Schools CEO Andre Hornsby with a 10-day, all-expenses-paid trip to South Africa. The trip, which reportedly took place in July 2003, was organized by the National Alliance of Black School Educators (NABSE), of which Hornsby was president at the time, according to the Sun.

As NABSE’s corporate sponsor, PLATO–which currently is seeking a bid for a district-wide contract in Prince George’s County, Maryland’s second-largest school system–footed the bill for the trip. School board officials said Hornsby informed them of the trip but never disclosed it was being paid for by PLATO. According to the Sun, Hornsby went on the trip again this past July, despite having stepped down as president of the alliance.

PLATO spokeswoman Terri Reden said it was NASBE’s decision to use a portion of PLATO’s sponsorship to finance the trip for members of its leadership. She also said Hornsby paid for the second trip out of his own pocket.

In a January ethics disclosure form obtained by the Sun, Hornsby said that during his time as president of the alliance he never accepted gifts or money from companies doing business with the school district. The Federal Bureau of Investigation, the Maryland prosecutor’s office, and the Prince George’s County School Board’s ethics panel all have opened probes into Hornsby’s dealings with PLATO and other educational service providers with ties to the district.

When contacted by an eSchool News reporter, PLATO executives said the change in company leadership had nothing to do with allegations of a scandal or any suggestion of impropriety on behalf of the company. Reden also denied speculation that the move was made to halt two consecutive years of losses for the company.

Last year, PLATO reported a net loss of $1.67 million. This year, the company is expecting to make between $140 and $142 million in revenue, which is at least $3 million short of analysts’ expectations, it was reported. Part of that shortfall can be attributed to a weaker-than-expected fourth quarter, which is projected at somewhere between $41 million and $43 million in revenue, just south of the $45 million expected by analysts.

Though the board “has been somewhat disappointed with the company’s earnings,” Reden said, PLATO is performing well compared with its competitors–and losses are a reality of the current fiscal climate.

According to Reden, both the board–and Murray–felt it was simply a “good time to bring in new leadership that could help get the company to the next level.” She added that the change would have no effect on any of the services PLATO currently provides to its school customers.

When asked whether Murray’s departure and the Nov. 10 resignation of former Chief Financial Officer Greg Melsen were in any way related, Reden said Melsen left the company to pursue new opportunities and that the timing of the two announcements was purely coincidental.

As acting CEO, Smith reiterated that the board’s split with Murray had not occurred on bad terms. “I look forward to working with the PLATO Learning employees to build on the foundation John laid and to continue to position the company for strategic and operational success,” he said.

During his tenure, Murray served as the chief architect behind several high-profile contracts and mergers, including the company’s acquisition last year of Lightspan Inc. Already a major player in high schools, the all-stock deal was intended to expand PLATO’s reach into elementary schools, where Lightspan’s popular reading software products would enable PLATO to compete with the likes of Pearson Education, among other established vendors.

Murray said the deal positioned the company as an industry leader and helped boost operating finances from a $20 million shortfall to near break-even status in less than 12 months.

Murray also played an integral role in inking a $22 million deal to provide software, support, and computerized instruction for students across the state of Idaho. As part of the deal, PLATO supplies software designed to help boost students’ scores on state tests, as well as technology and support for Idaho’s computerized student information system. (See “Idaho adds $5 million to its PLATO Learning deal,” http://www.eschoolnews.com/news/showstory.cfm?ArticleID=5186.)

“I’m proud of my 18 years of service with PLATO Learning, and I’ve enjoyed working with a talented team that’s dedicated to growing the company and serving both educators and shareholders,” said Murray in a statement. “I believe in the company and its prospects and will remain a stockholder so that I can share in the benefits of the past efforts of the company and its employees.”

Shares of PLATO Learning’s stock, which trades on the NASDAQ under the sign TUTR, closed on Nov. 17 at $7.44, up 4 cents.

Links:

PLATO Learning Inc.
http://www.plato.com