Pearson Cuts 10 Percent of Its Workforce– (Possibly) Including Its CEO
Addendum 01-21-16, 12 noon CST:
In the post below, I assumed that Pearson CEO John Fallon had been fired. It seems that Fallon has not been terminated but that his job is uncertain.
In Pearson’s February 2014 earnings call, CEO John Fallon and and CFO Robin Freestone were clearly counting on the Common Core to garner notable profits from their US education market.
In discussing the US education market, Fallon spoke of “successfully embed[ding] ourselves with our customers”:
…We are choosing exactly this moment to push ahead with the largest restructuring in the history of Pearson… if we can [and as we] successfully embed ourselves with our customers. …what that work does is shift us much more quickly and much more irreversibly to where the biggest sources of future demand are. …we’re… stepping-up our investment in North America, with an extra GBP 60 million ($102 million) in 2013 alone. … We’re doing so to get ahead of the forces reshaping our industry… and to reduce our exposure to the corresponding risks. [Emphasis added.] (Transcript compliments of www.SeekingAlpha.com.)
One of the market analysts in that February 2014 meeting asked about Pearson’s plan if Common Core faltered. Here is what I wrote in May 2014 about that question:
One of the analysts (Whittaker) raises the question of Pearson’s dependence upon 2015 CCSS implementation for future profits. Fallon uses editorials on CCSS as evidence that CCSS will move forward (such sophisticated research, eh?) and comments that before CCSS, “local, stand-alone operating companies” were an impediment to not being able to “scale at anything.” …
Whittaker has asked once about an alternate plan of action if CCSS doesn’t work as anticipated. Fallon responded initially that all of CCSS need not work in 2015, just some of CCSS. Whittaker insists upon hearing of Fallon’s alternate plan of action; Fallon offers no substantive alternate plan.
Well. 2015 has come and gone, and so has CFO Robin Freestone, who participated in his last Pearson earnings call in July 2015. In that meeting, Fallon spoke about the need to polish the Pearson brand and “win hearts and minds… by telling the Pearson story more effectively.”
Guess that isn’t working, either. December 2015 saw Pearson stock at its lowest since 2009. And on January 21, 2016, the Financial Times announced that Pearson would be cutting 4,000 jobs– 10 percent of its workforce– and that CEO John Fallon was also threatened with getting the boot:
Pearson is axing 4,000 jobs, or 10 per cent of its workforce. The troubled publishing company is trying to arrest a decline in its fortunes resulting from lower educational spending and a muddled digital strategy.
Hefty restructuring charges of around £320m ($451 million) will be taken in 2016, depressing operating profits to between £260m ($367 million) to £300m ($423 million) from around £600m ($847 million). Pearson has been reducing its geographic spread, its complexity (for example by selling the FT) and investing in online products.
This looks like the last roll of the dice for chief executive John Fallon, who has presided over a plunge in the share price. New chairman Sidney Taurel started earlier this month. [Emphasis added.]
Common Core has not panned out for Pearson.
There are those who insist that Common Core is a success.
Looks like Pearson reality prevents it from joining that brigade.