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University of Phoenix

Photo courtesy of Apollo Group

The John Sperling Center for Innovation is located on the University of Phoenix main campus in Arizona.


Ashley Devick/MEDILL

Students seeking bachelors degrees continue to drive the University of Phoenix student population.

Apollo Group’s University of Phoenix leads career initiative

by Ashley Devick
March 14, 2013

Apollo Graph

Ashley Devick/MEDILL

University of Phoenix has seen a decline in enrollment from 2012 to 2013.

For Apollo Group Inc., success in the higher education marketplace is all about providing jobs.

The for-profit education provider, corporate parent of the University of Phoenix, faces increasing competition and declining enrollment. These days, finding ways to attract new students is the company’s biggest challenge.

And CEO Greg Cappelli says it has everything to do with jobs.

“If you put that in front of them, and you show them that you understand that, and it’s important, then they’re going to choose you, whether they have to borrow some money to get that value,” Cappelli said.

Apollo is in the same boat as other for-profit educators, as the sector struggles to emerge from a downturn. Apollo’s total enrollment of degree-seeking students in the first quarter was dropped 14 percent to 319,700 from the year-ago period.

With the labor market still depressed, potential new students are questioning whether or not the education is worth the expense. Tuition costs have risen faster than inflation. In addition, the median income of individuals with a bachelor’s degree is in decline, according to the National Center for Education Statistics.

In response, Apollo is taking steps to connect employers with its graduates, and to bridge the gap between desired skills and required education.

“We’re collaborating with corporations and industry associations to develop curriculum relevant to today’s workforce that’s focused on core skills and competencies,” Cappelli said. “We know from talking to hundreds of employers, thousands of employers, to people across the nation, what is important to them.”

Barry Feierstein is leading the charge on this initiative. As the Chief Business Operating Operator of Apollo’s flagship University of Phoenix segment. Feierstein's main goal is to help companies globally solve their skills gap needs.

“As a global education company, we believe it is critical to connect graduates to careers across the board,” Feierstein said.

To Feierstein, the university has a responsibility to inspire students to aim high in their professional aspirations.

“We are repositioning the university specifically around how to help students who want to change their career trajectory,” Feierstein said. “If they want to do something different with their lives career-wise and selected higher education, then it’s up to us to help students think through the details and translate that through the academic curriculum to ultimately connect them to jobs.”

University of Phoenix is paving the way to match its graduates with employers in the United States, focusing efforts primarily on non-traditional students who are battling underemployment. With additional degrees, certifications and credentials, officials say, more capable workers will be entering the workplace prepared to meet employers’ baseline needs.

Feierstein and his team have relationships with over 2,000 companies around the country. His team has been diligent about building relationships with a number of different organizations to take a top down approach that allows them to inform the curriculum around industry needs.

“As we do this, I think we’re really going to be able to help working adults change their lives in a really meaningful way,” Feierstein said. “We are being very tangible with the education experience and the workforce.”

University of Phoenix recently established a relationship with The Manufacturing Institute, to keep the conversation going around workforce needs in the manufacturing sector.

“Manufacturers’ ability to compete globally depends on an educated and skilled workforce,” Jennifer McNelly President of The Manufacturing Institute said in a recent press release.

The organization awards scholarships for students to attend University of Phoenix.

“These individuals represent the workforce that will lead the innovation that is critical to our U.S. manufacturing base,” McNelly said.

Focusing on vocational skills and certificate programs for non-traditional students provides
Apollo with a chance to distinguish itself from the competition. Dr. Phaedra Weiler went back to school at age 37 in 2001. She was working for her family business and wanted to get new knowledge about accounting and find new strategies for the company. The ideal school, she said,would accommodate her schedule and allow her to finish at her own pace.

“I decided to take that leap of faith and go for it,” Weiler said. She chose University of Phoenix because she could build her education around her work and family obligations.

Weiler was so impressed with the program she went on to earn a doctorate in management and organizational leadership. Her graduation is coming up in June after over ten years of study.

Apollo and other for-profit educators are increasingly being forced to compete with traditional colleges and universities that are now offering online programs. Because of the additional competition, Apollo is lowering its prices. Apollo is one of several schools now experimenting with significant discounts and while the discounts have driven incremental starts, it would be easy to assume a pull-forward in demand from students that could result in further discounting,” said William Blair analyst Brandon Dobell.

During the earnings call for the period ended Nov. 30, 2012, executives announced additional discounting through the expansion of their grant programs. They also projected that revenues per student will be down as much as 2 percent for the remainder of the fiscal year.

The one-two punch of slipping enrollment and the reduced tuition rate could continue to negatively impact Apollo’s bottom line.

There are “a lot of students who have gone away and the cost structure didn’t shrink as fast as it could. Apollo is simply less profitable than it was before,” Dobell said.

The tuition costs may drop even further.

“With uncertainty over federal education funding in the coming years, it is likely the entire for-profit industry will need to reset prices by at least a few points, and perhaps more,” Dobell said.

For Baird Equity Research Analyst Jeff Meuler, branding and marketing of the group will be a key factor in how well the company’s effort pays off in terms of enrollment trends.

“The perception of University of Phoenix’s brand quality creates additional challenges, which may create an obstacle to the company’s improved differentiated value proposition being well-received by some prospective students,” Meuler said.

The key branding tool comes back to guaranteeing that graduates will reach employers, but changing the University of Phoenix perception in the market will be a big factor.

Executives are tapping into their massive alumni network to continue to progress the career initiative.

Apollo management is actively seeking a solution to strengthen the company’s financial position and reduce costs. By closing some locations and focusing on the courses that offer the biggest return. t.
For now, analysts are advising investors to be cautious.

“We believe some investors may underestimate the magnitude of the adjustments necessary before returning to sustainable growth,” Meuler said.

“We are maintaining our investment rating of Market Perform, despite its single-digit P/E due to lower earnings expectations, impaired visibility and the lack of a near term catalyst,” said Barrington Research analyst Alexander Paris.

“Apollo Group has to be nimble, we have to be focused on continuing innovation and offer value propositions that are distinctive, attractive, relevant and that provide a strong return on investment for our learners,” Cappelli said.

Still, it all comes back to the jobs.

“We must also address the needs of employers to find appropriately skilled workers.”