Working for Working Adults

Apollo Group's University of Phoenix shows that colleges for older students are a good business

As an entrepreneur, John G. Sperling was a late bloomer. A PhD who had spent most of his career teaching at San Jose State University, he didn't launch Apollo Group Inc. -- parent of the University of Phoenix, the nation's largest private university -- until 1976, when he was 55. But what Sperling lacked in precociousness he more than made up for in ambition: His goal was nothing less than to turn conventional higher education on its head.

Rather than catering to 18- to 22-year-olds looking to find themselves, Sperling focused on the then-neglected market of working adults. And he recruited working professionals as teachers, rather than tenured professors. Although UOP and its online campus, University of Phoenix Online, have more than 9,000 faculty, only about 250 are full-time. Most radical of all, while nearly all other universities are nonprofits, Sperling ran his university to make money. Those ideas sparked overwhelming resistance from the education establishment, which branded UOP a "diploma mill." The result? "We faced failure every day for the first 10 years," says Chairman Sperling, now 82.

But these days Apollo has been soaring, all the way to the No. 7 spot on Hot Growth. The Phoenix-based company, whose day-to-day operations are run by CEO Todd S. Nelson, 44, generated average annual revenue growth of 27% over the past three years, to $1.2 billion. Profits rose 41% per year, to $202.5 million. And with a price-earnings ratio of 56, Apollo has one of the richest multiples on our list.

Tuition at Apollo averages only $10,000 a year, 55% of what a typical private college charges. A key factor, says Sperling, is that universities for the young require student unions, sports teams, student societies, and so on. The average age of a UOP student is 35, so UOP doesn't have those expenses. It also saves by holding classes in leased office spaces around the country. And 50,000 of its 157,800 students study at University of Phoenix Online.

Sperling is still agitating against the establishment. His latest target: textbooks. "Our goal is to move all of our texts and materials into electronic format," he says. Some 30,000 Apollo students use digital materials. By next March it should be everyone. Who says old professors can't teach new tricks?

By William C. Symonds in Boston

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