As the Knowledge Economy Expands, New Opportunities are Developing in the Education Industry, NationsBanc Montgomery Securities Analyst Tells Investors.

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 17, 1998--As the U.S. economy transitions from an industrial focus into a knowledge-based economy, huge opportunities are arising for companies to offer educational services to everyone from toddlers to corporate employees, according to an education industry analyst for NationsBanc Montgomery Securities.

"The educational sector is a huge portion of the U.S. economy - 10 percent of gross domestic product (GDP), yet the industry is highly fragmented, very inefficient and lacking in professional management," said Keith Gay, an analyst for NationsBanc Montgomery Securities. "For instance, the U.S. spends an average of $6,700 per student for K-12 education, yet only 50 percent of that money reaches the regular classroom. Where does the rest of it go? There's a value proposition for private companies to come in to deliver better outcomes on a cost-effective basis," he added.

Gay's comments came at the 28th Annual NationsBanc Montgomery Securities Investment Conference, which is running this week in San Francisco. The conference, which is the firm's largest to date, features 245 companies with a combined market capitalization of $1.6 trillion making presentations to more than 1,900 portfolio managers. These managers represent 280 different institutions with a combined $3.5 trillion in assets under management.

Gay asserted that there are opportunities for private companies to revolutionize education at all levels, from childcare and K-12 education to colleges and corporate training. Despite a long history of fragmentation, government control and daunting political barriers, education remains a $660 billion industry that is ripe for the introduction of measurable outcomes, strong accountability, cost-controls and professional management.

In the childcare arena, Gay said, educators are coming to realize that early learning programs translate into educational and social success in later years, while large companies are becoming aware that worker productivity can be improved with the introduction of company-sponsored childcare programs. An estimated $3 billion is lost annually in lost productivity due to childcare issues, Gay said. In this market, Gay's recommended stock pick is Bright Horizons Family Solution(1), which has over 260 corporate-sponsored childcare centers.

In the K-12 segment, Gay believes there are huge opportunities for improvement in terms of enhanced curriculums, greater emphasis on math and science and dramatic improvements in technology. There are no publicly traded companies yet that are managing K-12 schools, but The Edison Project, which is managing private schools in 26 states, has the potential to become a billion dollar plus company over the long-term. Investors can participate in this market now by investing in Sylvan Learning Systems(1), a provider of tutoring services with approximately 700 centers globally and 190 centers located directly inside schools.

Post-secondary education is increasingly seen as a must by both companies and workers, and Gay believes that both the coming surge in enrollment of children of the Baby Boomers, as well as adults returning for continuing education, will drive changes in this market. Gay asserts that the new model of college education is learner-focused, rather than teacher-driven, and that students are given access to memory in the form of continuous training, rather than being expected to simply commit facts to memory. Traditional schools are not responding to this changing environment, but several publicly traded companies, such as Apollo Group, Inc.(1), Devry, Inc. and Education Management(1) - all of which Gay recommends - are exploiting this area.

The need for corporate education and training is being driven by a shortage of skilled knowledge workers and the rapid obsolescence of collegiate learning, Gay said. "Companies simply can't get enough skilled workers to sustain their growth," he added. This is a $60 billion market in the U.S. and a $110 billion market worldwide, Gay said. In this segment, Gay is recommending three stocks: Asymetrix Learning System(1), CBT Group and Provant, Inc(1).

NationsBanc Montgomery Securities LLC (NMS), a subsidiary of NationsBank Corporation, is a full-service investment bank and brokerage firm with approximately $900 million of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets). Other services include M&A advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and the primary dealer.

Through NationsBank, NMS clients can also access products and services that include senior bank debt, bridge financing, real estate banking, treasury management, trade finance and risk management (derivatives products and foreign exchange).

NMS is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. NMS employs more than 2,700 investment professionals. (1) NationsBanc Montgomery Securities LLC currently maintains a

market in this security. NationsBanc Montgomery Securities LLC

was manager or co-manager of a public offering and/or has

performed investment banking or other services for this company

in the last three years.