You could call Sylvan Learning Systems Inc. the "stealth" company of the school privatization business.
Amid a bitter controversy over the Baltimore school system's decision to put Education Alternatives Inc. of Minneapolis in charge of eight of its schools, Sylvan has quietly gone about the business of tutoring children at six other city schools. Test results have been so positive that school officials are thinking of expanding its role.
Sylvan's successes have not won it the front-page attention of EAI's well-publicized difficulties, but Wall Street has taken notice. Shares in the Columbia-based tutoring and testing company, which went public last December at $11 a share, have risen sharply since then.
The stock reached a trading high of $21.75 Monday, but has dropped 9 percent since then, to close yesterday at $19.75. The two-day decline came in the wake of a company vice president's disclosure Tuesday that he sold 1,000 shares.
Sylvan's overall gains since it went public are not based solely on its venture into the public school system. Growth prospects appear bright in all three of its lines of business, and a company that lacked a strong identity a few years ago is rapidly becoming a recognized brand name in education services. A healthy third-quarter earnings report has done nothing to hurt.
"They have a very good model to address the long-term opportunities in the education marketplace by capitalizing on the trend toward computerized testing, the trend to ward privatization in schools and the broad-based dissatisfaction with our schools," said Steven L. Eskanazi, an analyst at Alex. Brown & Sons' New York office.
Last month, Sylvan's computerized testing business got a boost when Novell Inc., one of the world's largest software companies, authorized the Maryland company to conduct certification testing for professional users of its computer programs.
Keith E. Benjamin, an analyst with Robertson Stephens & Co. in San Francisco, estimated that the first 100,000 tests Sylvan administers should yield $1 million in earnings, or 10 cents a share.
The Novell contract builds on the company's already strong relationship with the Educational Testing Service, the nation's leading educational test publisher, which has designated Sylvan its chief provider of computer-based testing.
"ETS is really working with us to usher in a sea change in how testing is done," said Sylvan President Douglas Becker.
Sylvan's other businesses involve succeeding where the public schools fall short -- a daunting task but also a field of virtually limitless growth opportunity.
The public school tutoring business, the newest of Sylvan's ventures, got its start in Baltimore last year and since then has expanded to three other systems -- in Dorchester County, the District of Columbia and Pasadena, Texas.
Mr. Becker said one reason for the company's strong start in this field is that it has carefully limited its role. "We view ourselves as more of a supplement to what the schools are already doing," he said.
That stance has gone far to limit the controversy over its role in Baltimore, where the teachers union has led vigorous opposition to the EAI venture. Earlier this year, Mr. Becker said that Sylvan has largely defused the union's opposition by avoiding confrontation and hiring many of its members on a part-time basis.
The public school venture is an outgrowth of Sylvan's core business -- offering private tutoring programs in math and reading skills through a nationwide chain of more than 500 company-owned and franchised learning centers.
Mr. Becker said the private tutoring business has been expanding briskly in recent quarters, including 23 percent revenue growth in the third period.
Overall in the third quarter, the company posted net income of $1.42 million, or 15 cents a share, on revenue of $12.1 million. Both were records and more than double the previous year's figures.