Sylvan Learning Systems, the nation's leading provider of computer-based educational testing services, got caught in the cross-fire yesterday after the Educational Testing Service came under attack from a company that coaches students to improve their test scores.
Columbia-based Sylvan's stock price was a casualty. After closing Thursday at $19.75, it dropped as low as $17.50 yesterday morning before rebounding to close at $19.
The Maryland company's wild ride came after Kaplan Educational Services of New York reported Thursday that 20 of its employees, taking the test undercover, had found a way to compromise the security of the computer version of the Graduate Record Examination.
The news hurt Sylvan because it has an exclusive contract with ETS, the largest publisher of educational tests in the United States, to administer the graduate school admission test to students who want to take it on a computer. ETS and Kaplan agreed that Sylvan's administration of the tests was not the problem, but Sylvan President Douglas Becker said "clearly we are affected."
On Thursday, ETS announced that it would suspend computer administration of the GRE test for a week after Christmas while it introduces new procedures the reduce the likelihood of cheating. Kaplan told the testing service that its test-takers had managed to memorize enough answers to give later test-takers a significant advantage.
The first reaction by ETS and the GRE's supervising board Thursday was to admit Kaplan had exposed a potential vulnerability in the exam and to promise changes. But yesterday their officials suggested that Kaplan -- a longtime nemesis -- had less than noble motives.
"They're trying to discredit the practice of computerized testing," said Brian Foster, chairman of the ERE board and dean of the College of Arts and Sciences at the University of Nebraska at Lincoln. He said the board was still committed to computer delivery of its test, adding that students appreciate the flexible scheduling and the ability to learn their results almost immediately.
ETS officials said Kaplan has built its business around the testing service's traditional practice of holding classes four times a year. Computerized testing throws a monkey wrench into the coaching service's program by letting students take the test at a time of their choosing, they said.
"Test preparation classes are basically structured for paper and pencil tests," said Ernie Anastasio, executive vice president of ETS.
Jonathan Grayer, chief executive officer of Kaplan, said his company's only interest was in the integrity of the testing process. He said his company acted after hearing anecdotal reports of students beating the test, but said he had no proof that any cheating had occurred. Kaplan, a subsidiary of the Washington Post Co., pledged not to use any of the memorized questions in its test preparation classes.
Mr. Grayer denied his firm's motive was to discredit computerized testing per se, but he contended that ETS should go back to the drawing board in its efforts to move standardized testing to computers.
ETS said that when it resumes the computerized GRE Jan. 3, it will have an increased pool of questions that will be rotated more frequently.
Mr. Grayer said he doubted those measures will be sufficient to ensure security and hinted that Kaplan would test ETS' defenses yet again.
Sylvan is best known locally for its nationwide chain of franchised tutoring centers and its contract with the Baltimore school system to tutor at six city schools.
Steve Eskenazi, an analyst at Alex. Brown & Sons' New York office, said the perception that Sylvan is at the forefront of a general shift toward computerized testing is a major reason the stock price has increased sharply since it went public a year ago at $11.
Mr. Eskenazi said he doubted this week's news would have much impact on Sylvan. "This is a speed bump on the way to computerized testing," he said. "This is not a big deal."