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Caliber Learning Network struggles

THE BALTIMORE SUN

Bad news came in threes yesterday for Caliber Learning Network Inc., the company that Sylvan Learning Systems Inc. launched to capitalize on the shift of corporate training programs onto the Internet: Its chief executive officer resigned, it laid off one-third of its staff and the Nasdaq stock market threatened to delist its sinking stock.

The resignation of Chris L. Nguyen, the only chief executive officer in the five years since Sylvan spun off the company as a separate entity, took effect yesterday, the company said.

Glen M. Marder, Caliber's chief operating officer, was named interim president and CEO while the company searches for a permanent replacement.

Caliber lost $9 million in the quarter ended March 31 on revenue of $3.5 million, according to a filing with the Securities and Exchange Commission.

In the comparable period a year ago, it lost $7.3 million on revenue of $5 million.

Its basic and diluted loss per share was 76 cents for the quarter, compared with a 61 cent loss last year.

"Given Caliber's current situation and its need to fully reassess its operations and strategic direction, I told the board I felt it would be best for the company to have new leadership," Nguyen said in a prepared statement.

He has been offered a position with Sylvan Ventures LLC, the venture capital subsidiary of Sylvan Learning Systems Inc. The company said Nguyen was not available for additional comment.

Nguyen will continue to serve on Caliber's board of directors.

"Because of the cost-cutting we did today, we are more optimistic now about our future than we have ever been," said Marder, who just joined the company weeks ago from Cerberus Capital Management, L.P., a hedge fund.

"Chris has been the strategic force and inspiration at Caliber since its inception and we look forward to his continued support."

Reduction in force

The company also announced yesterday that it was laying off 63 of its 182 employees. The company declined to disclose details of severance packages, but it said the employees were being treated "professionally."

Taking into account the 40 employees laid off in January, the company is half as large as a year ago.

Caliber's stock closed down 5 cents to 36 cents on the Nasdaq yesterday.

Meanwhile, Nasdaq officials informed Caliber it might remove its listing by July 30 if the stock does not climb to at least $1 for 10 consecutive trading days.

The stock has closed at less than $1 for 44 consecutive trading days, since March 21. Its highest close ever was $18.75 on May 6, 1998, the day after the company went public at $14 a share and raised $80 million.

Tap e-training sector

Sylvan founders Douglas Becker and Chris Hoehn-Saric and MCI WorldCom Inc. pooled more than $12 million to create Caliber in 1996 to tap the so-called "e-training" sector for corporations.

IDC Inc., a Boston-area based Internet research firm, predicts that specialty will grow from a total of $2.2 billion in 2000 to $11 billion by 2003.

More than one-third of corporate training will be done over the Internet by then, it predicts.

But that won't be soon enough for Caliber, whose fortunes have rapidly declined since fall.

In January, Caliber received $15 million in financing from Sylvan Ventures and Fleming US Discovery Fund III.

Caliber is among the investments that have been a drag on Sylvan's bottom line. This month, Sylvan reported a net loss of $11.6 for the first quarter of 2001, due largely to write-offs of Sylvan Venture investments.

Caliber said yesterday that it has received proposed terms from Sylvan for a new $750,000 loan at 10 percent interest to help pay its bills.

Sylvan "would not be doing that if they didn't feel close to bringing in another chunk of money from other investors," Trace Urdan, an analyst in San Francisco for WR Hambrecht & Co., which tracks e-learning companies, said yesterday.

"There's no sense in buying Caliber another month, so they have to believe they're pretty far along with other investors."

Steven E. Drake, vice president of communications for Sylvan, declined to say whether another round of financing is imminent. The "bridge loan" from Sylvan gives Caliber more time to get on its feet, he said.

Caliber's headquarters is in a modern, low-slung office in Baltimore's Little Italy in a waterside crescent that local leaders hope forms the core of a "Digital Harbor."

The company initially signed up some promising clients for its "distance learning" programs, including the Johns Hopkins University and the Wharton School of the University of Pennsylvania.

Change in direction

But it eventually decided that offering general classroom programs was a mistake and refocused on customized training for business customers, from AT&T; Corp. to the National Wildlife Federation.

"Like many technology companies, we overreached into different markets. We tried to hit business and academic side," said Kevin M. Thibodeau, senior vice president for sales and marketing.

"The consumer model didn't fit well with the business approach. Now, a clarity of vision along with some fine-tuning sets us up for success."

The company's net loss grew to $34 million in 2000 from $22.2 million in 1999.

Emerging competitors such as Centra Software Inc. of Lexington, Mass., and WebEx Communications Inc. of San Jose, Calif., helped to erode Caliber's sales, which dropped 20 percent to $20.9 million in 2000 from $26 million in 1999.

Urdan, the San Francisco analyst, said Caliber's business relies on companies sending people to their studios to make richly produced training programs, while others offer "more intimate" programs that can be produced with a camera mounted on a desktop computer.

"The problem is not with the industry as a whole," Urdan said. "But as the market has become more sophisticated and with more competitive bidding, Caliber hasn't fared as well.

"They're best suited to a large audience with communication one-way.

"Caliber is only really suited to the big things."

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