The Rosetta Stone is a leading developer of software for learning languages in the world. Rosetta Stone revolves around a very simple idea: learning a language should be fun, easy, and most definitely effective. Rosetta Stone began their business with one man’s quest for a better way to learn a language. The company’s idea came to the world when Allen Stoltzfus began studying Russian in 1980s and became very frustrated with his slow progress. He knew there was a better way to learn a language, through immersion, which he had experienced years earlier while studying in Germany. He started to learn German not from sitting in the classroom, but from learning of being a part of the culture and the world of Germany. However, his idea had to wait for the technology to simulate the way that people learn their native language, such as with pictures, sounds in context, and with no translation. That time came in 1992 when Fairfield Language Technologies was founded in Harrisonburg, Va. Then Allen, the company’s Chairman and President, and his brother, Eugene Stolzfus, the company’s first Executive Vice President, combined their skills and create the structural and visual components of the program, which quickly went from a dream to reality. They called their product “Rosetta Stone,” named after the artifact that had unlocked the secrets of Egyptian hieroglyphics for linguists. The name certainly fits the product. The software unlocks language-learning success to millions of users around the world.
In 2003, Tom Adams was named CEO and his innovative leadership and passion for language-learning has taken the company global. In 2006, the company was sold to investment firms ABS Capital Partners and Norwest Equity Partners, and was renamed after their signature product. Before the offering, ABS owned 46% of Rosetta and Norwest owned 30%. In January 2006, to get the company off the ground, ABS provided $29 million and Norwest invested $19 million. Those investments have paid off handsomely. The company became publicly traded on the New York Stock Exchange (RST) in April, 2009, providing language-learning solutions for 30 different languages in more than 150 countries. After that ABC’s 46% stake was worth about $145 million, while Norwest’s stake was worth about $95 million. They essentially made about five times their money in 3 years. The company became a leader in providing educational materials in particular targeting individuals, businesses and school, as well as the U.S. government and military. The teaching technique Rosetta Stone employed, called “dynamic immersion,” is akin to how kids learn their first language. No translations or tedious grammar drills are used. Instead, learners gain command of new words and proper pronunciation by matching them with images and pictures that provide real-life context. According to its SEC filing, the company’s idea for business and motto brought the expected results. Rosetta Stone reported a profit of $13.9 million in 2008, up from $2.3 million the year before. Since Tom Adams joined Rosetta Stone as chief executive, the company had grown from a small, family-owned business with $10 million in annual revenue and 90 full-time employees into a 1,200-employee operation with first-quarter revenue in 2009 of $50.3 million. Moreover, the consumer revenue was $167.70 million for the year ended December 31, 2008, and an increase of $60.6 million, or 57%, from the year ended December 31, 2007. Institutional revenue was $41.7 million for the year ended December 31, 2008, and an increase of $11.5 million, or 38%, compared to the year ended December 31, 2007. Cost of revenue for the year ended December 31, 2008 was $28.7 million, and an increase of $8.0 million, or 38.6% from the year ended December 31, 2007. Operating expenses, such as sales and marketing for the year ended December 31, 2008 were $93.4 million, and an increase of $27.90 million, or 43%, from the year ended December 31, 2007. The...
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