U.S. Bancorp Piper Jaffray
The Learning Services Update
May 29, 2002 : Volume 3, Issue 11

Mark A. Marostica 612-303-5572, mmarostica@pjc.com
David Rudow 612-303-2204, drudow@pjc.com
_______________________________________________________

The Learning Services Update provides news on the latest
trends in the expanding Learning Services sectors.
The U.S. Bancorp Piper Jaffray Learning Services team
strives to provide brief but insightful commentary on
the companies that leverage various Internet and Web
technologies to create, enable, deliver, and/or facilitate
lifelong learning.

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In This Week's Learning Services Update:

I. U.S. Bancorp Piper Jaffray Learning Services Indices
II. Market Overview
III. Learning Services Overview
IV. Research Coverage Updates
V. Public Equity Activity
VI. News
VII. Upcoming Conferences & Activities
_______________________________________________________

I. INDEX - U.S. Bancorp Piper Jaffray Learning Services Indices

e-Learning Companies decreased 4.9%
Knowledge Infrastructure Companies decreased 2.4%
Training & Education Companies decreased 4.6%

View graph of U.S. Bancorp Piper Jaffray Learning Services Indices:
http://www.gotoanalysts.com/piperpublic/goto/assets/learningservices/learnin
gindices29may02.gif

View table of U.S. Bancorp Piper Jaffray Learning Services Universe:
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etable29may02.gif

II. Market Overview

Pre K-12 Companies increased 0.9%
Postsecondary Education Companies decreased 3.9%
Corporate Training Companies remained flat changing 0.0%
Education Publishing Companies remained flat changing 0.0%

The Dow decreased 0.1%
The NASDAQ increased 0.5%
The S&P 500 increased 0.9%
Russell 2000 decreased 1.2%

The following commentary was taken from Brian Belski's MarketWatch:
May 28, 2002;

Overall Market (The View from 25,000 Feet)
More mixed data last week has intensified the near-term cloud of
economic uncertainty hovering overhead, despite a very strong Durable
Goods report...

Positives = Durable Goods (exceeded est. by nearly 3X); Inventory
portion declined for the fifteenth month + Strong New Home Sales
Negatives = Leading Indicators turned negative (5/10 leading index
components declined) + High continuing unemployment claims + Downward
GDP Revision
Keys This Week = Friday is the key (esp. Q1 Productivity and April
Factory Orders) in helping discern industrial improvement/expansion.
Mutual Fund Money Flow Recap

Equity Funds = Outflows Resume [-$1.27 Billion vs. +$3.88 Billion]
Money Market Funds = Inflows Return [+$25.88 Billion vs.-$5.46
Billion]
Bottom Line = The alternating trend of Equity Fund inflows and
outflows continued this week (sixth consecutive week of such a
pattern), suggesting near-term investor uncertainty remains very much
in place.

View Market Indices Graph:
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ndices29may02.gif

III. Learning Services Overview

For the two-week period ending May 24, 2002, the PreK-12, Post
Secondary, Corporate Training, and Educational Publishing universes
posted returns of 0.9%, (3.9%), 0.0%, and 0.0%, respectively. Price
performance of stocks in the Learning Services sectors were mixed over
the two-week period, while the broader technology-heavy NASDAQ index
closed up 0.5% for the same period. Stock price declines in the
PreK-12 space was dominated by continued price declines of Edison
Schools shares, which were down 53% for the two-week period. The Post
Secondary space experienced slight declines, on no specific news, from
shares of Apollo, Corinthian Colleges and Career Education. Overall,
the Corporate Training space remains weak as we have yet to see a pick
up in technology and training related spending. The Educational
Publishers ended the two-week period flat. Overall, the share price
performance of the Learning Services sector, in our opinion, reflects
continued investor interest in the higher education and K-12 sectors,
which tend to have relatively stable demand profiles in recessionary
environments, in our opinion.

IV. Research Coverage Updates

Edison Schools (EDSN, $1.26, Market Perform, #)
On May 14, after the market close, Edison reported Q302 results. The
Company reported Q3 "net" revenue of $121.9M (net of certain district
paid expenses) and "gross" revenue of $131.2M, compared to our gross
revenue estimate of $133.5M. The reported pro forma EPS was ($0.19),
compared to our estimate of ($0.24); the Street consensus was ($0.22).
Edison announced for the first time that it was involved in and just
closed a SEC inquiry that started about three months ago. This
resulted in prior period and prospective revenue reclassifications,
with no impact on prior period operating or net losses. As we
previously noted, Edison indicated that it is attempting to secure
$30M-$50M of funding and talks are underway with a potential investor.
However, the Company provided no further details related to its
potential financing activities. We feel that if Edison is able to
raise the desired capital, it will likely contain an equity piece that
will be dilutive and costly from an interest rate standpoint. We point
out that there are no assurances that this financing will be
consummated and thus feel that if Edison limited its discussion to a
single investor, it may prove to be risky if the deal does not
materialize. The Company provided no new news on the pending
Philadelphia school management and consulting contracts. We
reiterated our Market Perform rating and $3 price target (15-year DCF)
on EDSN shares.

Lightspan (LSPN, $1.14, Outperform, #@)
On May 21, 2002, Lightspan reported first quarter FY03 revenue of
$10.3M, slightly below our estimate of $10.7M. EPS for the first
quarter was ($0.26), beating our estimate of ($0.31) by $0.05, marking
the sixth consecutive quarter of EPS outperformance relative to Street
expectations. Despite posting revenue slightly below expectations,
solid expense control contributed to the bottom-line outperformance.
The Company also burned $9.3M in cash during the quarter, compared to
its original guidance of $11-$13M. The Company reaffirmed its goal of
reaching cash flow profitability by the October quarter FY03 (2
quarters from now). We believe Lightspan will turn the corner with
approximately $20M in cash on the balance sheet. The Company
reiterated its FY03 revenue guidance of $60M-$65M, and raised its FY03
EPS guidance from a range of ($0.75) to ($0.85) to a range of ($0.70)
to ($0.80). We maintained our Outperform rating on LSPN shares and
reduced our target price from $8 to $6, based on our lower revenue
estimate.

Learning Services Symposium Summary
We held our annual Learning Services Symposium on May 14, 2002. The
following is a summary of K-12 and higher education companies under
coverage that presented at the learning services symposium.

The Princeton Review (REVU - $7.95 -- #@)
Outperform
Volatility: High
Target Price: $12 (3.5x CY02 Rev Est.)
· The Princeton Review continues to extend its test preparation
business beyond traditional college admissions and K-12 state
standardized test preparation. For instance, the Company recently
announced a multiyear contract worth about $1.5M with Ross University
School of Medicine whereby The Princeton Review will develop a medical
school course to help students with clinical learning and enhance
performance on the U.S. Medical licensing examination.
· The Ross University deal comes on the heels of the Company's April
2002 announcement that it will offer worldwide online, as well as new
classroom instruction for Step 1 of the three-part United States
Medical Licensing Exam (USMLE) in seven cities: New York, Houston,
Boston, Chicago, Washington, D.C., Philadelphia, and San Francisco.
· We like the Company's move to diversify its test preparation
business, as it provides additional revenue-producing opportunities.

Lightspan (LSPN - $1.14)
Outperform
Volatility: High
Target Price: $6 (6.0x CY02 Rev. Est.)
· In our opinion, the Company remains focused on getting to cash flow
break-even status by its third quarter fiscal 2003 (October 2002
quarter end) and bottom-line profitability by second quarter fiscal
2004 (July 2003 quarter end).
· Sony's recent announcement to cut the price of the Sony Playstation
from $99 to $49 should help make AchieveNow, the Company's core
Achieve Now product, more affordable for schools.

Reniassance Learning (RLRN - $34.50 --#~)
Strong Buy
Volatility: High
Target Price: $55 (6.0x CY02 Rev. Est.)
· Renaissance Learning is undergoing a new product cycle with the
recent launch of six new products. The Company's new products are
included in its latest annual catalog, which was mailed to schools a
few months ago. The table below summarizes key attributes of the new
products.
· We feel that the Company's products focus on curriculum areas that
attract the lion's share of school expenditures (reading, writing, and
arithmetic). K-12 spending mix by curriculum area is as follows:
reading: 30%; writing: 15%; arithmetic: 20%; other: 35% (source:
Company information).
· We believe the pipeline of new product development continues to be
active and anticipate additional new product announcements over the
coming quarters.

V. Public Equity Activity

There was no public equity activity for the two weeks ending May 24,
2002.

View Recently Completed Learning Services Offerings:
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View Selected Learning Services Offerings In Registration:
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VII. News

Centra
May 20, 2002-- Centra announced that the State of New Hampshire has
selected Centra's Web collaboration platform to provide efficiencies
in the administration of their Food Stamp Program. Using Centra, New
Hampshire's Department of Health and Human Services has launched a new
program aimed at streamlining the delivery of live, interactive
training and information to eligibility workers.

May 22, 2002 -- Centra announced that Port Augusta School of the Air
is providing a unique program of instruction to isolated students in
Australia, using Centra to restyle their distance education program.
In partnership with Appcon, Centra's exclusive reseller in Australia,
School of the Air has deployed CentraOne(TM) in a pilot project to
assess the need to replace a 50-year old radio-based education program
for children living in an area of the Australian Outback that is 50
percent larger than the state of Texas.

Docent
May 17, 2002 -- Docent Inc. (DCNT) is cutting 40 employees, or about
20% of its total work force, realigning management and is cutting its
second quarter revenue guidance.

May 22, 2002 -- Docent Inc. announced the introduction of Docent
Notify(TM) to extend course scheduling capabilities to personal
information managers (PIMs). Docent has integrated Infotriever's
unique calendar and address book integration technologies into the
Docent Learning Management System(TM) (LMS) to power Docent Notify,
enabling a dynamic, event-based synchronization between course
schedules and the most widely used PIMs, including: Microsoft
Outlook(TM), Lotus Notes(TM), Palm OS® and Act 2000(TM).

Edison Schools
May 23, 2002 -- Edison Schools announced that school expansions are
underway at 12 Edison schools around the country, including schools in
Albany, the Bronx, Rochester, and Buffalo in New York; Phoenixville
and Philadelphia in Pennsylvania; Washington, DC; Milwaukee,
Wisconsin; Atlanta, Georgia and Dayton, Ohio. These expansions
represent a total increase of over 1,500 students. In addition, Edison
announced the opening of two additional new schools this fall -- the
first Edison school in Indiana and a new charter school in Kansas
City, Missouri -- together these two schools expect to enroll more
than 1,250 students.

eCollege
May 22, 2002 -- eCollege(SM) announced it has been chosen as the
enterprise-wide eLearning solution for Texas Christian University's
distance and on-campus programs. eCollege currently powers two online
master's programs for TCU. Through this extended partnership, eCollege
will support additional online degree programs for TCU's distance
students, as well as provide online course supplements to all of TCU's
on-campus students.

May 28, 2002 -- eCollege announced that it has been selected by the
State of Colorado as one of the preferred providers of eLearning
solutions for programs delivered by the State's higher education
system, as well as by the State's government agencies.

Eloquent
May 24, 2002 -- Eloquent, Inc. announced that the NASDAQ Stock Market
approved the company's request to have its common stock traded on the
NASDAQ SmallCap Market. Eloquent's common stock currently trades on
the NASDAQ National Market. The transfer became effective as of the
commencement of trading on May 28, 2002. The securities continue to
trade under the symbol ELOQ.

ITT Education
May 20, 2002 -- ITT Educational Services is currently enrolling
students at the 71st ITT Technical Institute, located in Springfield,
VA. The new school is at the entrance to the Virginia 95 Business Park
just off the I-95 capital Beltway within 10 to 15 minutes of
Washington, D.C.

Lightspan
May 17, 2002 -- Lightspan announced that it has established an
agreement with Avatar Technology to provide Web-based professional
development resources to schools and educational organizations.

May 21, 2002 -- Lightspan announced that more than half of the school
districts in the state of Florida have begun using Lightspan eduTest
Assessment to help schools monitor student achievement.

McGraw-Hill Companies
May 23, 2002 -- The McGraw-Hill Companies announced plans to publish
the definitive self-help guide for job-seekers in partnership with
Resume.com, a leader in the career services area.

PRIMEDIA
May 17, 2002 -- PRIMEDIA's American School & University magazine
announced the findings from its 28th annual Official Education
Construction Report. The report, which appears in the May issue of
American School & University, indicates that despite last year's
economic recession, education construction spending reached record
heights in 2001 and is projected to remain strong over the next three
years.

Provant
May 22, 2002 -- Provant, Inc. announced that it has received
notification from The NASDAQ Stock Market that it intends to delist
the Company's common stock from The NASDAQ National Market, effective
at the opening of business on May 24, 2002, due to the Company's
failure to comply with the U.S. $1.00 minimum bid price requirement
for continued listing on The NASDAQ National Market.

Renaissance Learning
May 22, 2002 -- Renaissance Learning announced that it has appointed
Deloitte & Touche LLP (Deloitte) as the Company's independent public
accountants for the year 2002, replacing Arthur Andersen LLP
(Andersen). Deloitte & Touche LLP will be taking over immediately.

Scholastic
May 20, 2002 -- Scholastic Inc., the leading provider of reading
improvement programs for struggling middle and high school students,
announced this week that it has been recognized and approved for its
breakthrough reading intervention program, READ 180® by the National
Center on Education and the Economy (NCEE). A non-profit organization
committed to standards-based education, NCEE's America's Choice school
design is in more than 450 schools across the country. NCEE has
recommended the use of Scholastic's intensive research-validated READ
180 program, proven to increase the reading skills and test scores of
students in grades 4-12 reading below grade level.

May 22, 2002 -- Scholastic announced the October release of "I Spy
Challenger" -- the first Scholastic title created for the Nintendo
Game Boy Advance. By combining the unique brand attributes of the
award-winning "I Spy" CD-ROM series and the portable play of the
Nintendo Game Boy Advance, "I Spy Challenger" offers kids on-the-go
all the challenging riddles and fast-paced games they've grown to
love. The release of "I Spy Challenger" marks the seventh title in the
best-selling "I Spy" software series.

May 24, 2002 -- Scholastic's Star Wars: Episode II: Attack of the
Clones Jr. Novelization, which hit both traditional bookstores and
mass market merchandisers nationwide on April 23, debuted at #1 on The
New York Times Children's Paperback best-seller list for the week of
May 12 and has been at the #1 spot for four weeks in a row. The junior
novelization, which is a top-seller in Scholastic's School Book Clubs,
also debuted at #1 on the Bookscan Children's best-seller list and at
#13 on the May 2nd USA Today best-seller list. Scholastic also
published another Star Wars best-seller, Boba Fett: The Fight to
Survive, which debuted at #7 on The New York Times Best-seller List
for children's chapter books.

Student Advantage
May 22, 2002 -- Student Advantage announced its Board of Directors has
approved a one-for-ten reverse split of the Company's common stock.
The Board has called a special meeting of stockholders for June 28 to
consider the reverse stock split.

The Princeton Review
May 23, 2002 -- The Princeton Review will hold a free SAT practice day
in more than 100 locations around the country. High school students
who want to try the college admissions test under simulated SAT
testing conditions will be able to take a full-length practice test at
no charge (the College Board charges $25 to take the official test).
The Princeton Review will then mail a detailed analysis of their
scores and how they can be improved. More than 5,000 students are
registered and expected to participate.

May 28, 2002 -- The Princeton Review announced a contract to develop
an online testing skills preparation program for the United States
Army. The contract, worth over $1.5 million for the first year, calls
for the development and delivery of a customized Princeton Review
online training program to be provided through a partnership with
Resource Consultants Inc (Vienna, VA), a leading professional services
company serving military, governmental and commercial customers.

VII. Upcoming Conferences & Activities

View Upcoming Conferences & Activities table:
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U.S. Bancorp Piper Jaffray Learning Services Team

INVESTMENT BANKING CONTACTS
John Jacobs 206-287-8831 jjacobs@pjc.com
Cameron Hewes 206-287-8837 chewes@pjc.com
Erik Tolzmann 206-287-8832 etolzmann@pjc.com
Sarah Scheessele 206-287-8844 sscheessele@pjc.com

RESEARCH CONTACTS
Mark Marostica 612-303-5572 mmarostica@pjc.com
David Rudow 612-303-2204 drudow@pjc.com

_______________________________________________________

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(~) A USBPJ officer, director, or other employee is a director and/or
officer of the company.

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Copyright 2002 U.S. Bancorp Piper Jaffray, 800 Nicollet Mall, Suite
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