DeVry's Retrenchment

May 23, 2005

DeVry University cut back faculty positions last week in a continuing effort to bolster profits amid decreasing enrollment.

The for-profit institution said Wednesday that it had eliminated the jobs of 134 faculty members, both full-time and part-time. DeVry had already carried out two voluntary buyout programs earlier in the fiscal year. This most recent reduction, in which 29 faculty members voluntarily took a buyout, followed an evaluation of DeVry’s “campus-based instructional needs.”

All of the faculty members leaving are from DeVry’s 23 major campuses, and most are full-time faculty. The cuts are primarily from campus-based instruction, not online programs. None of the faculty members leaving are from the 73 smaller university centers.

According to DeVry, the earlier buyout programs were not quite enough to balance slumping enrollment. The student population at DeVry University, the centerpiece of DeVry Inc.’s for-profit education stable, has decreased from 49,480 in 2001, to 39,450 in fall 2004. Consequently, DeVry Inc.’s operating profit margin has slipped from 17 percent in 2002, to 11.3 percent last year. Apollo Group, which owns the University of Phoenix, has posted an operating profit margin of 25.15 percent for the last 12 months, while DeVry Inc.’s has been 6.15 percent. The industry averaged 7.22 percent over the last 12 months, according to Yahoo! Finance.

DeVry estimates that $6 million in annual salary and benefits will be saved by the most recent cuts, but, due to severance packages, the saving will be delayed until fiscal 2006. According to a recent DeVry Inc. report, this year’s buyout costs partly contributed to the low current profit margin.

The cuts are part of a push by DeVry to redistribute programs to attract students beyond its traditional tech constituency. DeVry lost almost 3,000 undergraduate students between spring 2004 and spring 2005, but added almost 9,000 online students, according to SEC filings, reaching nearly 20,000.

“Traditionally, we operated the large campuses,” said Joan Bates, director of investor relations for DeVry Inc. “Now we see a greater proportion of online students and adult learners who are attending our learning centers and online, often in business programs.” The increase in online students has helped offset on-campus losses, but online students are more often part-time, and DeVry has found them harder to retain. “Those numbers are getting better,” Bates said. “But they’re still not as high as on-campus.”

During the boom DeVry experienced rapid growth and concentrated its resources on more traditional, on-campus technology programs, like electronics and computer technology, and networks systems. When the boom disappeared, so did many of DeVry’s students, while the infrastructure remained. The recent review found that the major campuses were operating well below peak efficiency. “We’re not getting rid of programs,” Bates said. “But if you don’t have as many students, you don’t need as many [faculty and staff members].”

Now, as part of restructuring, DeVry will put more resources into modish programs, like video-game programming and biomedical informatics. DeVry Inc. has also recently added Deaconess College of Nursing to a health education portfolio that includes schools of medicine and veterinary medicine as part of Ross University.  “A registered-nursing program is fairly unique among for-profits,” said Sean Gallagher, analyst with Eduventures Inc. “They’re aligning their resources with new niche growth opportunities. Their peers have already been much more diversified.”

DeVry also now offers more opportunities outside of four-year degrees, and is broadening its marketing. “Many of our marketing initiatives are still targeting high school students,” Bates said. “We want to diversify that to reach a broader base, in and beyond the technology students.”

None of DeVry’s existing programs will disappear as part of the recent reduction. “We’re not abandoning the on-campus student,” Bates said. “But we are adding more faculty and staff online. That’s where we’re reaching new students.”

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