Pearson shares plunge

LONDON - Pearson just lost a chunk of its market value that's greater than the proceeds it's making from the sale of the Financial Times and the Economist.

The shares fell 16 percent in London on Wednesday, the most since 1988, after the education company said full-year profit will be at the low end of its previous range of forecasts. That trimmed the stock's value by $2.5 billion. Pearson has agreed in recent months to dispose of the Financial Times newspaper and its stake in the Economist magazine for about $2 billion.

Chief Executive Officer John Fallon blamed a decline in U.S. college enrollments and sales of fewer textbooks in countries including South Africa, which came to light only at the end of last month. The summer months are the busiest time of the year for Pearson, known as the 'back to school” period in the United States.

While London-based Pearson, which has operations in the Corridor, gets almost all its profit from education, the company has struggled the past two years with job cuts and a reorganization to boost investment in digital services and emerging markets.

'What's happening now is somewhat frustrating because we've gained share in all our major markets, but they are weaker than we thought they'd be at the start of the year,” Fallon said. 'It's frustrating that we're having to guide to the lower edge of our earnings per share range.”

As it shifts online, Pearson has gone through what Fallon has called a 'bruising” restructuring. Since early 2013, the company has eliminated more than 4,000 positions and halved its warehousing capacity for textbooks and other physical media.

'What should also be worrying for Pearson shareholders is that when they had the profit warnings for 2012 and 2013 numbers,” they were issued in January trading updates, said Ian Whittaker, a media analyst at Liberum in London. 'The fact the company is turning so negative so early suggests the problems are greater than would have been anticipated.”

Pearson has shed stakes in Madame Tussaud's wax museums, the Lazard investment bank and France's Chateau Latour vineyard. Today it's the world's largest education company, with about 93 percent of revenue coming from sales of books, tests and other learning materials.

'The factors against us now are cyclical and they've been more persistent than we thought,” Fallon said. 'We will start to grow again.”