ROSETTA STONE INC

ROSETTA STONE INC

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Company Overview
The publicly quoted company is a provider of technology-based language learning solutions. Its registered head office is located in Arlington, Virginia.
The company develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. Its teaching method (called by the name dynamic immersion) is designed to use the innate, natural language learning ability that children use to learn their native language. The company’s stone’s courses are based on its own interactive technologies and pedagogical content, and utilize a sequencing of images, text and sounds to teach a new language without translation or grammar explanation. As of September 2008, the company offered its self-study language learning solutions in 31 languages. The company’s customers include individuals, educational institutions, armed forces, government agencies and corporations.
The company trades on the New York Stock Exchange under the ticker symbol RST.
Business Summary
Rosetta Stone Inc. is a provider of technology-based language learning solutions. The Company develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. Its teaching method, called as Dynamic Immersion, is designed to use the innate, natural language learning ability that children use to learn their native language. The Company’s courses are based on its interactive technologies and pedagogical content, and utilize a sequencing of images, text and sounds to teach a new language without translation or grammar explanation. As of December 31, 2009, the Company offered its self-study language learning solutions in 31 languages. Its customers include individuals, educational institutions, armed forces, government agencies and corporations. On November 1, 2009, the Company acquired certain assets from SGLC International Co. Ltd., headquartered in Seoul, South Korea.
Description and history
Rosetta Stone Inc. (Rosetta Stone), incorporated on December 23, 2005, is a provider of technology-based language learning solutions. The Company develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. Rosetta Stone’s teaching method, called as Dynamic Immersion, is designed to use the innate, natural language learning ability that children use to learn their native language. The Company’s courses are based on its interactive technologies and pedagogical content, and utilize a sequencing of images, text and sounds to teach a new language without translation or grammar explanation. As of December 31, 2009, the Company offered its self-study language learning solutions in 31 languages. Its customers include individuals, educational institutions, armed forces, government agencies and corporations. On November 1, 2009, the Company acquired certain assets from SGLC International Co. Ltd., headquartered in Seoul, South Korea.

The Company’s each language learning solution has up to five levels, with each consecutive level representing a higher level of proficiency. It sells each level as a standalone unit, although it offers a price incentive to customers to purchase all available levels of a language as a bundle, where that option is available. In August 2007, Rosetta Stone released its Version 3 solution for 10 of its languages. It released an additional four languages in Version 3 in March 2008, and it released an additional seven languages in Version 3 in September 2008. In May 2009, the Company released Levels 4 and 5 in English (the United States) and Spanish (Latin America), as well as an additional four languages in Version 3. In July 2009, the Company released Rosetta Stone TOTALe, its Web-based service offering that includes a component of dedicated language conversation coaching. In November 2009, Rosetta Stone released Levels 4 and 5 in 4 additional languages in Version 3. As of December 31, 2009, all Version 3 languages are sold with Audio Companion and all Version 3 languages, except for Latin, are available with Rosetta Stone TOTALe Web-based services. Rosetta Stone TOTALe integrates the Company’s online courses with coach-led practice sessions, fun and engaging language games, interaction with native speakers and live support from customer service agents.

Rosetta Stone has four different editions: personal, enterprise, classroom and home school. Each edition utilizes the same core software product, but includes different ancillary features. Personal Edition is targeted to individual consumers and contains the core software product the Company uses for all editions. Enterprise Edition is targeted to businesses, armed forces, government organizations and not-for-profit entities, and can accommodate organizations of any size, from individual learners to global organizations. This edition includes management tools that provide administrative and reporting functionality. These tools deliver reports and graphs that track learner activity, progress and scores, thereby providing organizations with key information they need to measure return on their language learning investment.

The Classroom Edition is targeted to language programs in primary, secondary and higher education settings, and is scalable to accommodate a variety of implementations, from individual schools to district-wide programs and universities. The classroom edition is designed to be incorporated into a teacher’s overall language-learning curriculum, complementing in-class teaching and enabling individualized self-paced learning outside the classroom. The classroom edition includes a learner management tool, the Rosetta Stone Manager, which provides administrative and reporting functionality. This tool enables teachers to plan lessons and generate reports and graphs that track student and classroom activity, progress and scores. Home School Edition is targeted to families with home school students and is designed to provide parents the tools and resources they need to manage student. The home school edition includes administrative tools that permit parents to follow student progress and access specific information about student performance, such as completed exercises, test scores, and time spent learning and to generate printable progress reports. In addition, parents have the ability to enroll their students in pre-defined curriculum paths designed to assist in lesson planning and in achieving learning objectives.

With its personal edition, the Company offers a compact disc audio practice tool, the Audio Companion, in all 25 Version 3 languages. Audio Companion is a series of digital audio files that contain lessons directly aligned to the Rosetta Stone curriculum, allowing users to practice and carry on their learning when they are away from a computer. The lessons on the Audio Companion can be transferred to Moving Picture Experts Group layer-3 audio (MP3) players. The Company’s solutions are available both pre-packaged and by subscription online through its language learning portal. During the year ended December 31, 2009, approximately 87% of its revenue was from compact disk-read only memory (CD-ROM) sales to both consumers and institutions, while approximately 13% was from online subscriptions. The Company also provides an online peer-to-peer practice environment called SharedTalk, at www.sharedtalk.com, where registered language learners meet for language exchange and to practice their foreign language skills. During 2009, it had more than 125,000 SharedTalk users. In addition, the Company has developed Rosetta Stone products for the exclusive use of Native American communities to help to save their endangered languages, including Mohawk, Chitimacha, Innutitut and Inupiaq.

The Company competes with Berlitz International Inc., Simon & Schuster, Inc., Random House Ventures LLC, Disney Publishing Worldwide and McGraw-Hill Education.

Business Line
A provider of technology-based language learning solutions
Subsidiary
ROSETTA STONE LTD.
Advisor
DELOITTE & TOUCHE LLP
IPO date
4/21/2009
US SIC Code
7372
Company Address
7th Floor
1919, N. Lynn Street
City province or state postal code
22209, ARLINGTON, VA
Phone: +1 800 788 0822
Fax: +1 540 432 0953
Country address: UNITED STATES OF AMERICA
Website url: www.rosettastone.com