Eyeing growth, Rosetta Stone speaks in foreign tongues
By S. John Tilak
BANGALORE (Reuters) - Rosetta Stone Inc (RST.N) is saying "seichou," "seungjang" and "Wachstum" -- Japanese, Korean and German for growth -- as it looks to take its language-learning software beyond U.S. shores.
The newly public company sees the three countries as its most attractive global markets, presenting an opportunity three times the size of the United States, Chief Executive Tom Adams said in an interview with Reuters.
"There's a massive international opportunity," Adams said.
Rising international travel, growing immigrant populations and globalization have spurred the need for learning new languages.
Rosetta is eyeing markets in both Asia, where there is huge demand for learning English, and Europe, where the focus is on non-English languages.
The company, which depends on the United States for 95 percent of revenue, expects international markets to drive revenue and rise to form 30 percent to 50 percent of its business five years from now, Adams said.
"When you're looking at five to ten years out, we should be at a multiple of where were are today," Adams said.
Rosetta more than doubled in size between 2006 and 2008, posting revenue of $209 million in 2008. It has grown nearly eightfold since 2004.
It has opened offices in London and Tokyo, and plans to set up shop in Germany and Korea later this year.
The company is seeking to increase its share of the market for language learning that is dominated by traditional methods and offerings such as classrooms, DVDs and tapes.
Rosetta, which provides online and CD-ROM-based instruction services in 31 languages to individuals, companies and schools, is targeting the larger pie by chasing the traditional players.
The company says it is a more effective alternative.
"If you think about how language learning happens around the world right now, people learn how to pass tests. But they can't speak. It's a fundamental problem," Adams said.
A study by City University of New York professor Roumen Vesselinov found 55 hours of Rosetta Stone was equivalent to a college semester.
The worldwide consumer market for language learning is worth $83 billion, Adams said, citing market researcher Nielsen Co.
"It's so big that all we need to do an excellent job of providing language instruction," said Adams, 37, a native of Sweden who is fluent in Swedish, French and English. He has a working knowledge of Spanish and is learning Russian on his laptop using Rosetta software.
The company drew attention last year when it ran a TV advertising campaign that featured U.S. swimming sensation Michael Phelps.
Founded as Fairfield Language Technologies, it was renamed in 2006. Rosetta Stone takes its name from an ancient Egyptian artifact that was crucial in the understanding of hieroglyphics.
Despite its prospects abroad, United States remains a key near-term driver for the company.
Rosetta is addressing the need for English language learning in U.S. schools for students whose parents don't speak English at home.
"We're very active in schools. We're in over 10,000 schools. That's a fast-growing segment."
The company is also tapping corporate clients, who make up about 20 percent of its business. They include General Motors Corp (GM.N), Thomson Reuters (TRIL.L) (TRI.TO) and Marriott International Inc (MAR.N).
Rosetta Stone, which has retail tie-ups with Amazon.com (AMZN.O), Apple (AAPL.O), Barnes & Noble (BKS.N) and Borders Group (BGP.N), is looking to bolster its U.S. retail presence and is in talks with large retailers, Adams said.
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