Two years after emerging from bankruptcy, publisher Houghton
Mifflin Harcourt Co. has a growing appetite for acquisitions. The company
this year has snapped up Channel One News, which provides daily news programs
to students; Curiosityville, an early-education website aimed at children 3 to
7, and SchoolChapters Inc., an education-technology company. More deals are
likely as Houghton builds its digital portfolio and looks to expand its
direct-to-consumer business.
Houghton went public last year at $12 a share. Today the
stock is trading above $19, and the company has a market capitalization of $2.8
billion. The publisher is primarily focused on pre-K to 12 education but also
boasts a consumer books business whose authors include J.R.R. Tolkien and
Philip Roth.
Overseeing the new strategy is Linda Zecher, a former Microsoft Corp.
executive who is Houghton’s first female chief executive since the company was
founded in 1832. In a recent interview, Ms. Zecher, 61 years old, discussed
Houghton’s transformation. Edited excerpts:
WSJ: People still
think of Houghton as a major textbook publisher. What percentage of your
revenue still comes from textbooks?
Ms. Zecher: About 85% of our revenue comes from the
education business and about 15% come from our trade business. On the education
side, digital is over 50% of revenue; last year it was probably 40% and the
year before that it was in the teens. That means that less than 50% of our
overall education revenue comes from print materials. On the trade publishing
side (consumer books), digital revenue is in the teens.
WSJ: What’s
driving your digital push?
Ms. Zecher: Common Core is coming into play. There is
more pressure on standards and there’s more pressure on testing. Every school
district in the nation is trying to figure out how to get ahead and make sure
their kids are getting the very best. You have a lot of parents putting
pressure on school districts to get more digital content.
WSJ: Who is
paying for this?
Ms. Zecher: The schools. Two things have been driving
that. School spending tends to follow the real-estate market
by about 12 to 18 months, and real estate tax revenues have been increasing.
The states have been somewhat flush with cash, and it really comes from that.
The second thing driving it is Common Core, and the need to make sure they have
new materials that meet the Common Core standards.
WSJ: You made several deals in recent months. What is
your M&A strategy?
Ms. Zecher: Those were small tuck-ins, but all part of
our strategy to go directly to consumers and provide educational games and
content in a variety of ways. We want to expand our portfolio and our
footprint.
WSJ: Will you sell your consumer book business and
focus strictly on education?
Ms. Zecher: The history of our company [Houghton has
published such major American literary writers as Ralph Waldo Emerson, Henry
David Thoreau and Henry Wadsworth Longfellow] is all about our trade business,
and I’m very proud of that. I’m also proud of our children’s division and all
of the great content we have there. I have no intention of selling off our
trade business.
WSJ: Earlier this year, Microsoft CEO Satya Nadella suggested
women should have faith in the system rather than asking for a raise. He later
backtracked. What are your thoughts?
Ms. Zecher: I know Satya, and he’s a great guy. It was
an out-of-context comment. Women have made great strides. But women need to
help more women. We still aren’t as good at the networking component as men
are. People tend to hire and promote people they know and are comfortable with.
I don’t think women have built as much of that network as men have.
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