Latest sale of Rosetta Stone clouds future of iconic Harrisonburg startup

Founded in Harrisonburg in 1992, Rosetta Stone grew into the area’s largest tech employer and the world’s leading language learning software company. The company, which has significantly reduced its local workforce in recent years, has announced it is being acquired by Cambium Learning Group.

By Eric Gorton, contributor

Allen Stoltzfus got the idea that computers could be used to ease the process of learning a foreign language while struggling to learn Russian in school. He ran the idea by a friend who was a programmer and they launched a product that became synonymous with language learning around the world, it just took a while.

That was one of the many lessons Eugene Stoltzfus said he learned in the early days of developing Rosetta Stone language learning software with his brother, Allen, and brother-in-law, John Fairfield.

“We dreamed we could make a living,” Eugene Stoltzfus said with a chuckle as he recounted Rosetta Stone’s early years and the challenges he and his colleagues faced in developing and marketing a product that was a little ahead of its time.

As it turned out, they did much better than just scratching out a living. After a little more than a decade of building Rosetta Stone into the world’s leading language learning software, the founders sold the company for millions in the early 2000s. The new owners, ABS Capital and Norwest, took the company public, where it quickly struggled to maintain its value, at times seeing its stock dip to about $6 a share after an IPO of $18 a share.

New leadership helped Rosetta Stone regain its value over the past several years and on August 31, the company announced it was being acquired for a second time, this time by Cambium Learning Group, for $30 a share, representing an equity value of $792 million.

In a press release, John Hass, chairman and chief executive officer of Rosetta Stone, said, the transaction “represents the next step on a path that, over the past several years, has transformed our language business and built a previously small K-12 software business into a growing leader in education technology.”

In the same release, Cambium CEO John Campbell said the company’s “significant addition of Rosetta Stone” will allow it “to deliver even more expansive solutions to teachers, administrators, and learners everywhere.”

Long a major employer in Harrisonburg, the company relocated its headquarters prior to its 2009 IPO. As recently as 2015, it employed 450 people in town, according to Harrisonburg Economic Development Director Brian Shull. That total has since fallen to about 180, Shull said.

It remains unclear how the latest acquisition might affect the company’s presence in its home city. Andrea Riggs, senior director of global communications, did not directly answer a question from The Citizen about whether Rosetta Stone will stay in Harrisonburg.

“We feel that Cambium is the right partner to help us achieve our long-term strategic objectives to expand the business and fulfill our company’s mission,” she wrote in an email. “Finding a partner such as Cambium provides us with more flexibility and opportunities to invest in our businesses that we don’t currently have today. The news has no impact on our strategic direction or our business priorities.”

No one from Cambium responded to the question by press time.

Current employees, who spoke to The Citizen on condition they not be identified, said the only information they have received is what came out in the August 31 press release. One employee expressed “guarded optimism” after employees were told to continue doing their jobs.

Stoltzfus, who no longer has an official role with the company but has friends who work there, said he would be saddened if the company left Harrisonburg.

“I think the office for them in Harrisonburg has worked out pretty well,” he said, noting that it would be much more expensive to operate in Arlington, where the corporate headquarters is located. However, “Cambium should do what they need to do to be successful,” he said.

Despite significant reductions in its local workforce, Rosetta Stone remains the largest tech employer in Harrisonburg. The second-largest, Boston-based software company Jenzabar, has more than 100 employees in town, Shull said.

“The Rosetta Stone name is known around the world, and Harrisonburg is proud to be closely associated with this iconic brand,” Shull said in an email to The Citizen. “We look forward to working with Cambium Learning Group and we are hopeful that this new ownership structure will provide additional resources for the Harrisonburg team and enable them to grow and prosper here. Rosetta Stone is a key player in Harrisonburg’s technology cluster, and we will continue to strengthen that partnership going forward.”

According to its website, Rosetta Stone uses advanced digital technology to help all types of learners read, write and speak more than 30 languages, including several endangered ones. Lexia Learning, Rosetta Stone’s literacy education division, which Rosetta Stone bought in 2013, “is a leader in the literacy education space and helps students build fundamental reading skills through its rigorously researched, independently evaluated, and widely respected instruction and assessment programs.” 

Jack Marmorstein, who worked in various leadership roles at Rosetta Stone from 1998 until this past January, said Lexia is the part of Rosetta Stone most aligned with Cambium.

“I don’t think anyone can be sure what the future holds for the legacy Rosetta Stone language business,” he said.

He believes, however, that the Rosetta Stone brand is valuable enough that someone will want to use it.

Stoltzfus agrees. “It’s still a really good program, nothing that competes with it in terms of effective teaching,” he said.

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