Blackboard Chalks Up a Deal

I've taught online courses for the past five years or so, and in that time I've used a variety of educational software systems. By far, the best one I've used is from Blackboard (Nasdaq: BBBB  ) , a Motley Fool Hidden Gems recommendation. In fact, I'm currently teaching a course at UCLA using the system.

But that's not what we're here for today. We're here to talk about the good news that investors just received from the company -- a nearly 15% surge in the stock price on news that Blackboard has entered a deal with Microsoft (Nasdaq: MSFT  ) in which Blackboard will better integrate with Microsoft's SharePoint Portal server, as well as with Office.

I don't use SharePoint, but I do use Office. (Who doesn't?) And I can certainly say that making Blackboard and Microsoft function together as seamlessly as possible can do nothing but help those who use both platforms. Schools like Blackboard's level of functionality, and this move serves to increase it.

According to Blackboard, that's just what its customers wanted. And history shows that Blackboard does listen to its customers. It even gives awards to its customers for developing innovative programs.

Getting recognition from a company like Microsoft is a something of a coup for Blackboard. And by collaborating more, Blackboard is likely to benefit from Microsoft's sales efforts. After all, even though Blackboard is a leader in its industry, it's still a small company, and being able to leverage the huge direct sales force of Microsoft should mean a boost for its business. It also looks as though both companies will engage in joint marketing efforts, and that is bound to help, too.

Blackboard has been busy lately. It recently plunked down $180 million to acquire a competitor, WebCT, in a move that gives the industry leader 810 new higher-education customers. And because WebCT has only one product offering while Blackboard has five, Blackboard has an opportunity to sell into the new customer base.

There's much more room for growth beyond the WebCT deal, too. The U.S. is home to roughly 6,400 higher-education institutions, and so far, Blackboard has 1,200 of those customers. (And most of them currently use only one or two products). Moreover, there are 11,000 international educational institutions, of which Blackboard has 500.

"There is a tremendous opportunity for growth," says Michael J. Stanton, senior director of Investor Relations at Blackboard. "We grow our business by adding brand-new client relationships, and we grow our business by growing our existing client relationships as they continue to license two, three, four, and five products."

That's a strategy that makes a lot of sense. No wonder companies like Microsoft are talking to Blackboard.

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Fool contributor Tom Taulli does not own shares of companies mentioned in this article.

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