Education software provider Blackboard (NASDAQ:BBBB) broke out the chalkboard yesterday to bring investors up to date about the company's operations. In short, it announced plans to acquire competitor WebCT and updated expectations on the company's results going forward. The company stock symbol may be all B's, but this Motley Fool Hidden Gems recommendation gets mixed grades for yesterday's press releases.

For those not familiar with Blackboard, read this Foolish look from fellow writer Andrew Patterson. When you see that Blackboard's products are present at 40% of America's universities, you know that this company is far more than a niche player.

For 2005, the company reiterated that it expects to earn between $0.84 and $0.86 per share -- a nice jump from $0.49 a share last year. Those results score an A.

For 2006, the news is mixed. Revenue is projected to increase 15% on the low end, but earnings are expected to fall to $0.73 to $0.77 a share. Since tax-loss carry-forwards are finally history, the tax rate is going to rise from 4% in 2005 to 38% in 2006, so the numbers are not as weak as they first appear. They rate a B-plus.

Blackboard shareholders may suffer the same fate as those of Motley Fool Stock Advisor recommendation Marvel Entertainment (NYSE:MVL). When Marvel's tax credits were exhausted, the company's per-share earnings looked lackluster when compared with previous periods. Marvel's stock has been a lackluster performer since then, too.

Blackboard also announced yesterday that it will acquire competitor WebCT for $180 million. That's a high price tag, especially given a look at Blackboard's books. Blackboard's trailing-12-month cash flow comes in at $23.2 million, and there is only $99 million in the bank. According to the company, the net effect of the acquisition on GAAP earnings will be dilutive in both 2006 and 2007.

The merger, in my book, rates no more than a B-minus. The combined companies' 3,700 clients will be one clear benefit -- the merged company's base of annual software licensing fees will far surpass that of competitor (NASDAQ:ECLG). In addition, the best features of each company's software will be integrated over time, creating a new feature-rich base product.

The merger might have rated an A or a strong B, but no financial details for WebCT were provided. Without metrics, it doesn't pay to be too optimistic -- particularly given Blackboard's announcement of its intent to support WebCT products, which might reduce initial cost savings.

Still, Blackboard is the class act in its space. eCollege is growing slowly, and VCampus' (NASDAQ:VCMP) money-losing ways have sent its shares plummeting into penny-stock territory. Analysts are expecting Blackboard to produce 25% earnings growth for the next five years. With WebCT on board, that number looks very doable. But the stock, at 34.2 times trailing earnings, looks fully priced to me -- especially with taxes ready to take a much larger bite out of operating income.

Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.