CCR Special 13 — The Learning Company

• December 18, 2024
• Specials  
• The Learning Company  
• Kevin O'Leary  

If you used a computer at school during the 1980s or early 1990s, there’s likely a handful of software titles that you can still recognize today, such as The Oregon Trail, Where in the World is Carmen Sandiego?, and Mavis Beacon Teaches Typing. The companies behind these iconic programs once competed in a market that featured dozens of small firms jockeying for sales at a time when personal computers were still a relatively new concept for most consumers. And as the PC slowly became a mass-market consumer electronics product in the 1990s, the software industry started to undergo its own rapid consolidation and contraction.

Indeed, the three software titles mentioned above were each originally published by three different companies that, by the 1990s, had combined under the control of a fourth company, which was known in its final form as The Learning Company. The story of how The Learning Company came into existence, grew rapidly, and suddenly collapsed is, in many ways, a study in the history of the first two decades of the retail computer software industry.

The Early Days of MicroPro International

The legal entity that would come to be called The Learning Company in the late 1990s began its corporate existence in the late 1970s under the nondescript name of MicroPro International. MicroPro’s founder, Seymour I. Rubinstein, was a 30-year-old college student at New York City’s Brooklyn College in 1964 when he took his first computer science class to get out of a foreign language requirement. Rubinstein took to computers and, after graduating with his psychology degree, went to work managing IBM mainframes for a defense contractor.

While on a business trip to San Francisco, Rubinstein met Bill Millard, then the city’s data processing manager. The two struck up a friendship. Later, when Millard left the public sector to start his own company, System Dynamics, Rubinstein moved out to the west coast to join him.

System Dynamics failed to survive its first year in business. So Rubinstein setup his own consulting business, which he quickly sold, before moving on to another company, Varian Associates, where he oversaw the installation of a new computer system for a Swiss bank.

After returning from Switzerland in 1977, Rubinstein happened by a newly opened computer store near his San Francisco home, the Byte Shop, where he purchased a $700 microcomputer kit manufactured by IMS Associates, Inc., (IMSAI), a company started and owned by his old friend Bill Millard. The kit, known as the IMSAI 8080, was cloned from the Altair 8800, a microcomputer designed by New Mexico-based Micro Instrumentation and Telemetry Systems, Inc. (MITS).

Soon after, Rubinstein was back working for Millard as IMSAI’s director of marketing. In that role, he negotiated some of the first software licensing deals in the microcomputer industry. His first such deal was with Gary Kildall, a professor at the Naval Postgraduate School in Monterey, California, who developed CP/M, an operating system for the Intel 8080 microprocessor that powered the IMSAI computer. According to Rubinstein, he convinced Kildall to sell IMSAI for a flat $25,000 fee with no per-unit royalties.

In mid-1978, Rubinstein left IMSAI to start his own software company, MicroPro International. Rubinstein said the name reflected his goal of selling “professional-level microcomputer software.” Unlike IMSAI, MicroPro would sell software to business customers rather than computer hobbyists. This led MicroPro to focus initially on two types of applications: word processing and database management.

Rubinstein recruited another former IMSAI employee, John Barnaby, to handle the actual programming. For the word processor, Barnaby took the existing text editor from CP/M, which was called ED, and created a “new editor” dubbed NED. This was still little more than a basic text editor that produced a simple ASCII file. And since NED was based on ED, it still technically fell within IMSAI’s original CP/M license from Gary Kildall. So Rubinstein directed Banaby to write a new text editing program from scratch, one which would take full advantage of the video capabilities of the microcomputer.

This led to WordMaster, a word processor compatible with any computer capable of running CP/M. Further improvement to WordMaster led to its final release as WordStar, which Rubinstein and MicroPro debuted at the May 1979 West Coast Computer Faire in San Francisco. That same show saw a demonstration of what would become the first computer spreadsheet application, VisiCalc.

WordStar and VisiCalc dominated the professional office software market during this period prior to the introduction of the IBM Personal Computer in August 1981, at which point the CP/M operating system gave way to Microsoft’s MS-DOS and new application software tailored to that platform, including the word processing program WordPerfect and the spreadsheet Lotus 1-2-3. But in the early 1980s, MicroPro International experienced rapid growth due to the popularity of WordStar. By 1984, the company reported over $100 million in annual sales.

Unfortunately for Rubinstein, he was no longer in effective control of the company at that point. In March 1981, Rubinstein accepted funding for MicroPro International from Adler & Company, a venture capital firm run by Fred Adler. An attorney by training, Adler was one of the first venture capitalists in the technology sector, having started out in 1967 and quickly making his mark as an early backer of Data General Corporation, which during the 1970s became a major player in the minicomputer market. Adler invested $150,000 in Data General in 1968, which later ballooned to an ownership stake valued between $15 million and $20 million.

Once you accept any kind of venture capital funding, the clock starts ticking to take your company public on the stock exchange. Rubinstein obliged, and MicroPro International held its initial public offering in March 1984, raising approximately $23 million. Two months before the offering, however, Rubinstein suffered a serious heart attack. While recovering, Rubinstein said he was approached in his hospital room by one of Adler’s employees, who essentially told him to sign over voting control of MicroPro’s stock to Adler–otherwise, the IPO would be canceled. In no condition to fight back, Rubinstein yielded and stepped aside as CEO in favor of an Adler appointee.

Spinnaker and SoftKey Enter the Picture

MicroPro International was just the first piece of what would become The Learning Company. Two other formative pieces were software companies founded in the early 1980s during the height of WordStar’s market success. Those companies were Spinnaker Software Corporation and SoftKey Software Products, Inc.

In these early days, the two companies had nothing in common with one another or MicroPro International. Bill Bowman and C. David Seuss, a pair of Boston-based business consultants, formed Spinnaker in April 1982. Backed by venture capital from the start, Spinnaker’s objective was to publish educational software targeting students and teachers. Unlike MicroPro, Spinnaker did not plan to develop its own software. Instead, it initially followed an acquisitions-based publishing model, similar to that of the book and music industries. Bowman and Seuss’ found early success publishing educational games licensed from Tom Snyder–not the former late-night talk show host–a schoolteacher-turned-programmer who happened to know Spinnaker’s main venture capital backer.

Meanwhile, in January 1984, Canadian businessman Kevin O’Leary launched SoftKey. O’Leary, best known today for his starring role on the long-running ABC business competition series Shark Tank, had recently sold his small television production company and moved into a new house in Toronto. He’d also bought his first computer, an Osborne-1, which came bundled with CP/M and WordStar. Although the Osborne is an absurd machine by modern standards–weighing nearly 25 pounds (11.3 kg) and featuring a built-in 5-inch black-and-white display–it was considered a “portable” computer at the time, which appealed to O’Leary as he brought the machine with him to make presentations to potential clients.

While attending an Osborne users group meeting, O’Leary met John Freeman, an accountant for a local energy company, who gave a presentation on a business graphics program he had written. Essentially, Freeman’s program made it possible to print charts and diagrams directly to a plotter. a machine that produces vector graphic drawings with a computer-controlled pen. O’Leary offered to buy the rights to the program from Freeman on the spot. Thus, SoftKey formed as a 50/50 partnership between O’Leary and Freeman, with the latter’s plotter software becoming the company’s first product, KeyChart.

So how did MicroPro, Spinnaker, and SoftKey end up coming together to create The Learning Company? Your first guess might be that since Spinnaker started out in education software, it eventually grew to the point where it absorbed the other two companies. But that would be far too easy. What actually happened was far more convoluted and involved all three firms taking a number of unexpected detours during the latter half of the 1980s and the first few years of the 1990s.

In May 1986, Spinnaker acquired Hayden Software. Hayden had been the software publishing arm of Macmillan Inc., which in turn was the American division of the British publishing giant Macmillan Publishers. Hayden Software’s best-known consumer product at the time was Sargon III, the latest in a series of computer chess games developed by Daniel and Kathe Spracklen. In terms of educational software, Hayden also published a number of successful standardized test preparation programs. The Hayden deal made Spinnaker the number-three computer game company in the United States.

A few months later, in October 1986, MicroPro International made its own high-profile acquisition, purchasing NewStar Software. This was less a merger than it was the resolution to a civil war that had divided the WordStar user community for more than three years. At the end of 1982, MicroPro laid off three of its key WordStar programmers. The trio then decided to form NewStar, which produced a word processing program of the same name. NewStar retained about 80 percent of WordStar’s functionality but added a number of new features, such as a built-in spelling checker and support for laser printers.

At the same time, MicroPro, now under the control of venture capitalist Fred Adler and his acolytes, decided to pull a “New Coke” and replaced the aging WordStar with an entirely new code base. This new-and-improved formula was released under the name WordStar 2000. Despite keeping the familiar name, WordStar 2000 had virtually nothing in common with the original WordStar. Consequently, many loyal WordStar consumers decided to switch over to NewWord instead.

During this period, WordPerfect started to overtake WordStar in terms of sales and market share. In response, Fred Adler dumped his handpicked CEO and brought in an outsider to run MicroPro. The new boss decided to buy out NewWord and its development team for $3 million.

Meanwhile, Kevin O’Leary quietly built SoftKey from a two-person, one-product company into a publicly traded corporation. In December 1986, SoftKey made its trading debut on the Vancouver Stock Exchange. While KeyChart continued to be a solid performer, O’Leary repositioned SoftKey as a provider of “vertical software.” That is, SoftKey sold complete hardware-and-software systems designed for specific industries and professions, such as auto repair shops and veterinary practices.

In taking SoftKey public, however, O’Leary set his sights on what he saw as the future of computer software: CD-ROM. Again, we’re not talking about consumer software at this point. Rather, O’Leary saw optical disc technology as a way of improving his vertical software products by, for instance, selling corporate training programs that included video.

At the other end of the spectrum, Spinnaker began its own shift away from educational software and towards low-cost home and business programs. In 1987, co-founder Bill Bowman left the company. Up to that point, Bowman and David Seuss had effectively been running the business together. Bowman later recalled that the company’s venture capital backers had come to prefer Seuss. So Bowman went off to start another company.

In a reflection of Seuss and the venture capitalists’ new priorities, in April 1988 Spinnaker announced the release of Better Working Eight-in-One, a $60 package for the IBM PC and its clones that combined a word processor, spreadsheet, database, and business graphics, among other functions. Considering this was still a period when a standalone professional application like WordStar cost several hundred dollars, Spinnaker was marking its territory as a “budget” software outfit.

This push accelerated when Seuss finally fulfilled his venture capitalists’ destiny and took Spinnaker public in 1989. Although once again, it wasn’t quite a direct path to the stock market. Instead of simply conducting an initial public offering, as MicroPro and SoftKey had done, Spinnaker opted to merge into an existing public company and take over its place on the stock exchange–a practice often referred to as a reverse merger.

In this case, Spinnaker was “acquired” by Springboard Software Inc., a Minnesota-based company. In many ways, Springboard was Spinnaker’s Midwestern cousin. Both companies were founded in 1982 to make educational software. Springboard’s founder, John Paulson, was not a business consultant like Seuss and Bowman, but rather a schoolteacher who was dissatisfied with the available educational programs on the market.

Originally incorporated as Counterpoint Software, Paulson initially focused on flashcard-style drill programs targeting preschool-age children. He personally developed the company’s first products, which included Early Games for Young Children and Early Games Music. In 1984, Paulson changed the company’s name to Springboard Software and started branching out into other types of applications. Notably, Springboard published The Newsroom, a $50 desktop publishing program that made it easy for anyone to create and publish their own newsletters using a personal computer and a dot-matrix printer.

Bolstered by the success of The Newsroom, Springboard went public in September 1986. Almost immediately, the company’s finances started to spiral downward. Beset by product delays in early 1987, Springboard reported losses in 1988 and 1989. Indeed, on the day the Spinnaker deal was announced, Springboard said it incurred a first-quarter loss of about $40,000 on just over $900,000 in revenue.

Given Springboard’s weakening financial position and stock price, Spinnaker’s shareholders actually took about 62 percent of the combined company. Although Springboard remained a publicly traded company, it now went under the Spinnaker name, and the company’s operations were re-based at the Spinnaker’s officers in Boston.

Springboard was not the only company to undergo a formal name change in 1989. In November, MicroPro International became WordStar International. The previous May, WordStar’s newest president–a replacement for the outsider that chairman Fred Adler hired and subsequently fired in November 1988–explained the change was meant to “eliminate the confusion we have always faced because MicroPro is a relatively unknown name, whereas WordStar is a household word throughout the world.”

Spinnaker Exits Education, SoftKey Enters Tax Preparation

In August 1990, Spinnaker sold its educational software business to a small Connecticut company, QUEUE Inc., for $1 million in cash plus ongoing royalty payments. David Seuss told the press that the education market represented just 11 percent of Spinnaker’s revenues, and his focus was now squarely on the growing small business software and corporate information management market.

To that end, in October 1990, Spinnaker announced the release of PLUS 2.0 for the new Microsoft Windows 3.0 operating system. Spinnaker acquired the original PLUS from a West German company, Format Software GmbH, the previous November. Format developed PLUS as a clone of Apple’s HyperCard, a flat-file database system for the Macintosh that featured a graphical interface. Notably, HyperCard made it possible to create individual “cards” with hyperlinks–essentially an early form of websites, albeit limited to a single Macintosh or local area network. Spinnaker quickly ported PLUS to Windows 3.0 and IBM’s own fledgling graphical interface, Presentation Manager, promoting the program as an easy way to “create customer applications that look and run the same” across all platforms.

Over at SoftKey, October 1990 marked the company’s debut on an American stock exchange with its listing on NASDAQ’s automated quotation system. This represented an important step towards expanding the company’s presence in the Untied States. Another step came in November 1990, when SoftKey announced its acquisition of New Jersey-based Management Dynamics Inc. (MDI)

To back up a bit, in September 1989, SoftKey acquired Insight Business Consultants, Inc., another Toronto-based vertical software company that developed manufacturing systems for IBM midrange computers (i.e., business computers that fell between a mainframe and a minicomputer.) Insight president Kevin Huggins joined SoftKey’s board as vice chairman, while his former company became the vertical software division of the new SoftKey. MDI was then merged into the Insight division, with MDI’s former shareholders acquiring a roughly 25-percent stake in SoftKey.

While the Insight and MDI deals helped shore up SoftKey’s vertical software operation, its next acquisition would set the stage for what would become The Learning Company. Although yet again, it wasn’t a direct path. In fact, this next acquisition involved something as far removed from education or entertainment as you can get: tax preparation software.

The tax preparation software market actually predates the rise of the personal computer. In the early 1970s, a small Quebec company called Informatrix 2000 Inc. started providing tax return processing services for corporations and professional accountants. Basically, these customers would provide their tax information to Informatrix, which would then run the numbers through an IBM mainframe that spit out the finished returns.

When the first personal computers started appearing in the North American market at the end of the 1970s and early 1980s, tax return preparation software quickly emerged as one of the few truly useful things a home user could do with their new machine. (If nothing else, they could deduct the cost of the computer and the software as a business expense!)

In the United States, there were a number of small software startups that got into the tax preparation market. Eventually this market would largely consolidate under the control of Intuit Corporation and its flagship program TurboTax, which itself is a convoluted story beyond the scope of this article.

In Canada, Informatrix quickly built a de facto monopoly in the local tax preparation software market. This included two key transactions at the end of the 1980s. In March 1987, Informatrix acquired the tax-processing division of Computer Utility Management Ltd. This was followed in April 1988 with the purchase of TaxPrep Information Systems, Inc., which made taxPREP, the Great White North’s answer to TurboTax. Informatrix later expanded the TaxPrep division’s operations into retail tax preparation services, similar to that of H&R Block in the United States.

By 1990, Informatrix handled roughly 80 percent of all computerized tax return processing in Canada. While the company had been publicly traded since 1986, its CEO, Normand Roy, still controlled nearly 75 percent of the outstanding shares. In theory, that made him invulnerable. But he ended up making a critical mistake that not only cost him his company–it set Kevin O’Leary and SoftKey on the road to its collision with Spinnaker and WordStar International.

Things began innocently enough. In March 1990, Informatrix announced it had retained Toronto-based Lancaster Financial Services Ltd. to help it “evaluate all alternatives available to the company.” In simple terms, Roy wanted to find a merger partner, or, barring that, sell the company outright.

One company that was definitely interested in acquiring Informatrix was SoftKey. But in October 1990, Roy abruptly terminated Lancaster’s consulting contract and announced Informatrix would not be making any deals at this time. Instead the company would “go it alone for now and grow internally.”

That might have been the end of it, except that not everyone in Informatrix management supported Roy’s about-face. In particular, a group of executives led by Informatrix vice president Leo Provencher wanted to make a deal with SoftKey. Roy still owned about 72 percent of the company at this time, however, so it wasn’t as if Provencher could force a sale.

At least, not until Roy made his critical mistake. At a January 1991 board meeting, Roy decided to trigger a buy-sell agreement with the members of the Provencher group. This is an agreement whereby one shareholder in a business can force another shareholder to sell their interest under certain circumstances. Here, Roy offered to buy all of the Provencher group’s outstanding shares, thus ridding the CEO of his troublesome rebels.

What happened next no doubt surprised Roy. It turned out the buy-sell agreement had what seasoned contract lawyers call a “shotgun clause.” The way this works is simple. If Partner A triggers a buy-sell agreement against Partner B, then Partner B has two options. Partner B can accept the buyout. Or Partner B can offer to buy out Partner A for the exact same price. If Partner B chooses the later option, then Partner A has no choice–they have to sell.

With the backing of SoftKey and O’Leary, the Provencher group successfully invoked the shotgun clause, forcing Roy and his allies to sell their 76.8-percent stake of the company. By April 1991, SoftKey had effective 100-percent control, financing the Informatrix buyout through a combination of debt and issuing new stock. Michael Perik, a former private equity firm partner who had joined SoftKey as its CEO and Kevin O’Leary’s right-hand man, told the Canadian press that was just the beginning for the company: “Our motivation is to grow.”

WordStar, Spinnaker Struggle in Early 90s Office Software Transition

Spinnaker and WordStar were also in the midst of their own acquisitions during this period. Admittedly, they were far less ambitious than SoftKey. WordStar acquired Lifetree Software in 1991, which made a grammar-checking utility. While not exactly front-page news, it was the first major deal made by WordStar’s latest CEO, Ronald Posner, who joined the company in October 1990. Posner previously served as CEO for one of the business software industry’s most recognized names, Peter Norton Computing Inc.

Posner came to WordStar just months after negotiating the sale of Peter Norton Computing to Symantec Corporation. Upon taking over at WordStar, Posner said his immediate goal was not to sell the company but rather to build it though acquiring smaller publishers, as he would do with Lifetree. And even as the flagship WordStar word processor–which would finally ship on Windows in late 1991–continued to recede into history, Posner still managed to secure deals to bundle the aging program with computer manufacturers looking to provide a little extra value.

Not to put too fine a point on it, but by 1991 not only was WordStar an also-ran in the word processor market, but so was the product that superseded it, WordPerfect. The product’s corporate parent, WordPerfect Corporation, badly bungled the transition from MS-DOS to Windows 3.0, largely because WordPerfect executives refused to believe that such a transition was taking place. Consequently, Microsoft Word, a product that was obviously designed to take full advantage of Microsoft’s own Windows platform, became the new Word Processor to Rule Them All.

This wasn’t just a problem for traditional word processing software developers like WordStar and WordPerfect, but also for Spinnaker, which had fully committed itself to becoming a low-price small business software company. In January 1991, Spinnaker acquired the PFS product line from Software Publishing Corporation (SPC). Established in 1980 by three former Hewlett-Packard employees, SPC’s first product was a flat-file database program for the Apple II called Personal Filing System (PFS). As the Apple II lost ground in the business market to the IBM PC, SPC pivoted accordingly and made a series of relatively inexpensive office applications under the PFS brand name, including PFS: First Choice (an office suite) and PFS: First Publisher (a desktop publishing program).

Fred Gibbons, SPC’s co-founder and CEO, told the press that selling off the PFS line was part of his company’s “shift from end-user to corporate computing” products. In other words, Gibbons saw the writing on the wall with respect to Microsoft and realized there was no point competing in what would soon become a Windows-dominated office software market. Undeterred, Spinnaker moved forward with their plan to develop new PFS titles for Windows 3.0, starting with an integrated package, PFS:Windowworks, which debuted in May 1991. A month later, Spinnaker announced a new database product, Personal Access, which offered a point-and-click interface and the ability to read files created in multiple other database formats. Within a year, Spinnaker would launch at least eight more new business applications.

WordStar International also made the jump to Windows in October 1991 with the launch of WordStar for Windows 1.0. Similar to WordStar 2000, WordStar for Windows was essentially a new codebase that WordStar International acquired from someone else. Earlier in the year, WordStar licensed the rights to Legacy, a word processor used in the legal profession, and essentially turned that into WordStar for Windows. The developer of Legacy, NBI, Inc., had filed for Chapter 11 bankruptcy in June 1991, and a year later sold the rights to its word processing program outright to WordStar.

WordStar Stumbles with Delrina

Entering 1992, Kevin O’Leary decided the time had come for SoftKey to start expanding its retail presence in the United States. SoftKey now had three major divisions: the vertical software consulting, Canadian tax preparation software, and consumer software publishing. The first two businesses provided SoftKey with a steady source of revenue. The third was where O’Leary hoped to rapidly grow SoftKey into one of the world’s largest software companies.

SoftKey’s publishing operation was similar to that of Spinnaker’s in that it focused largely on low-cost productivity software. But SoftKey didn’t limit its distribution to traditional outlets for software. In early 1992, SoftKey announced a number of distribution agreements with office supply store chains in both the United States and Canada. In many of these stores, SoftKey’s products were displayed together on special racks.

Meanwhile, WordStar International was in the process of negotiating a merger with a Toronto-based software company that was not SoftKey. In March 1992, WordStar entered talks with Delrina Corporation about combining the two companies. Founded in 1987, Delrina initially developed PerForm, a program used to create electronic business forms. But the company’s big break came in 1990 when it released WinFax Pro, a $140 application that allowed a PC user to send faxes from any Windows 3.0 application. (You also needed a separate fax board.)

As the talks began, neither WordStar nor Delrina were negotiating from a position of financial strength. WordStar had lost money for the past five years. And while Delrina’s sales had increased roughly 50 percent annually since 1988, it also was not profitable due to high software development costs. More to the point, Delrina lacked the sales infrastructure and marketing clout to reach “critical mass,” as Dennis Bennie, the company’s CEO and co-founder, told Canada’s National Post.

That was where WordStar could help. While the company’s venerable word processor had now fallen to a single-digit market share in North America, WordStar International actually had a strong international distribution network. In many less-developed computer software markets, particularly in Asia, WordStar continued to enjoy success distributing localized word processing products. Indeed, international sales accounted for about 56 percent of all WordStar revenues at this time. Delrina’s Bennie was hoping to leverage this intetnational distribution to get PerForm–and later WinFax Pro–to his desired “critical mass.” And from WordStar’s perspective, the company would finally gain access to new product lines in markets that had actual growth potential.

On March 23, 1992, WordStar and Delrina signed a formal letter of intent to combine the two companies. On paper, it would be a WordStar acquisition, with the company issuing new stock that would then be swapped for outstanding Delrina shares. The combined company would retain WordStar’s stock listing and California headquarters.

Despite this, Bennie presented the deal at a press conference as a merger of equals, noting that both companies would be equally represented on the new board and management team, with WordStar CEO Ron Posner remaining in that role. Bennie added that the new company would keep neither the WordStar nor Delrina names but come up with some combination of the two.

But just a couple of weeks later, on April 13, 1992, the parties called the merger off. There were a couple of reasons. First, many of Delrina’s shareholders were Canadian pension and investment funds, which had to follow strict rules when investing in foreign stocks. Since the WordStar deal would have turned the Canadian Delrina into a U.S.-based company, these investors would likely have been forced to sell their shares immediately, thus triggering potential capital gains tax liability. Second, it seemed that WordStar really did see this as an acquisition and not a merger of equals. Dennis Bennie later admitted to the press that he was concerned that Delrina’s management team would lose control over product development, which he considered unacceptable.

As something of a consolation prize, WordStar acquired another company, Georgia-based ZSoft Corporation, in July 1992. (WordStar was careful to tell the press it was a done deal this time, not just a letter of intent.) ZSoft developed graphics, paint, and image editing programs for the PC. Oddly enough, this was not the first time ZSoft had been acquired by a larger software company looking to expand its product line. In March 1988, the computer game publisher Activision acquired ZSoft as part of its own diversification efforts. This included changing the company’s name from Activision to Mediagenic. ZSoft remained a standalone division within Mediagenic.

Unfortunately, the diversification campaign failed to improve Mediagenic’s anemic financial position. The company’s management quickly decided to refocus on games and dump their other product lines. So in October 1990, Mediagenic sold ZSoft to an Atlanta-based venture capital firm for $3.8 million in cash. It turned out to be a good investment. When the venture capitalists re-sold ZSoft to WordStar less than two years later, they acquired $13 million worth of WordStar stock in the deal.

The Great Three-Way Merger

If you’re wondering when we’ll get to the proverbial fireworks factory, we’re just about there. It was 1993 when the final deals leading to the combination of WordStar International, Spinnaker, and SoftKey took place. The year started off with a Spinnaker acquisition. In February, Spinnaker purchased Power Up! Software, a California-based company that published low-cost home productivity software, such as Calendar Creator Plus and Express Publisher. Although Power Up! actually had slightly higher revenues at the time of the deal, Spinnaker was the surviving entity, with its CEO, David Seuss, remaining in charge.

A few weeks later, WordStar International announced a couple of small deals. First, the company completed two private stock sales that raised an additional $10.2 million in capital. Second, WordStar acquired the rights to WriteNow, one of the oldest word processing programs available for the Apple Macintosh. The original developer of WriteNow, Seattle-based Solaster Inc., licensed the marketing rights for the program to NeXT Computer Inc., the company started by Apple co-founder Steve Jobs after he lost a power struggle with then-Apple CEO John Sculley. Jobs then licensed WriteNow to T/Maker Company, which was primarily known for selling clip art and font packages for the PC. T/Maker CEO Heidi Roizen said the decision to divest WriteNow to WordStar was simply so her company could focus on the “rapidly growing electronic content market.” (She actually sold T/Maker less than a year later to Deluxe Corporation, a company that printed bank checks.)

Acquiring yet another moribund word processor–WriteNow had long been a distant number-two to Microsoft Word on the Macintosh–did little to improve WordStar International’s fortunes. The company was still losing money. Despite its efforts on Windows, the WordStar base was still largely composed of DOS users, whose numbers were dwindling rapidly each year. And even the company’s international sales provided little comfort due to the unfavorable currency exchange rates in many Asian countries. WordStar CEO Ron Posner was now in his third year on the job, and he knew it was time to make a big move that would save–or at least sell–the company.

Thus, on May 13, 1993, WordStar signed a merger agreement with SoftKey. At first glance, you might think this was a repeat of the failed Delrina merger from a year earlier. The merged company planned to retain WordStar’s California headquarters and U.S. stock listing. SoftKey’s shareholders would exchange their shares for WordStar stock. And the new board and management would combine representatives fro both WordStar and SoftKey.

Except there were some key differences. Despite how the deal was structured, everyone understood this was a SoftKey takeover of WordPerfect. SoftKey’s shareholders would own roughly 75 percent of the new company. Kevin O’Leary would chair of the new board, where former SoftKey directors would hold a two-thirds majority. O’Leary’s longtime number-two, Michael Perik, would be the CEO, with WordStar president Yoav Sten reporting to him. Ron Posner would keep a seat on the board but retain no executive authority.

Another key difference was that O’Leary and his team took steps to avoid the Canadian tax issues that helped to derail the Delrina-WordStar deal. Although the merger would be a stock swap, each SoftKey shareholder would have a choice of receiving either 3.6 WordStar shares or an equivalent amount of non-voting exchangeable SoftKey shares. The exchangeable shares could later be traded-in for the same number of WordStar shares, this enabling Canadian shareholders to defer their capital gains tax liability.

Like Delrina, SoftKey saw the primary benefit of a WordStar merger as gaining access to the company’s still-formidable distribution network. O’Leary told the press that SoftKey would now be able to sell a combined 102 consumer software titles (79 from SoftKey, 23 from WordPerfect) through WordStar’s direct marketing, international distribution, and original equipment manufacturing contracts.

A couple weeks after WordStar and SoftKey announced their deal, Spinnaker had an announcement of its own: The company would post a $19-million loss for the previous quarter. Most of that loss was due to the costs of the February acquisition of Power Up! Software. But David Seuss acknowledged there had been a general slump in U.S. retail sales. This led Spinnaker to pursue an aggressive price cutting strategy that only further cut into revenues. On top of that, Spinnaker had replaced its chief financial officer and outside accounting firm the previous October for unspecified reasons.

Spinnaker had hoped that Power Up!’s products, which were mostly sold through catalogs, would help reinvigorate sales. But with the office and productivity software market starting to dry up for smaller players, Spinnaker and Power Up! were both increasingly dependent on fairly niche product lines. For example, a Spinnaker spokesman boasted to the press that his company had a 70-percent share of the “resume software” market while Power Up! was still the number-one company in the “PC calendar software” market.

Spinnaker was also dealing with legal fallout from its 1991 acquisition of the PFS software line from Software Publishing Corporation. This hadn’t been a straight-up licensing deal for cash or royalty payments. Instead, Spinnaker agreed to pay SPC for the software in Spinnaker stock. But for some reason, Spinnaker never delivered the shares. SPC eventually took the matter to binding arbitration and won a $1.4 million damages award.

With all of these mounting issues, David Seuss had apparently had enough. In August 1993, he agreed to add Spinnaker to the still-pending WordStar-SoftKey merger. From SoftKey’s perspective, Spinnaker brought an extensive catalog of additional software product and distribution infrastructure to the table. O’Leary also scrapped the original plan to move to WordStar’s California headquarters in favor of Spinnaker’s Boston digs.

Otherwise, this was still a SoftKey takeover of the two American companies. SoftKey shareholders received just over half of the combined companies’ stock. Spinnaker shareholders were originally slated to receive about 31 percent, with WordStar shareholders taking just 16 percent, but these percentages were later revised after the SPC arbitration award against Spinnaker became final in December 1993. This left Spinnaker shareholders receiving slightly less, and WordStar and SoftKey shareholders receiving slightly more.

The three-way merger closed at the start of February 1994. WordStar International was the surviving corporation on paper, with its name changed to SoftKey International Inc. And in a slight alteration to the original post-merger management plan, Kevin O’Leary became president of the new SoftKey, with Michael Perik assuming the roles of chairman and CEO.

Perik and O’Leary wasted no time implementing their vision for the new SoftKey. Put simply, they planned to make SoftKey the leader in consumer “multimedia” software. Indeed, a few weeks after concluding the mega-merger, SoftKey shipped 18 new products, mostly CD-ROM reference titles like the American Heritage Talking Dictionary and Roget’s II Electronic Thesaurus.

There were also more acquisitions. By the end of 1994, SoftKey absorbed three more companies. In July, SoftKey acquired Aris Multimedia Entertainment Inc. and Compact Publishing Inc., in exchange for issuing $11 million in additional SoftKey stock. This was followed in September with the acquisition of Software Marketing Corporation for yet more SoftKey stock and the assumption of $1.6 million in long-term debt. All three of these companies were publishers of multimedia educational software, and their acquisitions coincided with the establishment of SoftKey’s new CD-ROM division.

In the short run, this strategy paid off handsomely. By the end of SoftKey’s fiscal year in December 1994, the company reported profits of $21.145 million on sales of $121.287 million. More than half of those sales came from CD-ROM software. Emboldened, SoftKey acquired Future Vision Holding Inc., an Israeli multimedia software studio, in July 1995 in exchange for roughly $36 million worth of SoftKey stock. SoftKey’s chief financial officer, Scott Murray, identified two key reasons for this newest deal: Future Vision’s existing software catalog of 110 titles, and the fact that development costs were lower in Israel than in the United States.

The Battle for The Learning Company

Up to this point, SoftKey’s post-mega merger acquisitions had all been friendly deals. But as we saw when Kevin O’Leary gained control of Informatrix 2000 back in 1991, he was not above using more aggressive tactics to usurp control of a company out from under its own management’s control. Such would be the case with SoftKey International’s most critical acquisition yet–the one that finally allowed it to become The Learning Company.

Now, The Learning Company (TLC) has actually been around for most of the time period discussed up to this point. But as we have seen with many software companies, it started out under a different identity. Ann McCormick, Teri Perl, and Warren Robinett formed Advanced Learning Technologies, Inc., in 1980. McCormick was a former Roman Catholic nun and schoolteacher who had won a handful of grants to develop educational software for the Apple II. She recruited Perl, an educational psychologist, and Robinett, a computer engineer and former video game designer for Atari, to create additional games.

This new company released its first six products in late 1982. By this time, the founders dropped the name Advanced Learning Technologies in favor of The Learning Company (TLC). Among the new company’s early successes were Reader Rabbit, a literacy program, and Rocky’s Boots, which Robinett created to teach the basics of electrical circuit design.

While these first releases propelled TLC to over $1 million in sales during its first year, there was a good deal of management turnover during the company’s early years. McCormick initially brought in an outsider, Jack Smyth, as CEO. Smyth clashed with the founders, however, and was quickly replaced by Marcia Klein, who sadly suffered a stroke not long after her appointment. After a stint under a temporary CEO, Bill Dinsmore took over as CEO in 1985 and would remain in that role for the rest of the company’s original incarnation.

Dinsmore took TLC public in 1992. And like its competitors in the home software market, including the new SoftKey, TLC pivoted to CD-ROM around the same time. As the market continued to consolidate, Dinsmore decided the best course of action was to find a merger partner, which he did in 1995.

Now you might expect that merger partner would be SoftKey. It was not. Rather, on July 31, 1995, TLC’s board of directors approved a merger agreement with Broderbund Software, Inc. Founded by brothers Douglas and Gary Carlston in 1980, Broderbund started out as a small publisher of games for the Apple II. Initially following the same acquisitions model as contemporaries like Spinnaker, Broderbund started to do more in-house development in the mid-1980s, which led to the release of its two most iconic products, The Print Shop (1984) and Where in the World is Carmen Sandiego? (1985), both of which launched franchises that continued well into the 1990s. By 1986, Broderbund was the number-two home software company in the United States behind Activision.

Despite its growth, the Carlstons largely ran Broderbund as a family business during the 1980s. But Doug Carlston had taken some venture capital funding early on, which meant there would inevitably come a time when he had take the company public. Broderbund announced an initial public offering in April 1987, but it was canceled two months later due to the company’s poor quarterly results and an overall downturn in the computer games market.

Still, Carlston knew he either had to go public or sell the company to pay back his investors. A second attempt came in March 1991, when Sierra On-Line Inc. announced it would acquire Broderbund for $37.9 million. Like Broderbund, Sierra On-Line was one of the earliest computer game publishers. Founded by spouses Ken and Roberta Williams in 1979, Sierra’s main claim-to-fame was publishing graphical adventure games. The Williamses took Sierra public in 1989, and unlike the Carlstons, they were eager to expand their company through aggressive acquisitions.

The plan was to combine the two companies under the name Sierra-Broderbund. But two weeks after the merger was announced, the deal was dead. A Broderbund spokesperson told the press it was a “mutual decision” by Doug Carlston and Ken Williams. Williams confirmed that there had been a “disagreement regarding [the] management structure of the consolidated company,” which led to a breakdown in talks.

Seven months later, Broderbund decided to make a second attempt at a public offering. This one proved successful, with Broderbund debuting on the stock exchange in November 1991. The initial offering was limited, however, to the venture capitalists cashing out their 36-percent stake in the company. Broderbund itself raised no new capital in the sale.

By 1994, Broderbund was still a major player in the home software market, having made the transition to CD-ROM like its competitors. But Doug Carlston was still looking for a merger partner following the failed 1991 Sierra deal. He eventually found one in Electronic Arts (EA), the computer and video game giant founded by William “Trip” Hawkins in 1982.

In February 1994, EA announced it would purchase Broderbund in a $400 million stock swap. Existing Broderbund shareholders would receive about 25 percent of EA’s common stock. Doug Carlston would also join EA’s board of directors.

Unfortunately, this merger would also never be consummated. In May 1994, both sides called off the deal. This time the issue was not how to manage the combined companies, but rather the sales price. In the weeks following the announcement of the merger, share prices for both EA and Broderbund fell significantly. This led to failed attempts to renegotiate the terms of the stock swap, and EA ended up paying Broderbund a $10 million “breakup fee” to walk away from the deal.

Having now failed twice to be acquired, Broderbund decided to try and become the acquirer, which led to the July 1995 agreement to buy The Learning Company. Like the aborted Sierra and EA deals, this would also be a pure stock swap. Under the terms approved by the two companies’ boards, TLC shareholders would receive 0.8125 shares of Broderbund common stock for each share of TLC common stock. Broderbund would also retain Bill Dinsmore as president of what would now be its TLC subsidiary for three years.

As previously noted, the Broderbund-TLC deal was publicly announced on July 31, 1995. The TLC board scheduled a special shareholders meeting for November 9, 1995, to ratify the deal. But with TLC management strongly in favor of the sale, shareholder approval was just a formality. Or so everyone thought.

On October 30, 1995, ten days before the scheduled TLC shareholder meeting, SoftKey International announced an unsolicited offer for 50.1 percent of TLC’s stock at $65 per share. In other words, SoftKey launched a surprise, last-minute hostile takeover bid. Simultaneously, SoftKey filed a lawsuit in the Delaware Court of Chancery, seeking to postpone the November 9 shareholder meeting to approve the Broderbund deal. SoftKey further announced its intent to solicit TLC shareholders to replace the company’s board of directors with SoftKey executives.

To be clear, the SoftKey bid for The Learning Company came as a complete surprise to the latter. While Bill Dinsmore and Kevin O’Leary did meet briefly in June 1994 to discuss the possibility of a joint distribution agreement between their two companies, at no point did O’Leary ever publicly or privately inform TLC of his interest in an acquisition.

Indeed, it was also unclear why SoftKey waited until the last minute to launch its hostile takeover bid. When pressed by the Delaware Chancery Court for an explanation, SoftKey representatives said they waited because they wanted to complete another major acquisition first. That was SoftKey’s purchase of the Minnesota Educational Computing Corporation (MECC).

In many respects, MECC was the original educational software company, although it actually started out as a public agency. MECC grew out of an earlier project called Total Information for Education System (TIES), a computer network that remotely connected Minneapolis-area schools with mainframe computers. In April 1973, the Minnesota legislature chartered MECC–then standing for Minnesota Educational Computing Consortium–to advance the TIES project.

In its original conception, MECC was a timesharing network. Individual schools connected to mainframes. This allowed individual schools to exchange software. One notable early example was Oregon, a program developed by student-teachers Don Rawitsch, Bill Heinemann, and Paul Dillenberger. Oregon was a text-only game designed to simulate travel along the Oregon Trail, a route used in the 1800s to connect Missouri with what is now the State of Oregon.

Rawitsch later went to work at MECC, where he made revisions to Oregon and published it on the timeshare network for anyone to download. In late 1978, MECC agreed to purchase 500 Apple II computers, marking the start of the educational network’s transition from mainframes to microcomputers. Oregon was also ported to the Apple II. Later, in 1985, a completely new version of the program was developed by MECC’s R. Phillip Bouchard and released as The Oregon Trail for the Apple II.

By 1984, MECC had grown to the point where the State of Minnesota reorganized it as a publicly owned corporation. In January 1991, the state sold MECC to a private investment group, North American Fund II, for $5.25 million. The new owners took MECC public three years later in March 1994, raising $18.86 million in a public offering on NASDAQ.

Just over a year later, SoftKey agreed to purchase MECC in a stock swap valued at approximately $370 million. The deal was announced the same day that SoftKey launched its hostile takeover bid for The Learning Company. A SoftKey spokesperson told the media this was simply part of the company’s push to “increase its focus on the educational market,” although they would not elaborate further.

The Learning Company was definitely not amused by SoftKey’s hostile takeover bid. Nevertheless, on November 2, 1995, the TLC board held a three-hour meeting to consider the proposal. The next day, Broderbund offered to increase its bid to 0.92 shares of Broderbund stock for each TLC share, up from the original 0.8125 shares. Broderbund insisted, however, on doubling the originally agreed-upon breakup fee from $10 million to $20 million. The TLC board concluded the Broderbund deal was still the better offer, although they balked at the higher exit fee. TLC and Broderbund compromised on that point–they agreed to a revised breakup fee of $15 million–and TLC moved to postpone its shareholder meeting, originally scheduled for November 9, until December 11.

On November 6, SoftKey increased its pressure, announcing it would solicit shareholders to call a special meeting to replace the TLC board with SoftKey’s nominees, who would then accept the SoftKey bid. In response, the TLC board adopted an amendment to the company’s bylaws, which extended the timeframe to call a special meeting from a maximum of 60 days to 90 days. The next day, TLC formally accepted the revised Broderbund offer and rejected SoftKey’s offer. Applying the new bylaw, the TLC board also scheduled a special meeting on SoftKey’s proposals for January 8, 1996.

Undeterred, SoftKey asked the Delaware Chancery Court to issue an injunction against the TLC bylaw amendment. Essentially, SoftKey argued it had the right to an earlier shareholder meeting on its hostile takeover bid. The court rejected SoftKey’s demands. The judge noted that at best, all TLC had done was delay a shareholder vote on SoftKey’s proposals by 25 days.

It turned out to be little more than a speed bump. On December 8, 1995, TLC reversed course and accepted the SoftKey offer. A wholly-owned SoftKey subsidiary called Kidsco Inc. acquired 100-percent of TLC’s stock at $67.50 per share, for a final sales price of about $560 million.

At the same time, SoftKey also acquired Compton’s NewMedia Inc. and Compton’s Learning Co., two CD-ROM publishers owned by Tribune Publishing Company, for $106.5 million in SoftKey stock and the assumption of an additional $17 million in debt. This deal, which had been contingent on SoftKey completing its takeover of TLC, gave Tribune a roughly 10-percent stake in SoftKey.

The Mindscape Saga–or How Kevin Finally Got Mavis

In October 1996, SoftKey International announced yet another name change, this time assuming the identity of The Learning Company. At the same time, the company announced a $93.1 million third-quarter loss, which was almost entirely due to the costs of its 1995 acquisitions. On the bright side, revenues had more than doubled from the third quarter of the previous fiscal year.

Indeed, The Learning Company 2.0’s problem was not selling software. In April 1997, one analyst firm rated TLC as the number-four retail consumer software company in the United States, trailing only Microsoft, CUC International, and Intuit. Of course, that still left room to grow, so the acquisitions continued. In November 1997, TLC acquired Microsystems Software Inc., in a $16 million stock swap. Microsystems main product was Cyber Patrol, an early software tool designed to help parents filter the Internet sites their children visited.

This was followed with the March 1998 acquisition of Mindscape, Inc. Mindscape was yet another 1980s educational software publisher that had seen its share of corporate shenanigans. SFN Companies, Inc., a Chicago-based publisher of school textbooks, formed Mindscape in September 1983 as its electronic publishing subsidiary. John R. Purcell, the former number-three executive at CBS Inc., joined SFN in November 1982 as its chairman and CEO. CBS was a multimedia conglomerate, and Purcell sought to replicate that structure at SFN. In addition to starting Mindscape, the Purcell-led SFN also briefly got into the broadcast television business through its 1984 purchase of Western Broadcasting Co.

In early 1985, Purcell led SFN into a $450 million leveraged buyout led by Hallmark Cards Inc. Purcell was part of the investment group and stayed on as CEO. Although as it turned out, the buyout was almost immediately followed by a systemic liquidation of the company.

By the end of 1986, the only remaining piece of the former SFN under Purcell’s control was Mindscape, which he had spun off into a separate company with its president, Roger Buoy. Mindscape was a small, yet profitable company at the time, reporting about $12 million in sales in 1986. Most of the company’s software products relied on third-party licenses, such as James Bond and Indiana Jones. In August 1986, Mindscape acquired the rights to the educational software catalog of Scarborough Systems, Inc., which had decided to exit the business. This was quickly followed up with two more similar acqusiotions, from Living Well and Holt, Reinhart and Winston Inc., respectively. The latter deal was somewhat ironic for Purcell, as Holt had been the educational software unit of his previous company, CBS.

Purcell took Mindscape public in June 1988 with a $9.9 million initial stock offering. Just over a year later, Software Toolworks Inc., purchased Mindscape in a stock swap valued at $21.5 million. Founded in 1980 by Walt Bilofsky, Software Toolworks initially produced software for hobbyist computers such as the Heathkit H-89, before expanding to more mainstream platforms like IBM and Apple. Two of the company’s earliest hits were The Chessmaster 2000, a chess program, and Software Golden Oldies, Volume I, a collection of public domain computer games.

Software Toolworks distributed both of these programs through another company, Software Country, which was founded in 1984 by Les Crane, a former television talk-show host. Prompted largely by the commercial success of Chessmaster, Software Country and The Software Toolworks merged in October 1986. Crane became CEO of the combined company, which retained The Software Toolworks name, with Bilofsky staying on as a senior vice president. Joe Abrams, Bilofsky’s cousin, rounded out the management team as the executive vice president in charge of day-to-day operations.

Although it never specialized in educational software, Software Toolworks developed a notable title in the genre, Mavis Beacon Teaches Typing. Despite the name, there never was a “Mavis Beacon.” The original 1987 software package featured the picture of Renée L’Esperance, a local department store salesperson whom Crane and Abrams hired to put a face on their typing tutor program.

In January 1988, Crane took The Software Toolworks public through a reverse merger. Deseret-Western Venture Capital, Inc., a Utah-based shell corporation, acquired Software Toolworks and took its name. And as is tradition after taking a company public, Software Toolworks made a number of acquisitions over the next few years, including IntelliCreations in August 1988, DS Technologies in February 1989, and the aforementioned Mindscape in December 1989.

By 1994, Software Toolworks had entered the CD-ROM fray, securing publishing deals to develop software for Ziff-Davis Publishing and Newsweek. In March of that year, British educational publishing giant Pearson plc acquired The Software Toolworks for $462 million. After the deal closed, in October 1994, Pearson decided to change its new subsidiary’s name to Mindscape, Inc. At the same time, the revived Mindscape acquired computer game developer Strategic Simulations, Inc., and a France-based software company, Atreid Concept. The following year, Mindscape acquired MicroLogic Software, which developed PrintMaster Gold, a home desktop publishing package that completed against Broderbund’s Print Shop.

As the 1990s dragged on, however, Pearson started to realize that its investment in CD-ROM software would not yield higher returns in the long run. Pearson ended up selling off the entire Mindscape subsidiary to The Learning Company for $150 million in cash and stock–less than one-third of what the British conglomerate had paid for the company just four years earlier.

An ecstatic Kevin O’Leary gloated to the press about the “very good deal” he made to acquire Mindscape. He was particularly enthused about acquiring the rights to the Mavis Beacon franchise, telling the press, “I have been envious of Mavis for the past 10 years and have never been able to crack the dominant share that she had” in the typing instruction software market.

The Decline and Fall

The March 1998 acquisition of Mindscape was the beginning of Kevin O’Leary’s endgame for The Learning Company. In June, TLC reached an agreement to acquire Broderbund, where founder Douglas Carlston was clearly fed up after three failed merger attempts and looking for an exit. TLC would acquire all outstanding Broderbund shares in a stock swap valued at around $420 million.

To help pay for the Broderbund deal, TLC sold off one of its original businesses. In July 1988, TLC’s stlil-active SoftKey subsidiary sold its entire tax preparation business to CCH Canadian Ltd., a subsidiary of the Dutch conglomerate Wolters Kluwer NV, for $45 million. Within a year, Wolters divested the home tax preparation part of that business to Intuit Canada.

At this point, there was basically nothing left for The Learning Company to acquire. So it was time to sell. In December 1998, Los Angeles-based toy manufacturer Mattel, Inc., agreed to purchase TLC in a $3.8 billion stock swap. The deal closed on May 13, 1999, at which time TLC ceased to exist as an independent corporation. What had started out back in 1978 as MicroPro International before later becoming WordStar Interantional, SoftKey International, and finally The Learning Company, was now subsumed into a division of Mattel called Mattel Interactive. O’Leary stayed on as president of the TLC part of Mattel Interactive.

Although that would not last long. Mattel executives quickly realized they had overpaid for TLC. The company was worth nowhere near $3.8 billion. Kevin O’Leary’s decade-long acquisition spree came at an enormous price. TLC took on enormous amounts of debt to pay for many of its deals. This led to substantial cuts in staffing–particularly in research and development–at the acquired entities. By 1998, there was little in the way of genuine new-product development at TLC. The company was coasting on the fumes of its existing franchises like Broderbund’s Carmen Sandiego and Mindscape’s Mavis Beacon Teaches Typing.

O’Leary’s strategy of selling cheap CD-ROM titles through mass-market retailers was also no longer capable of generating any profits for TLC. This wasn’t all TLC’s fault. The retailers had been forcing prices down for most of the decade. It was no longer the 1980s, when a “budget” software title could sell for $40 or $50 at a specialty computer store. CD-ROM had become so ubiquitous that it was often sold for $10 or less in a discount rack at Wal-Mart or Staples.

As a result, what had once been a thriving educational software market was now just a bunch of shovelware. On top of that, the late 1990s marked the beginning of a transition from selling software on physical media to Internet-based downloads. Now, the software market was nowhere near online-only in 1998 when Mattel acquired TLC. But the CD-ROM boom of the early-to-mid 1990s was clearly over.

Within months, Mattel realized it had an utter catastrophe on its hands. In November 1999, Mattel fired O’Leary, who had a three-year contract to stay on as head of Mattel Interactive’s TLC unit. Three months later, Mattel CEO Jill E. Barad resigned, saying she took full responsibility for the company’s “devastating” financial losses, which were then around $300 million.

In April 2000, Mattel announced The Learning Company was up for sale. That September, the entire Mattel Interactive division was sold to Gores Technology Group. Actually, calling this a “sale” would be a bit of an overstatement. Mattel gave away its TLC assets for no money down. Gores was only obligated to pay Mattel a 50-percent share of any profits earned on TLC’s remaining software products. The final deal was valued at less than 10 percent of what Mattel paid for TLC less than two years earlier.

In January 2001, Gores relaunched TLC’s game publishing business under the name Game Studios. Later that year, in September, Gores sold the educational software assets of TLC to Riverdeep Group for $40 million in Riverdeep stock plus the assumption of $20 million in liabilities. Gores initially retained TLC’s e-commerce and productivity software assets under a separate entity called Broderbund LLC. The following year, in August 2002, Riverdeep also acquired this new Broderbund for $57.2 million.

In November 2006, Riverdeep acquired the educational publisher Houghton Mifflin Co., and renamed itself Houghton Miffilin Riverdeep PLC. This new company retained ownership of most of the former TLC and Broderbund assets. After another acquisition, this time of educational publisher Harcourt from Reed Elsevier Group plc, the “Riverdeep” name was dropped in favor of Houghton Mifflin Harcourt (HMH).

Whatever remains of TLC’s intellectual property–which, incidentally, might still include the original WordStar–is likely still owned by HMH, which was sold to Veritas Capital in February 2022 for $2.8 billion. In July 2008, Navarre Corporation licensed a number of TLC titles, including Mavis Beacon Teaches Typing, Where in the World is Carmen Sandiego?, and The Print Shop, to Navarre Corporation. Navarre then published new versions of these and other programs under the “Broderbund” name through a subsidiary, Encore Software, Inc.

In September 2013, Navarre Corporation changed its name to Speed Commerce and sold off its Encore subsidiary to WYNIT Distribution, which continued to publish TLC-licensed software as WD Encore. WYNIT itself filed for Chapter 11 bankruptcy in September 2017, however, and WD Encore was sold off to a new owner, Sereno Ventures, LLC, for $1.7 million. Sereno subsequently reorganized the company as Encore Software LLC.