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Background
Founded in 1998, KnowledgeNet (KN) is an e-learning company whose products are regarded as some of the highest quality within the e-learning industry. Students of KN IT certification programs pass their certification exams at a rate of 94%, compared to industry averages of 65-75%. Though approximately half of all training takes place in a traditional classroom setting, corporate training managers are turning to e-learning at ever-increasing levels due to its relative savings in time and travel costs over traditional classroom training, and its "anytime, anywhere" access. Though much of the e-learning market is composed of IT training programs, non-IT training programs are expected to surpass IT programs by the end of 2004, bringing the total e-learning market to an estimated size of 14 to 23 billion dollars.
KN is in a relatively strong financial position for a young company. Venture financing has flushed KN with over 32 million dollars in cash on hand to cover operations, and KN has been gradually progressing towards achieving positive net income. Losses of close to 7 million in quarter two of 1999 have been reduced to losses of 600,000 dollars through quarter one of 2001 (the company posted positive net income of 535,000 dollars for the month of March of 2001). KN has seen revenue and sales productivity increase, but sales expenses have also continued to increase.
For quarter one of 2001, Sales Expense contributed to 51% of total expenses. The company employs an inside and outside sales force (outside sales accounted for approximately 79% of quarter one 2001 revenue of 8.1 million), and it also partners with approximately 25 resellers who sell KN products, leav ...