Full Description

Rosetta Stone Inc. (Rosetta Stone), incorporated in December 2005, is a provider of technology-based language learning solutions. The Company develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. The Company’s teaching method (called by the name Dynamic Immersion) is designed to use the innate, natural language learning ability that children use to learn their native language. Rosetta Stone’s courses are based on its own interactive technologies and pedagogical content, and utilize a sequencing of images, text and sounds to teach a new language without translation or grammar explanation. As of September 23, 2008, the Company offered its self-study language learning solutions in 31 languages. The Company’s customers include individuals, educational institutions, armed forces, government agencies and corporations.

The Company has a multi-channel marketing and distribution strategy that directly targets customers, utilizing print, online, television and radio advertising, public relations initiatives and its branded kiosks. Approximately 85% of Rosetta Stone’s revenue the year ended December 31, 2007, was generated through its direct sales channels, which included its call centers, Websites, institutional sales force and kiosks. The Company also distributes its solutions through select retailers, such as Amazon.com, Apple, Barnes & Noble and Borders.

Rosetta Stone’s interactive language learning solutions enable its customers to learn a language on their own schedule and for a price that is lower than most classroom-based or one-on-one tutoring alternatives. Dynamic Immersion eliminates translation and grammar explanation. The Company’s content library consists of more than 25,000 individual photographic images and more than 400,000 sound files. Rosetta Stone designs the sequencing of its content for learning.

The Company’s language learning solutions are built upon a software platform that supports multiple languages and is deployable on personal computers, on local networks and online. The platform incorporates a number of technologies that are key to enabling language learning, including speech recognition; adaptive recall algorithms, that repeat content at scheduled intervals to promote long-term retention; reporting features and curriculum options, and an intuitive user interface that assists the learner’s transition from listening comprehension to speaking.

Rosetta Stone’s courses are available in up to three levels of proficiency per language, with each level providing approximately 40 hours of instruction and containing multiple units, lessons and activities. The Company has four different editions: personal, enterprise, classroom and home school. Each edition utilizes the same core software. The Company also provides an online peer-to-peer practice environment called SharedTalk, at www.sharedtalk.com, where registered language learners meet for language exchange to practice their foreign language skills.

The Company competes with Berlitz International Inc., Simon & Schuster, Inc. (Pimsleur), Random House Ventures LLC (Living Language), Disney Publishing Worldwide and McGraw-Hill Education.