Apr. 2--Profitability has been a long time coming to Plato Learning Inc., a Bloomington-based online education company that just turned its first quarterly profit since 2004.

It was a small profit -- $259,000, or 1 cent per share on revenue of $16 million -- but a milestone for the perpetually struggling firm, which serves about 1,200 public school districts nationwide and has posted annual losses for the past seven years.

The question is, can Plato Learning maintain its upward momentum? These are not boom times for Plato's customers: kindergarten-to-12th-grade public schools and community colleges. But the firm says it has retooled for the times.

Plato Learning's software lets students interact with lessons on a computer. A writing lesson invites students to underline words and phrases in Lincoln's Gettysburg Address that show how he used repetition to get his ideas across. The program gives students feedback about how well they did, and later tests them.

"It's a wonderful alternative to traditional classroom learning," said Nancy Stalland, a reading specialist at 1,800-student Tartan Senior High School in Oakdale, where 37 students are part of a four-month test to see if the learning software can help them pass a state reading test required for graduation. "Students can work at a pace that is individual to them, and spend more time in the areas that are harder for them."

Stalland can monitor their progress, right down to the number of minutes they spend on a lesson or test.

How did Plato Learning -- which has its roots in the old Control Data Corp. -- reinvent itself? Most importantly, the company radically changed its business model beginning in 2006, and now mostly collects its software licensing fees over several years (subscription model) rather than as a lump sum (perpetual license model).

"It makes earnings smoother, and investors like predictability," said Rob Rueckl, Plato's chief financial officer. The first-quarter profit came during what previously would have been a slow quarter, he said.

"Their business model has clearly turned for the better," said Robert Evans, an analyst with Craig-Hallum Capital in Minneapolis. "I expect every quarter this year will be a nice improvement over a year ago," although steady profitability will be elusive.

Evans predicts a second-quarter loss of $1.6 million, or 7 cents a share, on revenue of $15.7 million, and an annual loss of $2.7 million or 11 cents a share on revenue of $65 million.

Changed delivery model

The company also shifted the way it delivers its product.