If putting pen to interactive paper helps your little Einstein learn, LeapFrog Enterprises wants to spend some time with your pint-sized genius. The toy maker develops interactive reading systems, educational games, books, and learning toys in five languages, covering subjects from math to music. Its bestselling brands include LeapPad, Leapster, Learning Path, Didj, and Tag. Products are sold to retailers, distributors, and schools worldwide, as well as to consumers via the company's website. LeapFrog's target market is infants and children through age nine. Former vice chairman and CEO Michael Wood founded LeapFrog in 1995 because he felt the toy market offered nothing to help his 3-year-old learn phonics.
Apparently even young children need mobile devices and LeapFrog has developed mobile learning systems to cater to them. Indeed, the company's 14% gain in net sales in 2010 vs. 2009 was largely based on the strong reception of its newest handheld mobile learning platform -- the Leapster Explorer -- that launched in mid-2010, along with several other new products. Targeted at four- to nine-year-olds, the Leapster Explorer supports downloadable "Leaplet" learning applications, including e-books and videos, is Web connected and has a camera.
While trending upward, LeapFrog's sales (about $432.5 million in 2010) have fallen from their peak of $680 million in 2003. Despite the growing popularity of educational toys and electronic learning aids (both in-demand categories in the toy industry) for tech-savvy young children and their parents, LeapFrog has struggled to maintain consistent upward sales progress. 2009 was an especially difficult year for the company as retailers slashed their inventory levels in light of decreased consumer spending. In 2009 and 2008 LeapFrog cut costs to help its bottom line. The company slashed its operating expenses by about 30% in 2009, laying off 85 employees (about 15% of its workforce), consolidating the administrative offices of its French and UK subsidiaries, subletting space in its California headquarters, reducing advertising, and lowering bad debt expenses. This came on the heels of additional moves in 2008, during which LeapFrog cut its operating expenses by more than 10%, mainly through the elimination of some 90 jobs, roughly 20% of its workforce.
Now those cost savings measures appear to be paying off. In 2010 the company returned to profitability for the first time since 2005. Leading the business into what it hopes will be a more consistently profitable future is toy industry veteran John Barbour, who was named chief executive in March 2011. Previously, Barbour was president of Toys "R" Us and served in senior executive roles at Hasbro. He succeeded William Chiasson, who served as chief executive for only a year before deciding to trade in the CEO title to become LeapFrog's chairman. Three months after taking the top job, Barbour floated the idea of selling the company as soon as 2012.
Wal-Mart and Toys "R" Us accounted for nearly a third of LeapFrog's gross sales in 2010.
LeapFrog is controlled by Oracle CEO Larry Ellison, who holds a maj ority of the voting power through Mollusk Holdings, LLC. Michael Milken (of 1980s junk bond fame) owns more than 17% of the shares.
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