NEW YORK (CNNfn) - Mattel's board of directors ousted Chairman and Chief Executive Jill Barad Thursday amid growing pressure from shareholders over the company's growth strategy and fiscal performance.|
Barad, one of the country's most prominent female executives, joined Mattel in 1981 as a $38,000-a-year product manager, and eventually rose to CEO in 1997. Although she helped resurrect sales of the company's well-known Barbie dolls, she is widely blamed by investors and board members for the company's $3.5 billion acquisition of The Learning Co.
The computer software firm, which boasts such popular titles as Carmen Sandiego, Riven, and Myst, was supposed to allow Mattel to expand beyond its traditional toy business. However, the deal has turned out to be a nightmare for the nation's largest toy maker, costing Mattel $105 million in losses in the third quarter ended last September.
"The continued problems at The Learning Company are at the root of our disappointing overall performance. Unfortunately, this distracts from the very real gains achieved in our core brands."
-- Former Mattel CEO Jill Barad
Despite assurances from Barad that The Learning Co.'s problems were fixed, the unit lost another $183 million in the just-completed fourth quarter.
"The continued problems at The Learning Company are at the root of our disappointing overall performance. Unfortunately, this distracts from the very real gains achieved in our core brands," Barad said in a statement.
"The board of directors and I view the performance of The Learning Company, and its effect on our results, as unacceptable. Therefore, the board and I have agreed that today, I resign from the positions of chairman and chief executive officer of Mattel, and as a member of the company's board," said Barad.
The company's board has taken charge to oversee operations and coordinate the search for a new chief executive officer. Meanwhile, the board appointed William D. Rollnick as acting chairman and Ronald M. Loeb as acting CEO.
For the quarter ended Dec. 31, Mattel reported a loss of
$18.4 million, or 4 cents a share, compared with profit of $86.7
million, or 22 cents a share, in the same period a year ago.
Analysts surveyed by First Call/Thomson Financial had expected
the company to earn 25 cents a share. Sales for the quarter were $1.77 billion, down from $1.82 billion a year ago.
Investors and analysts supported the board's decision to oust Barad.
"The strategy that has been implemented by the company has been a disaster, and probably the biggest part of it has been the acquisition of (The) Learning Company," said Larry Fuller, manager of the $5 billion Merrill Lynch Fundamental Fund, which has unloaded its entire stake in Mattel (MAT: Research, Estimates). "I couldn't rationalize it. Software sales are one of the most vulnerable to Internet e-tailing ... It just did not make any sense strategically."
Fuller, who supports Mattel's decision to force Barad to step down, also said the company would have been better off investing in Electronic Arts, which makes video game software.
"I think the whole thing is unfortunate. It's always been a great company with a great tradition and history, and that's why we owned it," Fuller said. "But the thing that sticks out, a really stupid strategic decision, is acquiring The Learning Company."
Brian Eisenbarth, an analyst with Collins & Co., said Barad tried to do the right thing for the company by acquiring The Learning Co., but growth of the unit's specialty, educational software, had all but stopped. He also said that at the time of the purchase last May, The Learning Co.'s growth was primarily through acquisition, rather than its core products.
"I think that acquisition had the right intentions at the time, but I don't know if Mattel really looked that closely at what (The) Learning Company was," Eisenbarth said. "They kind of bought it in the midst of there being not a lot of growth in that end of the software market ... There's been a lot of
consolidation, pricing pressure, and (The) Learning Company kind of grew through acquisition itself."
In November, Mattel spun off a majority stake in Genealogy.com LLC, a Learning Co. subsidiary, in hopes of leveraging the company's software assets to stand-alone Internet-based businesses. The company invested $37.5 million in the venture with a group of partners that included A&E Television Networks, Hearst Interactive Media, Thomas H. Lee Partners and Weston Presidio Capital.
For the full year, Mattel lost $82.4 million, or 21 cents per diluted share, compared with $206 million, or 47 cents a share, a year ago. Revenue fell to $5.5 billion from $5.6 billion in 1998.
During the fourth quarter, U.S. sales of Barbie rose 11 percent; products associated with the movie sequel to "Toy Story" surged 70 percent. Meanwhile, sales of Fisher-Price products rose 48 percent.
Shares of Mattel dropped Thursday, closing at 1-1/16, or 9 percent, to 10-3/4.
--from staff and wire reports