NEW YORK (CNNfn) - Mattel Inc. announced plans Monday to sell its troubled software business, the Learning Company, with analysts expecting the unit to bring less than half the $3.5 billion that the world's No. 1 toy maker paid for it last spring.|
El Segundo, Calif.-based Mattel, the maker of Barbie dolls and Hot Wheels cars, has retained Credit Suisse First Boston to arrange a sale of the money-losing unit. Mattel hopes to sell the division soon, ending what would be a failed acquisition.
Marina Jacobson, a Bear Stearns analyst, said she expected the Learning Company to sell for between one and two times its annual sales of $700 million, far less than the purchase price.
Mattel will retain control of all Mattel brands in Learning Co.'s inventory, such as various types of Barbie software, the company said.
The software unit will be treated as a discontinued operation in the company's financial records effective March 31.
The software division has lost about $300 million since Mattel bought it last spring, losses that led to the recent resignations of Mattel CEO Jill Barad and President Ned Mansour.
Barad steered the company toward buying Learning Co., known for its popular software titles. She had hoped the unit would boost Mattel's Interactive toys division, involving computer software and Internet activities, which has lagged that of No. 2 toy maker Hasbro.
But the unit, which specializes in discounted educational software titles such as "Reader Rabbit," and "Where in the World is Carmen San Diego?" failed to produce the results Mattel was looking for. The company has been laying off Learning Co. employees, but has declined to say how many.
Hoping to make a comeback, Mattel in January named former video game maker Sega of America president Bernard Stolar to head the Interactive division, which included Learning Co.
The unit posted a $105 million third-quarter loss.
"It's the right thing to do in terms of dealing with their problems immediately," Jacobson said of Mattel's decision.
She said Mattel now will concentrate on developing its own $150 million-$200 million interactive unit rather than acquire another.
Mattel (MAT: Research, Estimates) spokesman Glenn Bozarth declined to discuss details of the unit's market value or interested buyers.
Among the possible buyers are Microsoft (MSFT: Research, Estimates), Time Warner (TWX: Research, Estimates) (the parent of CNN and CNNfn) and Knowledge Universe, an Internet investment firm co-founded by Michael Milken, the Wall Street Journal reported Monday.
Officials at those companies were not immediately available to comment.
Mattel's stock, which has lost two-thirds of its value over the last year, gained 3/16 to 10-11/16 in afternoon trading on the New York Stock Exchange Monday.