Toymaker’s Tablet Deal Plays Well on Wall Street

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El Segundo manufacturer Mattel Inc. is making room in its toy box.

The company paid out $21 million last month to win the battle for El Segundo children’s tablet maker Fuhu Inc., which filed for bankruptcy in December.

Mattel made the highest offer for the manufacturer of Nabi tablets, beating out the opening bid and auction floor of $10 million set by Australian golfer Greg Norman’s holding company Great White Shark Enterprises.

The news helped push Mattel’s stock up 8 percent to $26.97 for the week ended Jan. 27.

Fuhu launched in 2008 with its core product, a 7-inch Nabi Android tablet for kids. It gained national attention for its quick growth and reported revenue of more than $195 million in 2013. The company ranked No. 1 on the Business Journal’s list of 100 Fastest Growing Private Companies in both 2013 and 2014.

But Fuhu bottomed out last year, attributing its Chapter 11 bankruptcy filing to supply problems with Taiwanese electronics company Foxconn Technology Group, its chief supplier and key investor.

The tablet company now joins Mattel’s portfolio, which includes Barbie, Fisher-Price, Hot Wheels and American Girl.

Mattel did not respond to requests for comment.

It’s unclear what the company’s plans are for Fuhu. But the timing of the acquisition comes at a tough time for the world’s largest toymaker as overall sales have been declining for the past two years.

Mattel’s most recent earnings, for the quarter ended Oct. 27, showed revenue fell 11 percent to $1.79 billion, missing analysts’ expectations of $1.89 billion.

In addition, sales of Barbie dolls, which account for about $1 billion in annual revenue, fell 14 percent to $302 million for the quarter.

However, Mattel last week announced a new attempt to resurrect Barbie’s image – and sales – with three new body types – curvy, petite and tall – added to its Fashionistas doll line. The new dolls will also have seven skin tones, 22 eye colors and 24 hairstyles. Barbie’s perfect figure has long been criticized for creating a standard that most girls can never attain.

Sean McGowan, an analyst for Oppenheimer & Co. in New York, has mixed feelings on whether the new offerings will help revive the iconic doll’s sales.

“I don’t see this as a groundbreaking innovation or capitulation, but why not?” said McGowan in a statement. “Why not have multiple representations that expand the brand and gives fewer people a reason to say no?”

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