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Mattel, Losing Ground, Shakes Up Management

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TIMES STAFF WRITER

Mattel Inc., the big toy maker that is grappling with falling profit and weak sales of many of its familiar products, said Wednesday that two senior executives are leaving the company as part of a major reorganization.

Bruce Stein, 44, Mattel’s No. 2 executive and once heir apparent to Chairwoman and Chief Executive Jill Barad, has resigned as president and chief operating officer. Some analysts say Stein, who managed all of Mattel’s product lines, may have clashed with Barad over the direction of the company.

Gary Baughman, 52, president of Mattel’s Fisher-Price line, is also leaving.

The world’s largest toy maker said it is streamlining its management structure to respond faster to changes in the marketplace. The company is broadening its focus from a traditional toy company to a children’s products firm that markets to a wider age group and is expanding into new categories such as computer software.

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Additionally, Mattel is attempting to cut costs and increase revenue after a disappointing fourth quarter. The company reported that profit dropped 67% to $63.8 million, excluding a one-time charge, and that sales fell 4.3% to $1.54 billion.

“Mattel is a company that historically has been very careful about watching its costs and trying to manage its operating efficiency. That fell apart on them last year when revenue goals were not met,” said John Taylor, an analyst with Portland, Ore.-based Arcadia Investment Corp.

“Mattel told Wall Street this year that it is committed to two things--to grow revenues and increase operating margins” from 14% to 16%, Taylor said. “In a modest growth environment, that goes a long way to helping the company increase earnings.”

Taylor said the company is flattening the organization and driving accountability down to five new management units, eliminating the need for Stein’s position.

The unexpected drop in fourth-quarter revenue was blamed on retailers, such as giant Toys R Us, dramatically cutting back on post-Thanksgiving orders to avoid ending the holiday season with excess inventory.

Toys R Us cutting back “means the loss of a month or two worth of sales for manufacturers, and that’s a huge hit,” said Eric Johnson, a Vanderbilt University management professor who follows the toy industry.

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Shipments of Mattel’s famed Barbie line also lagged, falling 14% in 1998 to just under $2 billion, a dramatic reversal for a toy that for years generated double-digit revenue growth.

“That’s a painful pill for Mattel, given how large the brand is for the company,” Johnson said.

Mattel has also been hurt by what the Toy Manufacturers of America calls a trend toward children getting older younger. Analyst Taylor thinks that young children getting interested in toys for older children may be cutting into sales of Fisher-Price toys, which are aimed at preschoolers.

Overall toy industry sales have been sluggish, falling $41 million to $15.2 billion last year, according to the trade association.

Mattel, which is proceeding with its acquisition of software maker Learning Co., is moving into developing high-tech toys that appeal to older children. It also is exploring new retail channels, such as the Internet and direct sales.

The reorganization sets up five business units that will report directly to Barad. The new units are Boys/Entertainment, Girls/Barbie, Fisher-Price, Mattel Media and Pleasant Co., which makes the American Girl dolls.

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“The new organizational structure we have developed will provide for faster decision-making and encourage action that is entrepreneurial and responsive to change,” Barad said in a statement.

Five executives were named presidents of the new units.

Neil Friedman, president of Tyco Preschool--a bright spot within Fisher-Price--replaces the departing Baughman atop the Fisher-Price division, which includes all infant and preschool products, including the Disney, Sesame Street and Magna Doodle brands.

Adrienne Fontanella, now responsible for Barbie licensing and collectibles, will become president of the Girls/Barbie unit. Matt Bousquette will head the Boys/Entertainment unit, which includes Hot Wheels, Matchbox, radio-controlled vehicles and products licensed from Disney and Nickelodeon.

David Haddad becomes president of Mattel Media, which includes the company’s new Intel Play brand.

Pleasant Rowland will remain vice chairwoman of Mattel and president of Pleasant Co.

Mattel said the reorganization triggered Stein’s decision to leave the company. The industry veteran had been president of Mattel Worldwide since August 1996 and previously was president of Sony Interactive Entertainment.

Baughman joined Mattel when it merged with Tyco Toys in 1997. He will remain with the company through a transitional period.

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Mattel shares dropped 75 cents to close at $24.75 on the New York Stock Exchange.

Associated Press was used in compiling this report.

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