Toy Story off to Good Start for New CEO
Mattel Inc.’s new leader, Robert A. Eckert, received a warm reception from investors and analysts Wednesday based on little more than reporting to work.
Shares of the nation’s largest and most troubled toy maker surged 13%, or $1.50, to $12.75 in New York Stock Exchange trading Wednesday as Mattel officially announced the selection of Eckert, president and chief executive of giant Kraft Foods Co., to replace Jill Barad as chief executive of El Segundo-based Mattel. The stock surge was the company’s biggest one-day percentage gain this year.
In addition, at least two Wall Street analysts upgraded Mattel’s depressed shares Wednesday based on Eckert’s 22 years at Kraft, which were marked by strategic acquisitions, prudent cost cutting and increasingly improving profit and margins.
Eckert himself was long on exuberance and short on specifics Wednesday regarding his plans for Mattel, the maker of toy brands such as Barbie, Hot Wheels and Cabbage Patch Kids. “I’m looking forward to the challenges, and we’re going to deliver good results for the company and the shareholders,” he said in an interview. “I work very hard, I enjoy work and I view this time at Mattel as a tremendous opportunity both professionally and personally.”
Tim Ghriskey, senior portfolio manager at Dreyfus Corp. and a Mattel shareholder, said the company needs a strategic plan. “I’d call that priority number one,” he said.
Eckert said he needs to evaluate the situation at Mattel before he can outline a strategy.
“This is not the Titanic he’s on,” said William Rollnick, the Mattel director who was acting chairman before Eckert joined the company. “He’s got some solid brands [and] he has breathing room to look around and ask a lot of questions.”
One of his first tasks is to decide how Mattel will enter the digital age. Some company insiders have suggested that Mattel should simply license its strong brands to technology-oriented companies rather than try to build or buy a software division. The company’s $3.5-billion acquisition of children’s software maker Learning Co. turned into a fiasco that produced Mattel’s first losses in 11 years, sunk its once-lofty stock and cost Barad her job.
Eckert has strong experience in the licensing area, having linked Kraft with Starbucks coffee and California Pizza Kitchen, among others, whose products Kraft brings to grocery store shelves.
While there are similarities, the toy business is radically different from the food industry, noted Salomon Smith Barney analyst Jill Krutick, who upgraded Mattel’s stock to a “buy” Wednesday.
Unlike cheese and lunch meats, toys are faddish and hit-driven, an area where Eckert would seem to have less insight. Eckert himself notes the difference between a seasonal business like toys and a perishable business such as food, but says he is confident that Mattel’s strong stable of perennial toys will help the company navigate consumers’ fickle tastes.
There’s also the international marketplace, which accounted for 28% of Mattel’s $5.5 billion in 1999 sales. The company’s overseas operations have strayed off course in recent years with inventory problems and declining sales. Eckert has handled various Kraft operations in Canada and South and Central America, but he lacks direct experience of running a global brand.
The company’s depleted management ranks--the top manufacturing and international jobs and chief operating officer post are all vacant--could prove to be a clean rebuilding opportunity for Eckert.
Mattel said Wednesday that director Ron Loeb, who has been acting chief executive since Barad’s resignation, will step down. Both he and Rollnick will remain on Mattel’s board.
Employees got their first look at their new boss when they were summoned to a 10 a.m. meeting in the second-floor cafeteria. Eckert briefly introduced himself to the standing-room-only crowd and then took questions. Employees, acknowledging his unfamiliarity with the company, mostly asked questions about his time at Kraft and his family.
Eckert surprised many at Kraft, a company three times Mattel’s size, by resigning Wednesday. He was thought to be on the short list of potential successors to Geoffrey C. Bible, chief executive of Kraft’s parent, tobacco giant Philip Morris Cos. Working against him, Philip Morris insiders said, were his age (at 45, he was probably too young to immediately succeed Bible when Bible is forced to retire in two years) and that he came from the company’s secondary business, food.
The job of chief executive of a tobacco company also may have been both uncertain and possibly undesirable for Eckert. The cigarette industry faces increasing pressure on both the legislative and judicial fronts.
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Bloomberg News was used in compiling this report.
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Toy Maker’s New Player
Robert A. Eckert, Mattel’s new chief executive, has run Philip Morris’ Kraft Foods unit since 1997.
* Born: Aug. 14, 1954, in Elmhurst, Ill.
* Career: Started at Kraft Foods in 1977. Appointed chief executive in 1997.
* Education: MBA, Kellogg Graduate School of Management, Northwestern University, 1977. Bachelor’s degree in business administration, University of Arizona, 1976
* Personal: Married, with four children ages 8 to 22
While he was Kraft chief executive, both revenue and earnings increased:
Kraft Foods, a subsidiary of Philip Morris since 1988, is the largest maker of packaged foods in North America. Under Eckert, Kraft’s sales rose 4.2% and profit increased 8.4%. Annual results for Kraft’s domestic operations:
Operating revenue (in billions)
Operating earnings (in billions)
Sources: Bloomberg News, company Web site, Associated Press
Researched by NONA YATES/Los Angeles Times
