Mattel Inc., the world's largest toymaker, said yesterday that the two top managers of its beleaguered Learning Co. division have left the company.
The departures of Learning Co. Chairman Michael Perik and President Kevin O'Leary come a month after Mattel said the division would post a massive and unexpected loss in the third quarter. As a result, Mattel's earnings declined 42 percent in the three-month period. It also has adjusted its earnings forecast for the fiscal year to between 70 cents and 80 cents a share, far less than the 95 cents estimated by First Call Corp.
A Mattel spokesman declined to discuss the reasons behind the executives' departures, which were effective immediately, and would only say that the managers were pursuing other interests.
"Did they resign?" said Glenn Bozarth, a spokesman with El Segundo, Calif.-based Mattel. "I can only say they left the company. If you ask me the question 'Were they fired?,' I can only say they left the company."
Perik and O'Leary could not be reached yesterday at their offices or homes. But analysts said the two managers probably were asked to leave in part because Mattel executives believed they did not disclose details of the division's worsening financial situation in a timely manner.
The Learning Co. had been expected to post a $50 million profit in the third quarter ended Sept. 30. But a canceled licensing agreement, higher promotional costs and bad debts instead contributed to a loss of $105 million.
"It's pretty clear that senior management at Mattel felt blindsided by the shortfall in third-quarter revenue and earnings at the Learning Co.," said John Taylor, an analyst at Arcadia Investment Corp.
The losses also have raised questions about the $3.6 billion price Mattel paid in May for the Learning Co., a Cambridge, Mass., firm that makes educational software games such as "Where in the World Is Carmen Sandiego?"
"Obviously, the Learning Co. acquisition has not met their short-term expectations," said Bruce Raabe, an analyst with Collins & Co. in San Francisco. "It may be management is part of the problem. It may be that the acquisition isn't the perfect fit that they thought it would be."
The move is the latest in a rocky period for Mattel under chief executive Jill Barad, who was promoted to the top job in 1997. The manufacturer's bottom line has been hurt by the diminishing popularity of its Barbie dolls. Troubles at Toys R Us Inc., the second-largest U.S.toy retailer, also have reduced Mattel's revenue.
Wall Street has punished Mattel, a mature company with decades of experience in the toy business, to the point where eToys Inc., a much younger firm that sells toys on the Internet, now has a higher market value.
After yesterday's announcement, Mattel's stock rose 12 1/2 cents a share to close at $13.87 1/2 on the New York Stock Exchange. That's a far cry from the company's 52-week high of $39.
"Ultimately, Mattel is wounded right now, and they're trying to figure out how to get their business back on track," analyst Raabe said.