Mattel unloads software assets

The Associated Press
Saturday September 30, 2000

EL SEGUNDO – Mattel Inc. has found a buyer for the Learning Co., the software unit that lost hundreds of millions of dollars and led to the resignation of the toymaker’s chief executive and other top officials. 

The world’s largest toymaker said Friday it will sell the software business behind software titles like Carmen Sandiego to an affiliate of Los Angeles-based Gores Technology Group, which specializes in buying and turning around technology assets. 

The announcement said Mattel will get “a contractual right to receive future consideration” for the division that it acquired 16 months ago for $3.5 billion but has been losing money at a pace of about $1 million a day. 

Mattel will take a $430 million after-tax loss from discontinued operations as a result of the deal. 

The company announced its intention to sell the Learning Co. in April after the unit lost nearly $300 million. 

Mattel also said Friday it plans to eliminate about 350 jobs in the U.S. and reduce its quarterly dividend to five cents a share from nine cents to save $130 million annually. 

The company said it expects to take about $250 million in pretax charges from restructuring over the next two-and-a-half years, including $100 million in the third quarter. The moves will result in about $200 million in pretax savings. 

Mattel, which has brands including Barbie and Hot Wheels, has been scrambling to sell the Learning Co. whose losses have been a drag on its stock price. 

The losses also contributed to the departure in February of Mattel Chief Executive Jill Barad, who was forced to step down after reporting the company’s fourth consecutive quarterly loss. The company’s president, chief financial officer and other senior executives also resigned. 

Barad expected the company to be an immediate money maker that would spearhead Mattel’s move into interactive toys. 

Instead, analysts viewed the purchase as one of the worst deals in recent corporate history, rivaling Quaker Oats’ bungle in buying Snapple for $1.7 billion only to sell it three years later, in 1997, for $300 million. 

Mattel’s shareholders have criticized Barad’s exit package, valued at close to $50 million.