This post is part of a feature on companies and products that our bloggers think are in need of a makeover. See all 26.
Founded in 1945 in a garage workshop in southern California, Mattel Inc. (NYSE: MAT) is now the world's biggest toy maker, with a market cap of about $5.2 billion. Number two Hasbro Inc. (NYSE: HAS) has a market cap of about $4.2 billion. Mattel produces from everything Barbie and American Girl, to Hot Wheels, Fisher Price toys,
Scrabble, and the Magic 8 Ball, as well as tie-ins with Pixar, the Dark Knight, Harry Potter, and Nickelodeon. However, in 2002 Mattel shut its last factory in the United States, and since then most of its products have been produced in China.
That decision came back to bite Mattel when, beginning in the summer of 2007, it was forced to issue a series of recalls of Chinese-made toys that contained lead paint. The company is still reeling from that PR disaster, which for some reason included an apology from Mattel to the Chinese people. The situation prompted BloggingStocks contributor Tom Barlow a year ago to suggest (tongue in cheek) that Mattel merge with Waste Management Inc. (NYSE: WMI) so that toxic toys could go directly where they belonged, bypassing the middleman (i.e., the children). That would be one way to make over the company, I guess.
As Christmas of 2007 approached, it looked like the worst might be behind Mattel. The year-end numbers were respectable, and some investors were beginning to eye Mattel again. But first quarter 2008 results were disappointing, and by mid year, expectations were very low. The share price has continued to slide since the recalls, reaching a multi-year low recently. While there was a copyright infringement lawsuit settled in Mattel's favor (though they didn't get as much out of it as they wanted), and they are no doubt hoping for the Dark Knight and other tie-in merchandise to help boost what otherwise looks like it could be dismal holiday season for retailers, the newest thing Mattel has to contend with is claims by some parents that one of its dolls secretly promotes Islam, which Mattel denies.
So how can Mattel be made over so it can put this tale of outsourcing gone wrong behind it? I have one idea, and it's going to sound rather outlandish, but bear with me.
Think Star Trek: The Next Generation type replicators.
Now, the idea may not be as ridiculous as it may seem at first. The concept of reconstructing objects on a molecular level from base materials is known as digital fabrication, or desktop manufacturing, and scientists at MIT have been working on it for a while now. The goal, they say, to take what what now requires a whole factory to produce and make it cheaper and more quickly in a machine that can fit on a tabletop. One can imagine that this would take away any of the advantages to outsourcing overseas. For Mattel that could mean small shops located very near distributors or customers, perhaps even within toy stores themselves. Heck, one day kids might even have their own personal Mattel toy shops at home -- a quantum leap over the Easy-Bake Oven (a Hasbro product).
Yes, this technology is still in its infancy, and therefore not much help to Mattel right now, as it faces a questionable holiday season. But a good CEO has to have vision, right? And developing a reputation as a forward-looking company certainly couldn't hurt Mattel. It's better than continuing to be associated with recalls, lawsuits, and hysterical customers, right?
Does Mattel need a makeover? What would you suggest? Be sure to check out the other makeover posts.