While JAKKS Pacific is skilled at managing a portfolio of both licensed products and appealing niche items, it couldn't prevent its business from being overtaken by the recession. Management states that it intends on being conservative with its capital and perhaps investing in acquisitions if they make sense (the company purchased Disguise, Inc. late last year to take advantage of the Halloween holiday). They better be sure that any acquisition does indeed make sense for long-term shareholder enrichment, because they won't be forgiven for mistakes in this market.

JAKKS Pacific has some good brands in its roster such as toys based on characters from Viacom's (NYSE: VIA) Nickelodeon universe. But that doesn't mean that holding a valuable license is always going to work, especially if a fad is starting to wane. As an example, the release mentioned that products based on Disney's (NYSE: DIS) Hannah Montana failed to provide any sort of financial excitement for the company. Hopefully, JAKKS Pacific is redoubling its efforts as we speak in terms of making its product line as lean as possible, focusing only on the concepts that have the best chance at retail. Unfortunately, in times of recession, companies can get distracted by focusing only on cutting costs and not much else. It's difficult to strike an ideal balance.

Well, JAKKS Pacific hit a 52-week low of $14.44 on the news on Wednesday, but bounced back by the end of the day, closing at $15.81. Not a bad intraday trade for those who were courageous enough to step in. Personally, I wouldn't buy JAKKS Pacific at current levels. There's no way to tell if it will go lower than the new 52-week low, but my best guess is it will. The big hope now is that the company can leverage the upcoming Easter holiday to drive sales. I wish the company the best of luck, even if it's not deserving of my investment capital.

Disclosure: I own Disney; positions can change without notice.