Mattel Inc. (NYSE: MAT), which competes with toy makers Hasbro Inc. (NYSE: HAS) and JAKKS Pacific Inc. (NASDAQ: JAKK), will be reporting earnings for the fourth quarter on Monday, February 2. This is going to be an exciting one for the market. Why? Well, it was an awful Christmas for retail. If Mattel, a company that thrives on the season, can beat expectations, then investors can maybe feel a little bit better about the market. Amazon.com (NASDAQ: AMZN) surprised Wall Street and went beyond expectations during the holiday season, so perhaps there is hope for Mattel.

But I can't say I'd be willing to bet on it. Mattel should earn somewhere around $0.72 per share on the bottom line. That wouldn't be a great number, but it wouldn't be a disaster, either, because in the previous year Mattel delivered $0.76 per share.

There is fantastic news this morning for owner's of Barbie-maker, Mattel Inc. (NYSE: MAT). The Barbie-killer, Bratz line of dolls, is being pulled off the shelves by the end of the year. And Bratz-maker, MGA Entertainment has to pay Mattel $10 million for copyright infringement and $90 million for breach of contract after a trial starting with Mattel's 2004 lawsuit ended this August.

For those who are not familiar with Bratz, here's a brief tutorial. Bratz is a line of dolls -- with "huge lips, pug noses, almond-shaped eyes and coquettish figures," according to AP. Young girls loved them and in 2001 MGA took Bryant's original four dolls and created 40 characters, complete with accessories and related toys such as Bratz Boyz, Bratz Petz and Baby Bratz. Bratz generated as much as $778 million in profits and took market share from Barbie whose sales fell 15% in 2007.

Why are the Bratz dolls taking a walk down Dodo Lane? A jury found that Bratz designer Carter Bryant developed the concept for the dolls while working for Mattel. The jury ruled that MGA infringed on Mattel's copyright. The judge's injunction named all 40 Bratz dolls, including the four originals -- Yasmine, Chloe, Sasha and Jade. The judge also ordered MGA to reimburse its vendors and distributors for the cost of the dolls and shipping charges for sending them back.

Mattel stock is up 2% in pre-market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Parents rejoice: Bratz dolls are going the way of the hula hoop!

The sexed up Barbies on collagen injections that have been the subject of a 9-figure lawsuit involving Mattel (NYSE: MAT) and MGA Entertainment are not expected to be the hit this holiday season that they have been in recent years.

The Wall Street Journal reports (subscription required) that Target (NYSE: TGT) will be slashing Bratz-devoted shelf space by 50%, and annual sales of the dolls are expected to fall 25% to $300 million. Wal-Mart (NSYE: WMT) has also slashed its Bratz orders and many retailers are offering steep discounts on the dolls, indicative of an inventory glut.

The decline of Bratz is bad news for Mattel, which is locked in litigation over rights to a brand that appears to be rapidly declining in value.

In addition, Bratz's risque image is causing problems for the company. Scholastic (NASDAQ: SCHL) has pulled Bratz books from its roster after parents and psychologists complained that the dolls modeled "precocious sexuality."

Mattel (NYSE: MAT) scored a big victory when it sued MGA Entertainment over the origin of the wildly popular Bratz dolls, and won. But it looks like the victory won't be as big as the parent company of Barbie would like.

Mattel was seeking $1.8 billion in damages but, on Tuesday, a jury awarded Mattel just $100 million in damages, but The Wall Street Journal explains that that award "could be further reduced by U.S. District Judge Stephen G. Larson because it contains duplicate damages for the same offense, according to Thomas Nolan, an attorney for MGA." Still to be determined is who will have the right to continue marketing the Bratz brand.

This is a big loss for Mattel. The company spent millions pursuing the litigation -- the amount was large enough that Mattel said it materially affected earnings, and Mattel is a $30 billion company.

This has definitely been one of the more entertaining lawsuits in business news of late and it looks like there will be a few more rounds to go, with MGA Entertainment planning to file an appeal.

Mattel (NYSE: MAT) shares are trading higher today after the company posted a second-quarter profit of $11.8 million, or 3 cents per share, beating analysts' estimates of 2 cents per share. Also, last night Mattel won a copyright case against rival MGA Entertainment over the origins of MGA's Bratz dolls. Next week a jury will decide on any damages owed to MAT by MGA. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MAT.

After hitting a one-year high of $26.12 last July, the stock hit a one-year low of $16.42 in January. MAT opened this morning at $20.42. So far today the stock has hit a low of $19.96 and a high of $21.18. As of 1:05, MAT is trading at $20.48, up $2.20 (12.0%). The chart for MAT looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just six months as long as MAT is above $15 at January expiration. Mattel would have to fall by more than 26% before we would start to lose money. Learn more about this type of trade here.

MAT hasn't been below $16.40 at all in the past year and has shown support around $17 recently. This trade could be risky if the damages turn out to be negligible, but even if that happens, this position could be protected by the support the stock might find around $16.50, where it has bottomed out twice in the past seven months.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MAT.

This week games-maker Electronic Arts (NASDAQ:ERTS) announced a deal with Hasbro (NYSE:HAS) to create electronic versions of the toymaker's brands, including Scrabble and Monopoly. The deal runs through 2013, and covers all Hasbro properties, which include such popular names as the Bratz dolls, the Fantastic Four, Gastrointestinal Joe, The Simpsons, and Twister.

While EA hasn't released information about their plans to make use of these properties, the possibilities are endless –

• Monopoly Extreme -- Why should players be allowed to stroll uninhibited down Boardwalk and Atlantic Avenue, when the game could be much more interesting in a Grand-theft- Auto-type world? Imagine shooting your way out of Marvin Gardens, highjacking a Reading Railroad train, and trolling Baltic Ave. for a hooker.
• Chutes and Ladders -- In the video world, falling into a chute would cost the player much more than a few squares – perhaps even a visit the Hell! Ladders, on the other hand, could lead to greater rewards, such as a front row seat at a Barry Manilow show in Las Vegas. Or do I have those backwards?
• Bratz – the Hilton version. Dress up your Bratz from an endless variety of skanky outfits (underwear tonight- yes, or no?), take her partying in the hottest Hollywood clubs, indulge her in the very best drink and toot, and check her in to the most exclusive rehab clinics. Accumulate points every time she manages to smack a paparazzi with her purse.
• Scrbl – txt vrsn. Txtrs cmpt 2 c who cn use t fwst ltrs 2 spl wrds.
• Easy-Bake Iron Chef – No more light bulbs and tasteless cakes. In the virtual world, mini-chefs can compete with gamers around the world to create monster desserts, exotic entrees or even cook up batches of meth.

Now, that's entertainment.

Lions Gate Entertainment Corp (NYSE: LGF), which has been a bright light in the otherwise dim movie industry recently, has found success making low budget movies aimed at the 20-30 year-old audience. Here is a list of some of their more notable recent releases, sorted by their estimated budgets. None of the movies has a rating milder than PG-13.

• Hostel ($4.5M est. budget / $47.3M gross)
• Diary of a Mad Black Woman ($5.5M est. budget / $50.3M gross)
• Crash ($6.5M est. budget / $54.5M gross, won Best Picture Oscar)
• Crank ($12M est. budget / $27.8M gross)
• Employee of the Month ($12M est. budget / $28.4M gross)
• Saw III ($12M est. budget / $80.1M gross)
• Hotel Rwanda ($17.5M est. budget / $23.4M gross, nominated for 3 Oscars)
• Lord of War ($42M est. budget / $24.1M gross)

(All above figures taken from IMDB.com)

From the above list, you can see Lions Gate's winning formula. All their successes have budgets under $20 million dollars, and most fit into three categories: Movies that push the limits of violence and gore (Hostel, Crank, Saw); low-brow adult-themed comedies (Diary of a Mad Black Woman, Employee of the Month); and edgy dramatic works that gain critical appreciation (Crash, Hotel Rwanda).

Now, here is the problem -- neither the movie the just released, Happily N'Ever After, nor the movie that is making noise today with its addition of Paula Abdul to its cast, Bratz, fits this formula.

The new American Girl Doll, Nicki, costs $86, by far the priciest doll in the collection. Her dog will set you back $24. The horse is $62, but its accessories are another $34. So all told, you're talking about spending over $150 on a doll for a girl.

One of the the hottest items in the doll category is the Bratz doll, which costs around $9. Which would you rather see on your daughter's wish list?

According to a Wall Street Journal article [subscription], American Girl Nicki is athletic and loves animals. "She skis like a demon, rides horses, trains guide dogs, plans school parties, washes the dishes, battles popularity crises, and helps her little brother with his math homework."

Over at the Bratz webpage, we see Sasha: "My friends call me 'Bunny Boo' because I love the hip-hop thang."

A look at pictures of the dolls is also very revealing. While Nicki is dressed ready for activity and fun, Bratz Megan, Roxxi, and Sasha are dressed like ... well, let's just say they are dressed in a way that very few parents would want their eight-year-olds to dress.

Barbie is inviolate. Girls since the beginning of time (let's be clear: time didn't start, toywise, until the Barbie) have begged for Barbies, and no more time more loudly and earnestly than at Christmas. Even my four-year-old, mud-puddle-jumping, super-hero-adoring son wants a Barbie.

That was. Until Bratz came along. For the past few years Mattel, Inc. (NYSE:MAT) has been fighting tooth and nail to keep up with the overly-madeup, hiphop bad girls with the big heads. Where Barbie is too curvaceous, Bratz are too too -- too street, too saucy. If Barbie represents the unrealistic dimensions of a Vogue model, Bratz represent the unwanted idealization of a girl who hangs out at a strip mall when she should be in government class, spends her allowance on collagen lip injections, and dates a rapper twice her age.

Barbie sales have been falling in the past several years thanks to the formidably mispelled bad girls of the fashion doll world. They attempted to combat closely-held MGA Entertainment, Inc., who manufactures the Bratz dolls, in the marketplace by positioning its My Scene dolls to compete directly (although MGA sued Mattel last year, claiming that Mattel had changed the My Scene dolls to imitate Bratz too closely). When that didn't work so well, they brought out the big guns: an IP lawsuit.