Can't Wait to See the Next Chapter in the Unfolding Mattel Saga

Thursday Thwack

Mattel's mess: About a month ago Mattel (MAT) disclosed earnings trouble related to its The Learning Company sub. A few weeks later it said everything was OK. Then, on Wednesday, it announced that the two guys who ran TLC, Michael Perik and Kevin O'Leary, had "left." Left! Nothing more, nothing less. What really happened? A company spokesman was mum, but this much is certain: It's generally never a good sign when top execs abruptly leave after bad news with no explanation. Suggests some skeletons popped out of some closet.

Or maybe a bunch of unsold software that nobody ever knew existed?

Expect this to be just the start of yet another chapter in this saga.

School daze: Edison Schools, which is scheduled to go public as early as this week, was the focus of a blistering (albeit entertaining) column on TheStreet.com several months ago by Chris Byron, who focused on the company's IPO prospectus -- specifically, pay for CEO Chris Whittle and other execs.

But wait -- there's more: Here's a company supposedly in the biz of running public schools, but rather than relying on tried-and-true math to count the number of schools it operates, it has come up with a new math of its own. Rather than counting each facility as a school, as is common in education, Edison discloses that it counts each grouping of kindergarten through fifth grade, sixth grade through eighth grade and ninth grade through 12th grade as a separate school, even if those groupings are in the same building. Even if there's just one grade in each group, that counts as a separate school.

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The upshot: For public consumption, Edison claims it operates 79 schools. Sounds impressive until you do the real math and realize the company really operates only 38 schools. (That's confirmed in the fine print of the prospectus, where the company says it has 38 principals overseeing all of the Edison "schools" on each campus.) Thirty-eight schools, all of them losing money. The accumulated deficit since 1996 has jumped to $78.9 million, and the company pretty much confesses that it has no idea when and if it will ever make money.

And that doesn't even take into account a strike by teachers' unions, which the company lists as one of its lead risks.

For that, with just $133 million in revenue, Edison could wind up with a market value approaching $1 billion (including debt, convertible preferreds and warrants, etc.), and it's not even a dot-com. The gall!

One final point: Edison has five underwriters. You know this column's rule of thumb: More than three suggests the company needs as many bankers as possible to sell its stock, not to mention guaranteeing five buy ratings after the deal is done.

Edison officials didn't return my call.

Undisclosed disclosure: Back in May, Macromedia (MACR) unveiled its Shockwave.com Web site, which it set up as a new company that it planned to take public. On the same day, it also announced it hired Stephen Fields from Disney (DIS) to be the CEO of the new entity. Field's hiring was a big enough deal to warrant a story in the San Francisco Chronicle, as well as mentions in The Wall Street Journal, Dow Jones, Daily Variety and Network Briefing.

Yet, two months ago, when Fields was demoted to a new position in "strategic planning," the company didn't say a word. Why? According to Macromedia CEO Rob Burgess, it was "not material." Not material? You do an announcement when a guy is hired, especially as CEO, you should do the same when he loses that job. Makes you wonder what else the company's hiding. (Say this for Macromedia, though: When it realized Fields wasn't the right guy, it moved swiftly before any damage was done. Can't fault it for that.)

Ancor's away: Boy, seen that Ancor Communications (ANCR) lately? Up about 75% in the past two weeks. Guess who was selling during the rise? Try Fidelity, whose filing with the SEC Wednesday shows that its Ancor ownership dropped to 7.2% from 12.4% in August. No reason was given.

Reader revolt: Regarding my swipe Wednesday at priceline.com's (PCLN) bidding for grocery service, reader Bryan McCormick writes that, based on his experience, I couldn't be more off the mark(et). "In exchange for filling out some relatively painless surveys, I can collect points into a house account that guarantees 50%-off pricing on items I select," he says. "I agree there isn't a lot to choose from, but using the service solely for high-ticket items (in NYC that appears to be meat and batteries, don't ask me what the correlation is) really does pay off." Thanks, Bryan.

On the other hand, no thanks to reader Stephen Bloch, who was agitated by yesterday's item regarding confusion in the investment community between Integrated Device Technology (IDTI) and IDT (IDTC). I had suggested Integrated Device change its name.

Enter Bloch: "I visit the TSC site daily and without fail I find your column to be of a 'holier-than-thou-nature,'" he writes. "Your most recent feedback to the woman who indicated that there was confusion about IDT Corp. and Integrated Device Technology was unfair. It is your responsibility as a journalist to clarify what needs to be clarified. Would you like to be confused with H. Greenberg the mass murderer? How about Herb Greenburg the embezzler? Step back and take a look at yourself."

It's Greenberg, with an "e."

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