Barad Steps Down at Mattel, Firm Falls Short of Street Estimates

Updated from 5:19 p.m. EST

Jill Barad, the embattled chairman and chief executive of Mattel(MAT Quote), resigned Thursday after failing to turn around the weak sales and profits of the world's largest toymaker.

Mattel also shocked Wall Street by reporting steep losses for its fourth quarter in contrast to the earnings that analysts had expected.

The news sent Mattel's shares reeling in after-hours trading Thursday, falling 1 1/4, or 10.5%, to 10 11/16. Before the announcement, made after the 4 p.m. EST market close, Mattel's shares had finished regular trading up 1/8, or 1%, at 11 15/16.

Mattel blamed the poor quarter on The Learning Company, the software company that Mattel acquired for $3.5 billion last year. "The continued problems at The Learning Company are at the root of our disappointing overall performance," Barad said in a statement. Calling those results "unacceptable," Barad said she has agreed to resign.

"There's nothing I can say to gloss over the devastating effect The Learning Company has had on Mattel's bottom line," Barad told analysts in a conference call Thursday evening.

Mattel said The Learning Company posted a pretax loss of $183 million for the quarter and $206 million for the year, due mostly to a slowdown in CD-ROM sales and unfavorable pricing. Learning Co. revenue was also down 40%, to $165 million, compared with year-ago figures.

The world's largest toymaker said it lost $18.4 million, or 4 cents a share, in the fourth quarter, compared with a loss of $86.7 milllion, or 22 cents a share, a year earlier. Analysts surveyed by First Call/Thomson Financial had been projecting earnings of 25 cents a share in the latest quarter. The company had not been expected to announce earnings until next Tuesday.

Sales for the quarter were $1.77 billion, down from $1.82 billion a year ago.

Barad's resignation caps a tumultuous three-year reign. The company's stock has languished for much of her tenure as poor sales and earnings dogged the company. A former marketer, Barad came under fire for the perception that she spent too much time tending to the company's flagship toy, Barbie, at the expense of its other divisions.

Mattel's core domestic business has remained somewhat strong despite the problems at Learning Co. Barbie sales climbed 11% in the fourth quarter, while the Fisher-Price line, which includes the Sesame Street license, rose by a healthy 48% over year-ago figures.

Mattel's board will oversee the company's operations and will search for a new chief executive. In the meantime, the board appointed directors William D. Rollnick acting chairman and Ronald M. Loeb acting chief executive.

The company is also forming an office of chief operating officer to run day-to-day operations. That office will be composed of a cluster of current Mattel executives.

News of Barad's impending departure emerged Thursday morning amid speculation that the company would fail to meet already lowered earnings expectations. That speculation proved correct.

For the year, Mattel lost $86.35 million, or 21 cents a share, compared with earnings of $198 million, or 51 cents a share, in the same period a year ago. Sales for the year were $5.5 billion, down from $5.62 billion in 1998