Trouble In Toyland

The American International Toy Fair opened in New York City Sunday. For toymakers, the event isn't just fun and games. As Jeffrey Kofman reports, there's trouble in toyland.

Brace yourself for a brave new world of toys kids can talk to, and toys that can be programmed to talk to kids. Children are losing interest in traditional toys, so as toymakers unveil their latest offerings for the next Christmas season, all their hopes are in things electronic and interactive.

Mattel, for instance has created a toy that it says grows as the child grows.

"It's technology to us, but to a child, it's magic," says Neil Friedman, president of Fisher Price.

But that magic isn't translating into profits. Although 1999 was the industry's best year in a decade, with sales up almost nine percent, Wall Street has lost confidence in the country's two biggest toy makers.

How to explain profits up sales up stocks down? "Wall Street's a funny place," says Wayne Charness, a vice president at the Hasbro toy company

Both Hasbro and Mattel stock lost more than half their value in the last year, even though both companies showed healthy profits. At Mattel, CEO Jill Barad resigned earlier this month, after a disastrous acquisition of a computer software-maker that has been losing money.

"Mattel has had a very tough year and they are really the bellwether of the industry, and because you have the largest player falling from grace, players like Hasbro have been falling too," says Jill Krutick, entertainment and leisure analyst at Solomon Smith Barney

Winning over the skeptics won't be easy, because kids are outgrowing toys as fast as new ones arrive on the market. That leaves toymakers in constant scramble to stay ahead of the game.