Staff Reporter

As Mattel Inc. released disappointing fourth-quarter earnings, much of the talk was about the toy maker's problems at the retail level. But part of the trouble may be more basic:

Girls are giving up their Barbie dolls earlier than ever.

Toy industry analysts and child psychologists say that as children feel more pressure to grow up faster and faster, they also are giving up their traditional toys, such as Barbies, Matchboxes and Hot Wheels, at an ever-earlier age.

All those toys are made by Mattel.

"Kids are getting more sophisticated, and their goal and their outlook is more adult-centered than child-centered," said Dr. Dee Shepherd-Look, a clinical psychologist and Cal State Northridge professor specializing in child psychology. "They're taking on the accoutrements of junior high, then high school, then adulthood more quickly."

In years past, girls played with their Barbies until they were 12 or 13, but today many 8- and 9-year-old girls are forsaking their Barbies and moving on to wearing jewelry, styling their hair and playing computer games, said Shepherd-Look.

Jill Krutick, an analyst with Salomon Smith Barney, agreed that the world's largest toy maker has had a hard time dealing with the changes in children's toy-playing habits.

"I think the primary issue is that the demand curve for traditional toys is aiming down," she said. "The number of years (children) are playing with traditional toys seems to be contracting. It's been a real challenge (for Mattel)."

That challenge was made clear in the fourth quarter ended Dec. 31, with Mattel reporting net income of $63.8 million, compared with $195.1 million for the like period a year ago.

Sales of Barbie dolls fell 14 percent in 1998, following two years of double-digit sales growth.

More encouraging was the company's full-year net income of $332.3 million, up from $285.2 million a year earlier. But sales for 1998 were $4.78 billion, down from $4.84 billion.

Much of Mattel's problems last year came from the scaling back of inventory at Toys 'R' Us, the nation's largest toy retailer. The cutback ended up costing Mattel about $250 million in lost sales last year.

But changing play habits are perhaps a bigger long-term hurdle. The company last year began taking steps to try to keep customers until they're older including the acquisition of Learning Co., a Cambridge, Mass.-based maker of computer games and educational software.

Analysts characterized the move as an effort by Mattel to broaden its appeal to older children. (One of Mattel's most successful products has been "Barbie Fashion Designer," a CD-ROM that allows children to design clothing on their home computers.)

Because older children are more likely to spend time in front of a computer, the Learning Co. acquisition could help Mattel appeal to kids who have outgrown traditional toys. Simultaneously, the deal is expected to increase Mattel's appeal with parents eager to buy toys and games they view as educational. Learning Co. makes such popular educational titles as the geography-oriented "Carmen Sandiego" series.

"Barbie may be teaching kids how to spell, do math more educationally oriented products with Barbie as a strong performer," said analyst Margaret Whitfield of Tucker Anthony.

At this week's American International Toy Fair in New York, Mattel and Santa Clara-based computer chip maker Intel Corp. plan to introduce the first two products in their Intel Play line.

The Intel Play X3 Microscope will allow children to magnify and display microscopic objects on their computer screens, and then manipulate them. The Intel Play Me2Cam will allow children to capture images of themselves and place them into an imaginary world on their computers. The toys are scheduled to hit toy store shelves this fall and will retail for about $99 apiece.

Glenn Bozarth, a Mattel spokesman, said the company also will unveil 35 new titles in the Mattel Media line of CD-ROMs and other computer products a line that generated $100 million in sales last year. "We've known for some time that expansion into interactive was the way to go," Bozarth said.

Bozarth said Mattel has also made other moves to attract older children. One such move was its $700 million acquisition last June of Pleasant Co., maker of the American Girls line of historical dolls. Those dolls, he said, appeal to girls in the 7-to-12 age range, as opposed to Barbie, which primarily appeals to those in the 3-to-8 age range.

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