Profile: LeapFrog Enterprises Inc (LF)

LeapFrog Enterprises, Inc. (LeapFrog), incorporated in 1995, designs, develops and markets technology-based learning products and related content for the education of infant through grade school children at home and in schools around the world. LeapFrog has developed a number of learning platforms, including the LeapPad Learning System, Leapster, Tag reading system, Clickstart, and Didj, that support a library of software titles. In addition, LeapFrog markets a line of educational toys that do not require the separate purchase of software. These learning toys are targeted at young children, from infants to five year olds. Its products are available in six languages and are sold globally through retailers, distributors, directly to consumers via the leapfrog.com webstore, and directly to schools. LeapFrog organizes, operates and assesses its business in two primary operating segments: United States and International.

The Company’s Tag reading system (Tag), introduced worldwide in 2008, is a pen-based reading system that leverages the technology of optical hardware and optical character reading software. The Tag reading system focuses on fundamental reading skills and offers a library of interactive books based on both children’s classic book titles and popular licensed characters, such as Dr. Seuss’ Cat in the Hat, Disney Princess, and Nickelodeon’s SpongeBob Squarepants. The Company’s LeapPad learning system (LeapPad) product includes devices that introduce basic vocabulary and reading concepts for preschool and kindergarten children through music, talking characters, engaging narration and interactive play, and that can also be used to reinforce learning English as a second language.

LeapFrog produces educational gaming products primarily for children ages 4 to 12 years old. During 2008, the Company introduced the Leapster2 platform, a Web-connected version of its Leapster handheld, which connects to the LeapFrog Learning Path. It also launched five Leapster software titles, including Star Wars: The Clone Wars and Disney’s Wall-e. Its Leapster L-MAX, a television compatible version of the Leapster platform, has been phasing out in the United States and some international retail markets in 2008. LeapFrog introduced an educational gaming line, Didj Custom Gaming System (Didj) in 2008. Didj is a Web-connected handheld device that allows for customization of curriculum and game play. The Didj software library contains approximately 10 titles, including some licensed content, such as LucasArts’ Clone Wars, and Hannah Montana, by Disney.

In October 2008, LeapFrog introduced the Crammer Study and Sound System (Crammer), a hybrid music player and study device. Targeted at kids 8 to 12 years old, the Crammer is an electronic study device featuring custom flash cards, on-board games and free downloadable educational content, all playable while listening to music. The Company’s Learning Toys help develop motor skills, color, and sound and letter recognition for infants and children through age five. In 2008, the majority of its Learning Toys sales came from three product lines: the Fridge Series, a line of magnetic toys designed for preschoolers and kindergarteners that teaches letter names, letter sounds and learning songs: the Learn and Groove Series, led by the Learn and Groove musical table which features bilingual musical learning toys, and Pre-school Games, a line of fast-paced handheld learning games.

United States

The United States segment is responsible for the development, design and marketing of electronic educational hardware products and related software, or content, sold primarily through retail channels and through the Company’s Website in the United States. The Company markets and sells products directly to national and regional mass-market and specialty retailers, other retail stores and distributors and school-related distributors and resellers. LeapFrog also sells products through its online store and other Internet-based channels. The United States segment represented approximately 79% of LeapFrog’s consolidated net sales during the year ended December 31, 2008.

International

The International segment is responsible for the localization and marketing of electronic educational hardware products and related software originally developed for the United States, sold primarily in retail channels outside of the United States. The Company markets and sells products to retailers outside the United States through various distribution arrangements. It has sales offices in Canada, France, Mexico and the United Kingdom. LeapFrog also maintains various distribution and marketing arrangements in countries, such as Australia, Japan, Germany and Korea. Its International segment represented approximately 21%of its consolidated net sales in 2008.

The Company competes with Mattel, Inc., Hasbro, Inc., Vtech Holdings Ltd., Sony, Microsoft and Nintendo.