Toy story III

PAWTUCKET, R.I. Alan Hassenfeld is turning to two oldsters to wookids and revive Hasbro Inc.'s profits. His allies: G.I. Joe and Mr.Potato Head.

Hassenfeld, the toymaker's chief executive, decided to takeadvantage of the steady sales of Hasbro's classic toys, which alsoinclude Monopoly games and Play-Doh, and rely less on fad attractionslike Pokemon trading cards as the company last year had its firstloss in at least a decade.

"What we're seeing now is a new Alan," said money manager JohnMiller of Ariel Capital, Hasbro's largest shareholder. "He's becomemuch more conservative."

Some investors are skeptical that Hassenfeld can execute therestructuring, Hasbro's third in as many years and an abrupt changefrom the CEO's push the past few years into interactive software.After losing more than $200 million on that business, Hassenfeld soldit in December to French video-game maker Infogrames EntertainmentSA.

Hasbro last week reported a first-quarter loss from operations of$24 million, compared with net income of $15.1 million a yearearlier.

"Things couldn't get much worse," said analyst Michael Novak ofFrontier Capital Management, which holds 1.59 million shares. "Ifthey don't fix it, the company will get bought."

Shareholders next month will vote on a resolution that urges theboard to arrange a "prompt" sale to the highest bidder.

Hassenfeld wasn't available for an interview, spokesman WayneCharness said.

Just a year ago, Hassenfeld was at his peak. The 52-year-oldexecutive came out of 1999 with three top-sellers, Furby, Pokemoncards and action figures based on the movie "Star Wars: Episode I."The hit toys helped increase U.S. toy-industry sales by 9 percent andboosted Hasbro's profit as much as sixfold.

In 2000, demand for Furby, Pokemon and Star Wars toys faded fasterthan expected, and Hasbro was left with more than $100 million inStar Wars inventory. The video-game and Internet businesses drainedmoney. Sales of basic toys slumped, and profit plunged 80 percent and84 percent in the second and third quarters, respectively.

While accepting responsibility for Hasbro's woes, the scion of thefamily that founded the Pawtucket, R.I., company in 1923 isdetermined to keep Hasbro independent, spokesman Charness said.

The CEO pledged to make Hasbro smaller, but profitable, this year.Basic toys and long-term licenses like those from Disney and"Jurassic Park" movies will generate $2.5 billion in revenue, anamount that will let Hasbro break even each year. Sales fromtemporary fads or blockbuster-movie licenses would be icing onHasbro's cake.

To boost sales, Hassenfeld is updating G.I. Joe by equipping the37-year-old action figure with mountain climbing and scuba gear, andwill advertise the product on television for the first time in atleast six years.

The CEO hired a cartoonist to start a comic strip in July based onMr. Potato Head, a toy introduced in 1952, and may decide to makemovies or TV shows based on other top brands, such as the Clue boardgame, said Lehman Brothers analyst Felicia Rae Kantor.

Hasbro won't rely on just classics. The company aims to spark acollectibles craze among girls with Shoezies, tiny shoes inspired bythe runways of Paris and Milan that fit on fingertips. The TigerElectronics unit is introducing more robotic pets, including Shelby,an interactive clam that is friend to Furby.