The depressing headlines about the state of American education roll by one after another. "American high schoolers rank well below average in mathematics in comparison to their European counterparts." "High school graduation rate of 74 percent well below that of other developed countries." "70 percent of Americans cannot read and understand the science section of the New York Times." Everyone knows the problems with education, but no one agrees on what to do about it. The only research upon which educators universally concur is the crucial importance of instruction in a student's early years. And that is the arena Leapfrog Enterprises (NYSE: LF) has been operating in since 1995.
LeapFrog was born of necessity after California attorney Michael Wood went looking for an educational toy for his son. After finding none he developed his own prototype for an electronic toy that would teach phonics and writing, and be entertaining at the same time. In 1999 the LeapPad was introduced which went on to become the company's flagship product. The product received industry recognition and won the Toy Industry Association's first People's Choice Toy of the Year Award.
LeapFrog's educational entertainment products (aimed at children from 0-9 years old) began showing up on lists of America's best-selling toys, nestled among toy giants Mattel, Inc. (NASDAQ: MAT) and Hasbro, Inc. (NASDAQ: HAS) with their Hot Wheels, Easy Bake Ovens, and Barbie accessories. Although sold directly to schools, most LeapFrog sales come from big box retailers Toys "R" Us, Wal-Mart Stores, Inc. (NYSE: WMT), and Target Corporation (NYSE: TGT.
In 2002, with its educational toys being sold in 25 countries, LeapFrog went public with a listing on the New York Stock Exchange. Since being traded publicly LeapFrog has experienced a decade of turbulence. Leadership at the top changed over several times. The company went through boom and bust periods endemic with the toy industry. The LeapPad was officially retired in 2007 and a succession of replacement technologies were introduced as competitors elbowed into the pre-teen educational market.
By 2010 annual revenues had dipped below $350 million at LeapFrog, less than half the sales from just five years earlier. In 2011 John Barbour, an industry veteran with stints at Hasbro and Toys "R" Us on his resume, came on board as the fourth CEO since LeapFrog became a public company in 2002. Under his guidance earnings have rebounded and LeapFrog's market capitalization has gone past half a billion dollars.
The product line has expanded to include the Learning Path software system that delivers feedback from the child's performance with the LeapPad. The application can be downloaded on all available platforms. LeapFrog also excels in handheld educational gaming systems and is a leader in publishing e-books for young readers.
Barbour has also been energetic in expanding LeapFrog's products into other countries and cultures. The learning system is actively promoted to foreign markets as the easiest way to learn English. The company is not without its challenges, foremost among them being the weed-like proliferation of tablets and mobile devices which can offer much the same experience that LeapFrog does. But with strong name recognition and a nearly two-decade record of satisfied users, look for LeapFrog to keep hopping profitably along for the foreseeable future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.