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Mattel To Sell Software Unit

April 3, 2000

LOS ANGELES (AP) _ Mattel Inc. is putting its troubled Learning Company division up for sale, less than a year after the giant toymaker bought the software business to help step up its high-tech offerings.

The world’s largest toymaker said today that it has retained investment firm Credit Suisse First Boston Corp. to sell the money-losing Learning Company, which has been a burden to Mattel since it was acquired last May for $3.6 billion.

Problems with the Learning Company led to Jill E. Barad’s resignation in February as Mattel’s chairman and chief executive officer. She announced her departure after Mattel reported a steep fourth-quarter and year-end loss, mostly due to troubles with the software business.

Investors applauded today’s news. Mattel’s stock, which has been battered in recent months, rose 68.50 cents, or 6.5 percent, to $11.18 3/4 in morning trading on the New York Stock Exchange.

The Learning Company was bought as part of Mattel’s effort to tap the growing market for interactive toys.

The deal was supposed to immediately add $50 million annually to Mattel’s bottom line. The company instead lost $105 million in the third quarter because of a number of problems with the software division, including a loss of a key distribution deal and an unexpected high return of unsold products from retailers.

Its problems didn’t stop there. The Learning Company lost $183 million in the fourth quarter and $206 million for the year.

That put pressure on Mattel’s earnings. For all of 1999, Mattel lost $86.35 million, compared with earnings of $198 million in 1998. Sales for the year were $5.5 billion, down from $5.62 billion in 1998.

After Mattel reported its losses in February, the El Segundo, Calif.-based company said that it was reviewing entire operation of Mattel Interactive, the division which includes the Learning Company.

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