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No. of Recommendations: 7

I "stumbled" upon LeapFrog and this board yesterday while doing some window shopping at Hasbro and Jakks. These are my observations and summary of the postings on this bbs and in the news, and I would welcome any feedback from the community. I am a new student in investing and what I hope to achieve here is a simple descriptive page (non-financial) for myself on why I would want to invest in LF, btw, I am LTBH.

a. Leap Frog is a relatively new company which IPOed in 2002.Their products are primarily educational toys and games targeted at toddlers to eighth grade kids. They are most successful from kindergarden to toddlers. Case in point, today, 1st March 2004, they are in 5 out of the top 25 toys & games from Toyrus top seller list ( ). More interestingly, they dominate 9 out of 25 from the same list under the Activities & Learning category.

b. LF's general competitors include Mattel, Hasbro and Jakks. In my view, there is a real bruising fight brewing between Toy Biz(Marvel) series of toys (Spiderman, Fantastic 4 , Hulk etc) and Jakks's Anime series (Dragonball, Yu Yu Hakusho) and Hasbro's (Beyblade, Starwars, etc). LF is in a good position because of its focus on educational toys, FIsher Price is the closest competitor.

c. As a growing company, I suspect LF is also learning along the way, challenges like Scalability and managing inventories and cash flows are real issues. For example, they had issues with meeting demands for Leapster. They recently elevated the CEO & Founder Mike Wood to Chief Vision Officer. The then-chairman Kalinske resumes his role as CEO. And they brought in a Fisher-Price Brand & Mkt EVP Jerry Perez to lead as President. In my opinion, this is a good sign that the executive team recognizes the need for better brand marketing expertise, especially if it's from its closest competitor.

d. Downside & Risks

* Shareholder dilution ( have not done enough reading, can someone comment ? )

* Lawsuits. Since it's IPO, LF has been embroiled in lawsuits ranging from patent infringements ( to alleged financial misrepresentation ( , , and others (

* While the company is debt free, The Free Cashflow (TTm) provided by of 15.39M is low. As I am cash-flow-statement challenged, can someone comment on this ? Using 15.39M, the EV/FCF is 1400/15.39 is 91, compared to 10 for Mattel and 12 for Hasbro and 18 for Jakks.

e. Long Term. I think LF's potential is outside of N.A. Parents are more inclined to spend on kid's educational toys in Asia, especially if the toy is deemed safe and from a branded company. So far, LF does not have a big brand presence in Asia, to me, this is the logical step for growth.

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