LeapFrog 2007 Annual Report Download - page 9

PART I
Item 1. Business
LeapFrog designs, develops and markets innovative, technology-based learning products and related
proprietary content for the education of infant through grade school children at home and in schools around the
world. Our goal is to create educational products that kids love, parents trust and teachers value.
Founded in 1995, LeapFrog has developed a number of learning platforms that come to life with a broad
library of software titles, covering important subjects including phonics, reading, writing, and math for grade
school children. In addition, we have created a broad line of “stand-alone” learning toys that do not require the
separate purchase of software and are generally targeted at young children—from infants to grade school age
children. Our products are sold through retailers, distributors, directly to consumers at our web store and directly
to schools. LeapFrog’s products are available in six languages at major retailers globally.
LeapFrog organizes, operates, and assesses its business in three primary operating segments: U.S.
Consumer, International and School.
Our Strategy: A New LeapFrog
Beginning in July 2006, we conducted a strategic review of our business. Based on the findings, we have
begun implementing significant changes designed to reestablish us as a growing, profitable and innovative
company that delivers consistent financial performance. The primary themes from this review are:
•Retaking the reading market. Our strategy is to leverage our brand strength with parents and teachers,
and to re-establish a leading position in this market, which we estimate to be approximately $1 billion in
the United States alone. Toward that end, we are planning to introduce successor products to the
LeapPad line in 2008.
•Strengthening our portfolio of products. We are rebuilding our product offering for infants to grade
school children. We are building a broad product portfolio including: reading products, educational
gaming and learning toys, all with content designed and tested by educational experts. New products are
designed to meet minimum profitability hurdle rates and are built to deliver better margins. We expect
that in 2008, a substantial portion of our sales may come from products introduced in late 2007 and
2008.
•Providing web connectivity for all core products. Given current trends and the competitive environment,
we believe that web-enabling our age-appropriate products is expected by our consumers. We believe
that web connectivity enhances the play and learning value of our products by expanding game play on
our educational gaming systems, providing learning opportunities on reading systems, and offering a
system of shared rewards across our product line. Additionally, web connectivity of our products is
critical to establishing the LeapFrog Learning Path, an online application that communicates each
child’s progress to the parent and the child on his or her “learning journey.” Some products, particularly
learning toys designed for infants and toddlers, are likely to remain as stand-alone products in the near
future. Today’s lifestyles all around the world are increasingly web-centric: therefore it is essential that
we design, develop and market our age-appropriate products accordingly.
•Refreshing the brand. The LeapFrog brand remains one of the strongest in its category, but we are
taking steps to more broadly differentiate it. We believe that the LeapFrog Learning Path will provide a
technological advantage, build on our educational credibility, and will be a core aspect of our
web-connected product strategy. The LeapFrog Learning Path application will provide a unifying
communication structure as we execute a brand plan that underscores our leadership in educational
technology products, improves our retail presence, and extends our brand reach through our
communications, packaging and learning content.
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