Leading toymakers not having much fun these days, but new CEOs are hoping to change that

NEW YORK -- It's been a nothing short of a miserable year for Mattel and Toys R Us. Once the undisputed leaders in the toy industry, they've lost market share and struggled with slumping sales and profits.

But analysts say these companies, led by savvy new CEOs, may soon see business turn around.

''There's been a lot of talk about the things that went wrong at these companies recently, but I would look ahead. It could be very positive,'' said Jim Silver, editor of The Toy Book, a New York-based trade publication.

There no doubt that kids love toys -- industrywide sales totaled more than $23 billion last year up about 8 percent from 1998. But the kind of toys kids want and the places where their parents shop have changed in recent years, and both Mattel and Toys R Us found themselves struggling to keep up.

Much of Mattel's troubles grew out of its efforts to appeal to today's computer-literate children.

Mattel, the world's largest toymaker, is known for traditional toy brands including Barbie, Hot Wheels and Fisher-Price. But in 1999, the company realized it had fallen behind in interactive toys and had to get into the market fast.

So it purchased the popular software maker The Learning Company for $3.6 billion last May, expecting the new division to immediately add to its revenues. Instead, the Learning Company lost millions and became a drag on Mattel's earnings; it's now in the process of being sold.

The division's troubles led to the departure of Mattel CEO Jill Barad in February. This past week she was replaced by Robert Eckert, who left Kraft Foods to lead Mattel.

Finding a new strategy for the high-tech market will be one of Eckert's top priorities. But Eckert also knows he can't ignore Mattel's best-known brands, the backbone of the business that has come under some sales pressure in recent years.

''We'll certainly focus on our core brands, but we'll try and embrace the emerging technologies,'' Eckert said in an interview with The Associated Press. ''We'll be striving for that delicate balance.''

Analysts seem convinced that Eckert is up to the task of turning Mattel around and keeping it the No. 1 toymaker. While at Kraft, he gained the reputation as a marketing genius who brought the nation's biggest packaged food company into modern times by cutting prices and developing innovative products.

Investors cheered Eckert's appointment, pushing Mattel's stock up sharply in the past week. A number of investment firms, believing that improved earnings were ahead, upgraded Mattel's stock.

''Toy companies have to move fast. They need to respond to changes in the market place,'' said Chris Byrne, a toy industry consultant in New York. Eckert ''sounds like he can do that. He had to deal with the changes in supermarkets and the growth of price clubs, and how to make Kraft work in those stores.''

Toys R Us, meanwhile, is also in the process of rethinking how it does business, from the products it sells to how its stores are designed.

Just a few years ago, Toys R Us reigned as the No. 1 toy retailer, but it was dethroned in 1998 by the giant discounter Wal-Mart. Toys R Us has also lost ground to online retailers like eToys, which offer a convenient way to shop and a broader range of merchandise.

To keep Wal-Mart and other discounters from stealing more market share, Toys R Us has had to be more aggressive in its pricing strategy, putting more items on sale and offering more promotions.

It is also overhauling its stores, making them brighter and easier to navigate. It has added sections that reflect new trends in the industry, such as one dedicated to interactive toys.

In its battle against rival cyberstores, Toys R Us is focusing more attention on its Web unit, www.toysrus.com, adding an experienced staff and building warehouses to expedite shipping.