Third-quarter sales for the period ended September 30 rose 12% at LeapFrog Enterprises, to $203.9 million, and net income increased 25%, to $33.4 million. Sales from all three of LeapFrog's segments—consumer, education and training, and international—rose in the quarter, but the 4% increase, to $167.1 million, in the consumer segment, was below expectations. The sales performance of the consumer segment worried investors, causing a drop in LeapFrog's stock price.
Company CEO Mike Wood said the slower-than-expected growth was caused by a delay in orders from retailers and competition from the new PowerTouch system introduced by Mattel. LeapFrog has sued Mattel, charging that its PowerTouch technology infringes LeapFrog patents. Wood said LeapFrog expects sales in the fourth quarter to exceed earlier forecasts.
Third-quarter sales in the education and training segment, which includes its SchoolHouse division, rose 36%, to $7.3 million. International sales rose 86%, to $29.5 million.
For the first nine months of the year, LeapFrog reported a 102% gain in net income, to $28.5 million, on a 23% increase in revenue, to $348.6 million.
To boost its international sales, LeapFrog has teamed with Oxford University Press to adapt the publisher's English as a Foreign Language program, Let's Go, to LeapFrog's LeapPad learning system. LeapFrog plans to launch the series for the LeapPad platform in markets across Asia, Europe and Latin America.