LeapFrog Running on Tablet Power

If the recent Pew Foundation study showing e-reader and tablet ownership
doubling in December has you contemplating investment in a tablet maker, you
might want to take a closer look at LeapFrog Enterprises (NYSE: LF ), maker of
the LeapPad. The children's educational toy maker recognized early that
e-readers and tablets were being used more by consumers for entertainment, and
it came up with a must-have tablet of its own for kids. Unlike Amazon 's
(NASDAQ: AMZN ) Kindle and Barnes & Noble 's (NYSE: BKS ) Nook, whose sales
were largely fueled by price cuts, demand for the LeapPad was so high, many
parents were willing to pay more than the suggested retail price to get one. A
holiday fluke, you say? How about a continuation of the popularity the tablet
has enjoyed since its release last summer? Back in June, presale units of the
LeapPad sold out within two weeks. It's not difficult to see why the colorful
learning systems for toddlers and pre-tweens have been hits with kids and
parents. Although the tablets don't offer much in the way of hard drive, they
do include a built-in camera and video recorder, and interactive features for
e-books, games, art projects and music. Any kid who has watched an adult play
games or surf the Web on a smartphone probably will have no trouble adapting to
the new technology. That's something parents can feel good about along with
the fact that they can now reclaim their iPad. The LeapPad, which uses
LeapFrog's proprietary operating system and apps, has helped resurrect
LeapFrog's ailing shares. Back in early August, the Emeryville, Calif.-based
company's shares were trading in the $2.65 range. More recently the shares
have been trading at around $5.50, a lot closer to their 52-week high of $6.18.
Toy manufacturers Hasbro (NASDAQ: HAS ) and Mattel 's (NASDAQ: MAT ) Hit
Entertainment, which have penned agreements with the toymaker to distribute
their digital entertainment on the platform, also might see some upside. VTech
Holdings (PINK: VTKLY ) also makes an educational tablet for kids called the
InnoTab Interactive Learning System. However, VTech's telecom and hospitality
products could put a damper on the company's overall revenue and earnings
growth. When LeapFrog announces full-year earnings in February, investors will
be looking for signs that demand still is strong. If the parents who couldn't
get the LeapPad this past holiday still are in the market, that's encouraging.
If those parents still are willing to pay the full retail price for the tablet,
well that's even better. As of this writing, Cynthia Wilson did not hold a
position in any of the aforementioned stocks.