SM: In the next 10 years, do you see LeapFrog morphing into more of an online company as opposed to a toy company?
JK: I think we will be more of a content company, and by that virtue, I think we will be more online.
SM: At some level these chips may not be necessary.
JK: The advantage for the chip is portability, but even in the future we will have network access in the car. People can play online from some kind of device, a portable Xbox controller or Leapster Wireless.
SM: The strength of LeapFrog is still more in the content side than it is in the chip.
JK: Definitely. We have had to build these chips and that was part of the origin of why we missed the web because the guys who built the ASICS were very clever at designing the chip to meet the price requirement of a $49 learn to read device. That is still an important thing.
SM: Since you brought up the price question, one of the thoughts I had was that you had a lot of aging product lines. Have you tapped into the India, China, Africa markets with aging product lines?
JK: We are doing a lot of sourcing, we do a lot of manufacturing, and we are doing more engineering, design and content in China specifically. We are having some services provided right now in the Philippines. We have not yet done India.
SM: What about as end markets?
JK: In China we have a marketing and sales office. We have not hit India yet, we are discussing distributorships in India. I suspect that will happen.
SM: Your old products can still be sold in those markets.
JK: We have done some of that. One of the things we have been attentive to is not having too many old products on hand. We do not want to support them or have them on the balance sheet. At the end of the day what we prefer to do is sell new products to places like India and China. So far so good, although China has been a slower process because our items are expensive for the typical Chinese family.
SM: I think that is where you could take the older products and sell them cheaper.
JK: That is a bit of a weakness for us. We are almost akin to Apple in that respect. We charge a certain price, and we know parents are willing to pay a high price for education of their kids.
SM: In the first world, certainly.
JK: Even in the first world it is a stretch sometimes.
SM: What about Europe?
JK: We do sell a lot there. Principally in the UK and France; some in Spain and Germany.