[jmcclain19]

BTW - here is something Business Week did on Topps last week

http://www.businessweek.com/bwdaily/...2904_db016.htm

What's in the Cards for Topps?
The fabled maker of baseball cards and bubble gum has struggled of late. Some analysts see a sale in the offing


Baseball may be the national pastime. But as Topps (TOPP ) has discovered, having a close association with one of America's great passions is no longer enough to guarantee strong growth.

It has been a disappointing year for the legendary maker of sports cards and bubble gum. Its 2006 first-quarter results, posted June 28, showed a 10% drop in net sales year-over-year, from $88.1 million in last year's first quarter to $78.9 million this year.

What's in the Cards for Topps?
The fabled maker of baseball cards and bubble gum has struggled of late. Some analysts see a sale in the offing


Baseball may be the national pastime. But as Topps (TOPP ) has discovered, having a close association with one of America's great passions is no longer enough to guarantee strong growth.

It has been a disappointing year for the legendary maker of sports cards and bubble gum. Its 2006 first-quarter results, posted June 28, showed a 10% drop in net sales year-over-year, from $88.1 million in last year's first quarter to $78.9 million this year.

BOOM AND BUST. Tracy Hackler of Beckett Media, which publishes magazines on sports collectibles, thinks a sudden influx of investment-minded card collectors in the 1980s also is to blame. They quickly abandoned collecting when they sensed poor profit opportunities, and that hurt sales, Hackler figures. "For the 50 years [prior to the boom], collecting cards was almost entirely a pursuit of passion," says Hacker. Then, in the '80s, "it became a get-rich-quick scheme. The number of manufacturers and cards multiplied, then almost as quickly as those people came in, they left."

Analyst Dennis McAlpine of McAlpine Associates agrees. "There were too many competitors making too many cards available, so the value of cards in the aftermarket started going down, the prices started going down, and collectors started getting out. Only kids were left, and then the cards were probably overpriced for the kids."

Yet, Beckett Media's Hackler thinks the market may still rebound. "Kids are a definite growth market for trading cards. You also have sports fans in general who may have never collected. It's just a matter of finding something that resonates with them."

BRIGHT SPOTS. Jefferies analyst Routh believes Topps has some valuable brands and trademarks that it could license to partners such as sports-equipment makers, creating new revenue streams. He cites the well-known Topps brand as a crown jewel. "Licensing it to various manufacturers would be a noncapital-intensive, risk-averse way to generate revenue." Licensing has worked well for companies like Marvel and Playboy (PLA ), Routh adds.

Topps's entertainment divisions have made some innovative and successful moves in recent years, most analysts agree. Its WizKids unit, acquired in July, 2003, has performed well with the sale of collectible strategy games. Its nonsports card sales, including Pokémon, Star Wars, and Operation Desert Storm cards also have helped to make up for some of the sports-card shortfalls.

In October, 2001, Topps launched etopps.com, where people buy only the cards they want from among as many as 2,000 offered each week at prices ranging from $3.50 to $9.50. Buyers keep the e-cards in their portfolios, and can play various online games against other players, either just for fun or using cards as bets.

HOCKEY BOOST? Analyst McAlpine says so far, etopps is more or less breaking even, but Routh believes that making card-buying interactive and more exciting is a good way of adjusting to the new market environment and could eventually increase the market for sports cards.

Topps could also get a boost from the return of hockey and the World Baseball Classic, a baseball tournament of teams from around the world to be held next March.

Routh points out that Topps has virtually no debt, with $92.9 million in cash and assets on hand. He believes the entertainment side could do well on its own. Barrett cites the Pokémon tide of five years ago, which provided Topps with a quick shot in the arm.

"STILL FUN." Although Topps and its products have been staples in American culture for decades, its bubble gum has been hit by increasing concerns about health issues and retailer consolidation, and its entertainment products are hurting in the wake of ever-increasing competition for play time. Still, "it's not your father's trading-card business any more," says Beckett Media's Hackler. "It's still very cool, and it's still fun, it's still an important part of Americana."

With a few strategic adjustments, such as expanding its online entertainment alternatives and leveraging its long history and trusted brand name better, analysts agree that Topps may still have a prosperous future.