Hasbro Inc

As one might expect, there are toys everywhere at the Pawtucket, R.I., headquarters of Hasbro Inc. A larger-than-life Mr. Potato Head stands in greeting outside. The lobby is festooned with original artwork made from such Hasbro board games as Scrabble and Boggle. Even a bathroom sports an embossed portrait of two Potato Heads holding hands.

But the business mood is hardly playful these days at America's No. 2 toymaker. Hasbro's revenues were down by $930 million, or 23 percent, last year, and off by another $11 million for the first three months of this year—traditionally, the toy industry's worst sales quarter. Profits, meanwhile, in the red by $144 million in 2000, were barely back in the black last year. To reassure skittish investors, CEO Alan Hassenfeld has ordered budget cuts of $100 million in a second round of cost cuts that will save Hasbro a total of $200 million by 2004.

Hasbro is also under increasing pressure to innovate. Hasbro's brands have scored classic hits nearly every decade since the 1920s—Tinkertoys in the '20s, Tonka trucks in the '40s, Play-Doh in the 1950s, G.I. Joe and Easy Bake Ovens in the 1960s, Nerf balls in the 1970s, and Trivial Pursuit and Pictionary in the 1980s. In the '90s, Hasbro found itself without a hot new classic—and toward the end of the decade, stuck with a hodgepodge of more than 50 separate Web sites that weren't reaping any revenues or new insights about the people buying Hasbro toys.