Samsung Takes Aim at LeapFrog

This holiday season is about to get even more competitive for LeapFrog Enterprises

The company behind the popular line of electronic learning toys was hoping to make a big splash this season with LeapPad Ultra. The $149 device is the third generation of its kid-centric tablet, offering more features than its first two restricted incarnations. 

LeapFrog was already going to face heightened competition from with its now-cheaper $139 Kindle Fire and the critically-acclaimed-yet-obscure Fuhu Nabi. Now LeapFrog has Samsung gunning for its business. 

The smartphone and tablet giant announced on Monday that it would be rolling out Galaxy Tab 3 Kids. It's the guts of its popular 7-inch tablet, but made more child-friendly with a rugged exterior and an option that kicks into parental controls, a restricted app store, and a kid-friendly interface. At $230, it's $30 more than the regular version, but Samsung does help make it more valuable by bundling several games and educational programs with the device.

Analysts were already getting nervous about LeapFrog's prospects this time around. The original may have been a hot seller two years ago, but as conventional tablets get cheaper, it's been harder for LeapFrog to stand out beyond its proprietary software.

Two analysts have slashed their price targets on LeapFrog in recent weeks, largely on the dimming prospects for the LeapPad 2 Power and the LeapPad Ultra. Parents may see things differently, especially now that LeapFrog's products are making the cut on many of the tastemaker lists of hottest toys this upcoming shopping season. However, Samsung now gunning for this market -- a move that will even find the new tablet sold at Toys R Us -- is something that can't be ignored.

It was already going to be a challenging season for LeapFrog. Amazon's move to price its Kindle Fire HD as low as $139, along with its tempting FreeTime Unlimited offering -- a subscription-based edutainment platform for kids -- will make it a big player here. Samsung's new gadget with its protective bumper case also won't be ignored. 

However, a lot of this competition is already priced into the shares that have fallen 27% since recent summertime highs. Analysts still see LeapFrog growing its revenue this critical holiday shopping season. Samsung may make it harder by giving parents another reasonably priced option, but LeapFrog remains the brand to beat when it comes to kid-centric tablets.

If anything, with Amazon and Samsung now having kid-centric tablets or tablet services on the market this year, it wouldn't be a surprise if LeapFrog's low price attracts potential acquirers that can build on LeapFrog's trusted brand and award-winning software franchise.

Competition may be the best thing that ever happened to LeapFrog shareholders.

Source: LeapFrog Enterprises.

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