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Quick Hits: Mattel's Hot Wheels Heat Up

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Brief scrutiny of today's headlines.

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Hot Wheels are again hot.

The tiny autos, once a kid favorite, lost some of their appeal when production standards were cut in the early 1970s. Sales to the video-game generation continued to slide. But popularity is now rebounding, in part because the small cars give dads a chance to relive their childhoods while sharing an activity with their kids.

Mattel (MAT) now generates about $1 billion a year in revenue, and the little cars are a leader in the $2.3 billion US toy market. Maybe that's why its market capitalization currently outperforms GM's.

The toy began in 1967, when custom hot rods were popular in Southern California. Mattel wanted to cash in on the craze and hoped to develop a toy that would appeal to boys like Barbie dolls appealed to girls.

Mattel sought to make something that would stand out from the crude car models of the day. British competitor Matchbox, now also owned by Mattel, had nifty miniature cars with wheels that actually turned.

A Mattel designer came up with a prototype in about an hour, and rolled it across the desk to the boss, who proclaimed, "Now those are some hot wheels."

The cars have taken on every shape imaginable, including some that exist only in designers' minds.

Collectors now make up an estimated 25% of the market. At a recent convention of the faithful in Los Angeles, a collector paid $70,000 for a pink Beach Bomb model 1969 VW bus with a surfboard stuck in the back that never went into production, because it was too small for the track. Making the car pink was an unsuccessful bid to attract girls to the franchise.

Some see a solid future for Hot Wheels, because the cars create none of the angst engendered by Barbie's ridiculous bustline and frou-frou clothes. Heh - of course, there's sure to be someone offended by the sight of kids playing with teeny-tiny avatars of gas-guzzling and global warming.

Anyone interested in resurrecting Micro Machines (HAS)?
No positions in stocks mentioned.
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