TOY COMPANY'S CHAIRMAN IS STEERING TOWARD RECOVERY.

Byline: Brent Hopkins Staff Writer

WOODLAND HILLS - Though he runs a toy company for a living, Robert Solomon sees himself as a surgeon.

When he bought Applause back from foreclosure 18 months ago, the storied company he had owned years earlier was nearly dead. Saddled with a debt load of $100 million and its licenses in disarray, the company had drastically lost focus before the 47-year-old Solomon stepped in once again as chairman and chief executive officer. He took some radical steps, slicing the work force and reinventing Applause's strategy, but his course of treatment appears to have paid off.

Solomon's prognosis for Applause: a speedy recovery followed by marked improvement.

``In 2001, I had to stop the bleeding,'' he said. ``This year, I had to stabilize, where I added the master license of Disney and Nickelodeon. And in 2003, we'll see the biggest growth this company's seen in five years.''

To do so, he's completely changed the face of the company he joined two decades ago as a salesman and rejoined when his start-up, Dakin, was purchased by Applause in the early 1990s. Rather than relying heavily on movie tie-ins, as the toy maker did with an ill-fated ``Star Wars'' deal in 2000, he's prescribed a more steady base, adding big name licenses with long-term potential. In addition to the Disney and Nickelodeon lines, he's also reacquired the rights to Snoopy and the ``Peanuts'' characters, and picked up ``The Simpsons'' and a license to 82 National Collegiate Athletic Association teams' mascots and fight songs.

Solomon bets this new stable baseline will allow the company to see a 25 percent increase in sales next year.

``That gives them inner stability,'' said Stevanne Auerbach, who follows the toy business with her Web site, DrToy.com. ``If there are evergreen products, they tend to sustain the company and maintain growth. If a parent enjoyed having a Snoopy, they're more likely to want to pass it on now that they have kids.''

With the bottom line fattening up, Solomon can get back to the task of rebuilding his work force. Since he took over from the previous owners, he slashed 225 jobs, halving the head-count through cuts mainly overseas.

``It was painful, but I had to focus on saving 200-odd jobs, versus the ones that had to go by the wayside,'' he said. ``I was rebuilding the company, and I had to change the model. It was the least enjoyable thing to do.''

If sales shape up as expected, Applause should add 50 jobs in 2003, bringing its work force into the 275 range. Though this is well below its peak of 1,100 workers in the early 1990s, Applause is still in far better stead than had he not intervened last March.

`They would have disappeared and other people would have picked up the licenses,'' said Chris Byrne, an independent toy consultant in New York. ``Other companies would have come in and cherry-picked the assets they wanted, which would have been too bad, because the Applause brand name still has a lot of equity with consumers. That was great they could save that.''

Sales should see a boost from a new fall line, including plush versions of ``Lilo & Stitch''; characters from ``Lord of the Rings: The Two Towers''; and the revamped ``Peanuts'' line, which Applause created, but let lapse under its former management.

``I don't see anything being hot this year, but I see some things being very warm,'' he said. `` 'Lilo & Stitch' and 'Lord of the Rings' will do well, but I'm not counting on them as saviors. The American public is fickle, and every weekend, there's a new blockbuster. Because the movies aren't lasting, the product line won't last like the original 'Star Wars' or the original 'Batman.' There will be exceptions, but I'm not banking on it.''

Applause's turnaround is even more remarkable when compared with the toy industry as a whole. Mattel, a far larger, publicly held company that's also been retrenching, saw sales grow only 2.9 percent last year. Malibu-based Jakks Pacific, a smaller toy maker whose staff levels are closer to Applause's, enjoyed a 12.7 percent climb in revenues last year.

Beyond 2003, Solomon hasn't announced his plans, but he wants to proceed slowly.

``I like being in this business,'' he said. ``I feel comfortable and safe back in the saddle here. This time around, I think I've got the wisdom and experience I learned the last two times. I'm not in a hurry, I want to build a solid, safe company.''

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2 photos

Photo:

(1) - Robert Solomon

(2) Robert Solomon, chairman and CEO of Applause, has spent the past 18 months bringing the Woodland Hills-based toy maker back to a position of strength in the marketplace.

Michael Owen Baker/Staff Photographer