Lego Adrift in Space

Ask any red-blooded American male (from the pre-Nintendo generation) what toys he remembers playing with as a lad, and the answers are almost certain to include Lincoln Logs, Matchbox cars, and Legos produced by Hasbro (NYSE: HAS), Mattel (NYSE: MAT), and Lego, respectively. These toys are timeless classics, each set nearly impossible to wear out and capable of enriching the lives of multiple generations.

If only this were true of the toys' creators.

Take privately held Danish toymaker Lego, for example. The company recently posted a net loss of DKK 1.4 billion for 2003 (roughly $230 million), blaming ill-conceived strategic moves to sell toys based on popular films and books.

But the company's boondoggles aren't limited to Lego versions of Disney (NYSE: DIS), Star Wars, and Harry Potter merchandise. The company also became enamored with America's latest Mars exploration project, and is selling a Lego-based model of the Spirit Mars rover.

At $90 a pop, the Lego rover is not likely to attract many budget-conscious parents. Actually, it is hard to imagine who exactly would be interested in paying nearly a hundred bucks for Legos. The company itself expects to only sell a few million dollars worth of the rover sets -- hardly worth the effort for a company with more than $1.5 billion in annual sales, even if the sets are more profitable than ordinary Legos.

Simultaneously, the company appears to have fumbled a chance to capitalize on a much simpler marketing effort. The real Spirit rover (the one actually on Mars), as well as its companion rover, Opportunity (due to land on Mars on Saturday), contain three Lego bricks securing a DVD bearing the Lego trademark. Surely, Lego had to ante up to get those promotional items placed aboard the high-profile vehicles. Yet, the company has no plans to use this ultimate example of "product placement" in its marketing efforts.

In short, Lego's product development and marketing departments both seem lost in space. Perhaps the company should take a page from the playbook of fellow toy maker and Motley Fool Stock Advisor pick Hasbro, which over the past few months has reversed its own forays into selling whiz-bang products and refocused on its core brands. If it was not too late for Hasbro, it's probably not too late for Lego. After all, neither company's products became classics by accident.

Rich Smith does not own shares in any of the companies mentioned in this article, but he has used products made by each. Moreover, with a new daughter living in his house, he expects to be finding said products under tables, in his shoes, and secreted between the couch cushions over the next several years. The Fool has a disclosure policy .