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What: Shares of educational toy maker LeapFrog (NYSE: LF ) lost their bounce today, falling as much as 11% in intraday trading after Toys "R" Us announced its entry into the tablet computer market.
So what: A Toys "R" Us tablet? Yes, you heard that right. Of course, the toy giant isn't going to be competing with Apple or Google with the new Tabeo. Instead, the kid-focused tablet will compete with the likes of, you guessed it, LeapFrog. Last year, LeapFrog launched its LeapPad, a tough tablet with learning applications for kids as well as a camera and video recorder. What didn't it have? The Internet, which is a feature -- along with parental controls -- that the Tabeo will include.
Now what: In 2011, three retailers -- Wal-Mart, Toys "R" Us, and Target -- accounted for 64% of LeapFrog's domestic sales and 30% of international sales, so there's little surprise that investors are concerned about this competitive move. The LeapPad is hardly LeapFrog's only product, nor is Toys "R" Us its only channel. However, the LeapPad has been a key driver for LeapFrog's recent growth, so a good reception for the Tabeo could put a real dent in LeapFrog's prospects.
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