July 2007

Friends, my July post is going to be brief due to everything that is happening right now. As certainly you have heard by now, the IFE has declared a strike against our North Pole operations. This is an unfortunate misunderstanding of our intentions. We have made the decision to outsource some of our operations as a way of increasing our capacity. By outsourcing to off-shore operations, we can expand our capacity at a fraction of the costs it would take to add and operate that same capacity at the North Pole. While some functions may move off-shore, we have plans in place to replace those jobs one-for-one within other functions that will be required to grow headcount in order to respond to increasing demand. In effect, we are executing a "job swap" that focuses unique & highly skilled roles at the North Pole facilities and transfers other roles to a third-party. As we have zero unemployment at the North Pole and we have plans to offer training to re-skill impacted employees, we do not anticipate that any elf will be left without employment.

The bottom line for all of you out there is that Christmas Eve 2007 will not be impacted. You have my word on that. I, and the management team, are confident that we can work through this misunderstanding with our brethren at the IFE. Even if that fails, we have confirmation from the 3rd party outsourcer and a vast majority of major toy manufacturers that they can pick up the slack. But there is much to be done to ensure that happens... so I apologize but that's all I'm going to have time to post this month. If anything changes with the strike, I'll let you know; otherwise, I'll talk to you in August.