Here's news that Barbie might be getting a virtual world. Good for Mattel but we'll see if it's too late - it's not that Barbie doesn't have a sizable footprint but rather that the brand is about everything but technology. Well unless you count the cheap PC games they dumped on the market in 1999. Seriously, it literally killed the girl-game PC game space - releasing a large number of budget Barbie titles they took over shelf space and knocked prices down to where other software providers like Purple Moon had trouble competing.
I spent that summer in an internship at Mattel as part of a very small corporate new products group. My job specifically was working with Mattel Interactive on a video game strategy. What became apparent to me over the course of the summer was that Mattel lost their definition of core competency. Instead of saying "we're a company that brings entertainment and education to kids ages 3-13," they settled on "we're a toy company and that means plastic dolls and diecast metal cars sold into specialty retailers." The former would have left them flexible to thinking about technology as an important component of their target consumer's experience. The latter was stagnation.
Problem was that every single part of this statement was under attack by 1999: kids were "growing older younger" and turning towards the Internet, video games, etc. Specialty toy retailers founds themselves undercut by big box stores and the online retailers. And Mattel got chomped in the middle.
An interesting side note to why Mattel was so hesitant to pursue video games: they tired it in the early 1980s (Intellivision) and it almost bankrupted them. So the organization built up this amazing fear, a loadstone that weighed them down and, ironically, almost cost them their company a second time.