Lego losses: 500 jobs to go

Lego will do deals with the big ones to get back in the saddle.

The Danish toy maker Lego will sack 500 workers and close three factories after losing about 134m euros (£85m, $125m) during the first 12 months after it was named Toy of the Century.

We know what went wrong and we know what to do with it

Kjeld Kirk Kristiansen

One of the factories is in Hungary, the other two in Switzerland.

In addition, it will pull out of the clothing and publishing businesses.

"We know what went wrong and we know what to do with it," said company director Kjeld Kirk Kristiansen.

Getting into these businesses was a mistake and it contributed to Lego losing its direction, the company said.

"We lost focus," said Poul Ploughmann, executive vice president.

Electronic future

Lego, which is one of the world's 10 largest toy companies, will focus more on the electronic toys market in response to a change in children's tastes.

Lego will make games for Microsoft's Xbox

And it will introduce its basic brick and toy-parts concept to the universe of information technology.

As part of these efforts, the Danish firm has teamed up with Microsoft to develop Lego products to work with the US firm's forthcoming Xbox games console.

It will also produce an interactive CD-rom series based on the Harry Potter stories, in a deal with Warner Brothers Consumer Products.

The two firms have worked together before on a CD-rom series based on Star Wars.

In a separate deal with Universal Studios, Lego will create toys based on the film Jurassic Park III by Steven Spielberg.

Theme parks

Lego will push on with the launch of a new theme park in Gunzburg in Germany next year, its fourth.

But it has put the launch of a fifth theme park on hold because its parks near London and San Diego have drained cash from the company's coffers.

Lego also has a theme park in Billund in Denmark.

Previous losses

Lego made its first ever loss in 1999 when it ended the year 48.50m euros in the red.

Its response at the time was to slash its 10,000 strong workforce by 10%.

That was not enough; in 2000 Lego's losses more than doubled.

But in 2001, the company expects to climb back into the black.