Firefly Mobile: Calling All Tweens

Its kiddie cell phone was a smash. Can a version for older children compensate for a gruelling management shakeup?

Donald L. Deubler has the guts of a high roller. In 2005, the former industrial parts salesman created a hot cell phone for kids. The award-winning device, which allowed only parent-programmed calls, soon generated $20 million in annual sales for his Firefly Mobile. In less than a year and a half, though, the owner was ushering out his chief executive officer and half his staff as the startup was nearly done in by differences of opinion over strategy. "It was that close to ending," says Deubler.

Now the 34-year-old entrepreneur is doubling down. Firefly has just come out with a phone for tweens, the flyPhone, which comes with MP3 and video players, camera, games—and parental controls—for $124.99. Just in time for holiday sales, the Lincolnshire (Ill.) company has also launched the next generation of its blue Firefly kid's cell phone, the glowPhone, for $49.99.

The tween product may be a riskier gamble than Firefly's translucent, blue original. Industry analysts note many of the nation's 25 million 8- to 12-year-olds will be content with a kid's phone only so long before wanting a grown-up model. Firefly has competition, too: Sanyo, for instance, sells a phone that permits parents to block phone numbers or Web sites. "Firefly Mobile may be in catch-up mode," says David Weissman, a telecom analyst with Zacks Investment Research.

Differing Visions of the Future

Firefly's management is confident the translucent, colorful phone is what its target market wants. "Kids are still pushing the purchasing decisions, but parents will want to control access to content," says Firefly Chief Executive Patrick Marry, "and the flyPhone is in that perfect sweet spot." He predicts the company will post a profit in 2008. If so, it would be vindication for Deubler and the executive changes he made in mid-2006.

In 2003, at the suggestion of an investor, Deubler installed Robin Abrams, a seasoned high-tech executive, as CEO. But her vision for Firefly didn't match up with his. Deubler watches his words when describing what went wrong. "Robin got us into mass distribution, Target (TGT) and Kmart (SHLD), and we could never take that away from her," he says. "But decisions weren't being made the way I thought they should to capture a future for Firefly." Abrams could not be reached for comment.

In addition to elevating Marry, 50, a Motorola (MOT) veteran who had been Firefly's chief technology officer, Deubler retrenched to reduce losses. He closed a satellite office in San Francisco and cut his workforce from 49 to 23.

A Passion for the Product

Deubler has had the startup bug since taking a venture capital class at Stanford University in 1999. His first company, an Internet TV network, collapsed in the dot-com bust in 2000. Two years later he was working in Portland, Ore., for Deublin, his family's machine components company, when his girlfriend visited him. She wondered why there wasn't a better way to reach her son when the boy visited his father. Deubler quickly sketched out a simple, cheap phone.

Randy Rissman, whose Leo Capital Holdings has invested in Firefly, sees a kindred spirit in Deubler. Rissman came up with Tiger Electronics and its Furby toy, which he later sold to Hasbro (HAS). "Early on, Don had a vision of a market need and a product," Rissman says. "And he has remained very passionate about that vision."

Deubler and his backers will know soon enough if tweens have anything like the same passion for the flyPhone.

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