Fuhu

» see fuhu.com as it lived, on the wayback machine

~ the obituary ~

The nabi was a product that could only have existed in a country with big-box stores and a Christmas retail season measured in billions. It was an Android tablet wrapped in a fat rubber bumper so a six-year-old could drop it, running a launcher the parent set up and the child could not escape, sold off an endcap at Toys R Us and Walmart for around two hundred dollars. Turkey had no version of that shelf and no version of that week in December, so this one is researched rather than remembered. What makes it worth a grave is not the tablet. It is how fast it went up and what specifically pushed it over.

Fuhu was started in 2008 in El Segundo by Robb Fujioka along with the brothers John and Steve Hui, and the name is the first two letters of the founders' surnames. The nabi arrived in 2012 and worked immediately, because it answered a question a lot of parents were actually asking: how do you hand a child a tablet without handing them the whole internet. The nabi 2 followed in the same year, and a DreamTab built with DreamWorks came in 2014. Revenue for 2013 was $196 million.

That put Fuhu at number one on the Inc. 500 list of the fastest-growing private companies in America, on a three-year growth figure of 158,957 percent. It went back to number one the following year. Two consecutive appearances at the top of that list had not happened before. For about eighteen months this was the most spectacular growth story in American consumer hardware.

The thing that killed it was the thing that built it. Foxconn manufactured every unit and was also an investor, which is a relationship that works beautifully while the money moves and becomes something else when it stops. Product for the 2014 holiday season arrived late, some of it after Christmas, and Fuhu ended up carrying inventory it could not sell and returning around $90 million of goods. In late September 2015 Foxconn started chasing its receivables hard and refused to ship anything more, in the run-up to the only quarter that mattered. Fuhu filed Chapter 11 in Delaware on 7 December 2015 with a $9.5 million stalking-horse bid from Mattel already on the table.

~ the case file ~

~ the climb ~

The insight was small and correct. Around 2011 every household with a tablet had the same fight in it, because the device was expensive and breakable and connected to the entire internet. The market answer up to then had been the toy computer, which was cheap plastic that ran nothing real and which children saw through in about a week. Fuhu's answer was a real Android tablet with real apps, physically armored, and gated by software the parent held the key to.

It sold because it sat in the right aisle. Fuhu got into the big American chains early and the nabi became a default gift, and a default gift in that market is an enormous amount of volume arriving in a very narrow window. The company scaled its manufacturing and its purchase orders to match, which is the correct move and also the one that leaves you with no slack at all.

~ the postmortem ~

Concentration on both sides. All the revenue came from a handful of retailers in one season, and all the supply came from a single manufacturer that was also on the cap table. Either exposure alone is survivable. Together they mean that one late shipment turns into unsold stock, and unsold stock turns into unpaid invoices at the only factory that can build your product.

Foxconn was acting rationally by its own lights, chasing money it was owed by a customer whose inventory position had gone bad. Fuhu could not build without it and could not switch suppliers in a quarter. The 2016 Inc. writeup of the collapse is worth reading because the magazine had put the company on its own cover twice and then went back to work out what it had actually been looking at.

~ what got buried with it ~

Mattel bought the assets out of bankruptcy in January 2016 for $21.5 million and kept the nabi name going for a while on licensed variants with Barbie and American Girl branding. The line was quietly discontinued in 2019. By then the problem it solved had moved into the operating systems themselves, with Android and iOS both shipping proper parental controls and Amazon selling a Fire tablet in a rubber case for a third of the price.

The specialist kids tablet was a product category that existed for roughly the length of one hardware generation, in the gap between tablets becoming cheap and platform vendors noticing that children were using them. Fuhu was the best executed thing in that gap and it still only lasted seven years. The number on the Inc. list is the part people remember, and the useful part is what a growth rate that size does to a balance sheet when a single supplier decides to stop.

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