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Small World Aims to Be Big in Learning Toys

The Culver City company, which has just acquired Neurosmith, intends to compete by buying up little firms.

September 29, 2004|Melinda Fulmer | Times Staff Writer

Entrepreneur and investment banker Debra Fine is snapping up struggling pint-sized toy companies in an attempt to create a sizable Southland firm to compete in the ultra-competitive educational toy industry.

Last week, Fine's Culver City-based Small World Kids Inc. purchased the assets of Neurosmith, a Long Beach electronic learning toy company, for an undisclosed amount.

A few years ago Neurosmith posted sales of about $12 million on the strength of its award-winning music and educational toys, but it recently had difficulty finding shelf space because of its higher prices, lack of advertising and shipping disruptions.

"They had great products," Fine said, but as first-time toy makers, "they had a lot of learning to go through."

This summer Neurosmith stopped selling once-popular toys including Music Blocks, Sunshine Symphony and Pet Me Platypus, she said.

The purchase comes on the heels of Fine's acquisition in May of Small World Toys for $7.2 million.

Last year that company sold $26 million of classic toys and puzzles such as Gertie Balls, Ryan's Room playhouses and IQ Baby developmental toys.

Fine, who is chief executive of Small World Kids, previously worked as a venture capitalist and headed her own educational toy firm, Cloud 9 Children's Products, before selling it to Simon & Schuster Inc., a unit of Viacom Inc., in 2000. In the mid-'90s she also served as a marketing executive for Walt Disney Co.'s computer games unit.

Fine hopes to leverage her toy experience to revive Neurosmith's sales. Small World Kids will cuts costs, lower prices and begin advertising Neurosmith's high-tech educational toys aimed at infants and preschoolers.

Next week the company will offer a preview of new toys at an industry trade show.

These products will be aimed at high-end retailers such as Nordstrom and Saks Fifth Avenue and specialty toy shops, rather than discounters such as Wal-Mart and Toys R Us.

The $560-million electronic learning market is so competitive that smaller toy companies must search out these alternative outlets rather than go head-to-head in the mainstream toy market with larger rivals such as Mattel Inc.'s Fisher-Price unit and Leapfrog Enterprises Inc., NPD Group analyst David Riley said.

"It's harder to get a product out there," and it requires a lot of marketing firepower, Riley said.

Fine and several investors created their toy venture in May by recapitalizing publicly held Savon Team Sports Inc., then abandoning the sports business and changing its name.

Their game plan is to snap up other educational toy companies. On Monday, Small World Kids announced that it had raised $3.2 million to help fund its shopping spree.

Although other players in the educational market are turning to video games, Small World plans to carve out its niche by selling more tactile electronic toys.

The company is in acquisition talks with another toy maker to boost its distribution and to help land it on the Nasdaq Stock Market. "We plan on getting very aggressive," Fine said.

Small World Kids last traded at 50 cents a share Monday on the over-the-counter market.

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