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SmarterKids, toy marketer agree to play together

The online toy store and Earlychildhood.com agree to merge, further reducing the field of toy sellers who sell goods strictly on the Internet.

Online toy store SmarterKids.com agreed to merge Wednesday with a direct-marketing toy company, making eToys one of the last survivors among toy sellers who sell goods strictly online.

SmarterKids signed an all-stock deal with Earlychildhood.com, which makes and markets educational products and toys, mostly for toddlers and infants. Under the terms of the deal, shareholders of Earlychildhood will control two-thirds of the new company's stock while shareholders of SmarterKids will receive the remaining third.

The combined revenue from both companies is about $69 million, said Al Noyes, executive vice president for Needham, Mass.-based SmarterKids. Noyes said he will become chief executive of the new company, which does not yet have a name.

Online-only retailers--or so-called pure-play sites--are quickly disappearing. The merger is the latest example of an online retailer that is abandoning its pure-play approach, through either an acquisition, a merger or insolvency.

Some pure-play Internet companies that have recently said they will shut down include Garden.com, which announced Wednesday it was ceasing its e-commerce operations; online grocer Streamline.com; Pets.com; Furniture.com; and MotherNature.com.

The SmarterKids-Earlychildhood merger also marks the end of one of the last pure-play Web toy stores. Last holiday season, five Internet-only toy merchants squared off. Toysmart.com and Toytime.com have since closed down. Amazon.com merged its toy operations with Toysrus.com--the Internet unit of offline toy giant Toys "R" Us. And now, SmarterKids' deal with Earlychildhood will make Santa Monica, Calif.-based eToys one of the last pure-plays standing.

Privately held Earlychildhood said in a news release that it is profitable and that it earned $65 million in pro forma revenue for the nine months ended Sept. 30.

During the same nine-month period, 2-year-old SmarterKids earned $4.5 million in revenue. The company concentrated on selling educational toys online. The merger is expected to be finalized sometime in the spring of 2001, Noyes said.