RIVAL TOYS TALK BACK TO FURBY -- SILICON SIDEKICKS: PLAYTHINGS, STILL WARM AND FUZZY, GET MORE SOPHISTICATED WITH CHIPS INSIDE

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Move over, Furby. This year, Mickey Mouse, Barney, Winnie the Pooh and the four Teletubbies also have something to say to your kids.

Mickey begs to be tossed in the air, Barney plays the banjo, Pooh tells jokes, and Tinky Winky, Dipsy, Laa-Laa and Po giggle and show videos in their stomachs.

Like kinder, gentler Chuckie dolls from the film "Child's Play," these toys ruled the American International Toy Fair last week. The little plush-and-stuff creatures, embedded with intelligent microprocessors and silicon chips programmed to respond to humans, seemed almost human themselves.

"It's amazing -- and a little scary," said one retail toy buyer touring Mattel's Fisher-Price showroom at the New York event.

SMARTER TOYS

Electronic toys, from videogames to voice-activated dolls, will account for at least one-third of the estimated $15 billion in U.S. toy sales by next year, said David Leibowitz, analyst with Burnham Securities. Sales for "smarter toys" have steadily increased over the past decade but are expected to soar beginning this year.

The reason? Microchips now come with low price tags and an assortment of advanced capabilities.

That may be a blessing, considering U.S. toy sales in 1998 were almost flat at $15.2 billion, about $40 million less than the year before, according to the Toy Manufacturers of America. The group estimated toy and game sales will grow by 2% to 3% in 1999, while videogames are expected to climb as much as 5%.

Peter Eio, chairman of the association, said the popularity of the Internet is helping to acclimate kids to new forms of interactivity. In turn, the toy industry can use this familiarity with technology to its advantage, he said.

INTERACTIVE FUTURE

Toy makers are already realizing that. Many of the premier toys touted at the Toy Fair as candidates for the next big thing are interactive in some way.

Mattel has created several contenders, most for fall launch and most backed by millions in TV advertising. Its Pooh Chat Pals, which include Winnie the Pooh and Tigger, will debut via Fisher-Price in the fall with a third friend, Piglet, to bow in spring 2000.

By using patented radio-frequency technology, the Pooh pals react when a fellow friend is in the same room. Sensing each other, the two electronic pals interact with one another.

Another Fisher-Price invention, My Talkin' Pals Mickey and Minnie, inspired children in a test play group to treat the dolls as real-life playmates. In a video of the focus group, the children talk to Minnie and Mickey in a conversational way as the dolls ask to be turned over or to sing along to a song.

Another potential interactive breakout for Fisher-Price is from its "Blue's Clues" license. The popular Nickelodeon TV show had only two toys in 1998, but this year introduces 17 more.

`GOODNIGHT'

The highlight of the collection is Goodnight Blue, an interactive plush toy accompanied by a bedtime book due in August.

As a child turns the pages of the book, Blue sighs and begins to drop her eyelids. By the end of the book, she is asleep and snoring.

Hasbro, the country's No. 2 toy maker behind Mattel, has its own smart set of toys set for launch in 1999.

As the major "Star Wars" licensee, Hasbro and its Galoob division plan to combine "the force" with microchips.

The marketer said its "Star Wars" action figures will be equipped with chips that allow the new "Episode I: The Phantom Menace" characters to interact with each other.

FURBY BABIES

Of course, the marketplace hasn't heard the last from Furby, the 1998 holiday hit from Hasbro's Tiger Electronics division.

Hoping to ride the momentum further, Tiger is unleashing a new line of Furby babies in pastel colors, original Furbies in a new set of animallike fur patterns and a cadre of accessories -- including a Furby bed that stops the toy's chatter by putting the toy to "sleep."

With the glut of talkative toys poised for the next holiday season, Furby may be

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