EToys Agrees to Buy EParties, Bolstering Its Similar Service

Struggling Internet toy retailer EToys agreed Friday to pay $1.6 million in stock to buy EParties, an online party planning site that was on the verge of shutting down.

The deal between the Santa Monica firms would bolster EToys’ efforts to launch its own party planning service. EToys hopes that by adding party goods to its portfolio, it can create new sources of revenue while keeping its focus on children’s products.

The sale also represents an unusual alliance between the region’s two leading Internet incubators. EToys was launched three years ago by Bill Gross’ Idealab, the Pasadena incubator that is also responsible for Web search engine firm Goto.com, free Internet service provider NetZero and dozens of other start-ups.

EParties was the first venture launched by ECompanies, the Santa Monica incubator founded a year ago by Disney veteran Jake Winebaum and EarthLink Network founder Sky Dayton.

EParties was unveiled eight months ago amid great fanfare, with former Mattel Media President David Haddad at the helm. But EParties was unable to raise enough money from investors, and last week the company laid off all but a handful of its 29 employees.

Haddad and half a dozen other EParties employees will begin work next week at EToys.

A spokesman for EToys said the company plans to use EParties’ Web site and technology.

Shares in EToys fell 22 cents on Friday to close at $6.56 on Nasdaq. EToys’ shares sold for $20 in its initial stock offering a year ago, and hit a high of $86 in October.