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A game competitor: Sales surge for maker of Gnip Gnop, What's in Ned's Head?

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The atmosphere is lighthearted at the westside headquarters of Fundex Games Inc., where ideas sketched on cocktail napkins become award-winning games like What's in Ned's Head? and Alfredo's Food Fight.

And why not be happy at a company whose more tasteful games, such as Gnip Gnop and Phase 10, have helped grow revenue from $4.6 million to $20 million in the last decade?

If there's any nail-biting at Fundex it's because this is the most important time of the year. Late November and December sales sustain many toy and game companies through leaner summer months, and a good showing in February at the American International Toy Fair in New York City can mean a huge boost in distribution for a company's latest offerings.

Fundex, whose games sell for $3.99 to $99, seems wellpositioned to cash in.

This year, Family Fun magazine voted What's in Ned's Head its game of the year. In 2003, Alfredo's Food Fight won the coveted award. Both games enjoyed major launches in New York and were featured on NBC's "Today Show," spurring sales nationwide.

"Those awards are important because those are all kid-tested," said Fundex President Carl "Chip" Voigt IV. "To win those awards, those games had to undergo thousands of hours of testing. When kids chose it, that really means something."

Fundex, industry observers said, is a small, creative company known as much for its wacky kid games as for the traditional card and dice games that have been its bread and butter.

What's in Ned's Head has players racing to reach into Ned's head to try to pull out what matches the object on the players' cards. What exactly is in Ned's Head? You name it: vomit, a spider, moldy cheese, a rat. It's all fake, of course, but it looks pretty real as it's pulled through Ned's nostrils and ears.

In Alfredo's Food Fight, players wing forked meatballs-also fake-at poor Alfredo, who spins around hopelessly at the center of the game.

Fundex also has a new line of dominoes coming out and a deal with the Professional Domino Association that could make the company a fixture on ESPN. Fundex is in negotiations with the sports network and Fox Sports Net to use its domino sets on a r eg u l a r l y scheduled TV show featuring the PDA Tour. Various domino games have been a growing part of Fundex's lineup for six years and represent about one-fourth of the company's revenue, Voigt said. Industry experts said if the PDA Tour takes off, dominoes could be as big as Texas Hold 'Em poker games, and Fundex would be at the forefront.

Fundex also recently finalized a deal with magician Mac King to produce a "Magic in a Minute" game kit. The tie to King, a regular performer in Las Vegas and on television specials, is expected to boost sales of that product.

The fact that Fundex has survived in this consolidating industry is a testament to its strategy, said Nancy Lombardi, editorial director of Toys & Family Entertainment magazine, a trade publication based in New York.

"This is a good company that has survived by being creative and sticking to basics," Lombardi said. "Their dominoes line shows perhaps the most potential, but they have several quality products that show a lot of growth potential."

Like every great game player, Lombardi said, Fundex's "every move has been carefully measured."

Playing with giants

Despite revenue that has grown 30 percent each of the last five years, Voigt admits Fundex doesn't swing for the fence.

"We try to get a lot of base hits," he said.

Wall Street loves a slugger, but Voigt said the only way to have a quick hit in the games industry is by pushing products with millions of dollars in advertising. Fundex spends only about $200,000 annually for marketing, mostly in specialty trade publications.

"Our games sell because they're fun and engaging, not because they're in lots of TV ads," Voigt said. "When your product grows by word of mouth, growth is slow, but stable ... and sustainable."

Since 1996, the company has grown from eight to 50 full-time employees. Early next year, it will consolidate its four locations here into a 100,000-plussquare-foot building on the west side.

For all its success, Fundex is still a small player in the $20 billion box-game industry. Rhode Island-based Hasbro Inc. has long been the 800-pound gorilla. With the acquisition of Milton Bradley and Parker Brothers, Hasbro now controls 75 percent of the box-game segment. California-based Mattel Inc. has about 10 percent, with a handful of other companies fighting for the rest.

Fundex has only about 3 percent of the market, but its reputation is strong enough that it regularly fields pitches from independent game inventors. They show up, crude game sketches in hand, to try to capture the imaginations of Fundex's local designers and creative staff. If the company likes the concept, it buys the rights and engineers the game, which includes designing game pieces in more detail and creating molds and developing manufacturing techniques for mass production, said Voigt, who has a degree in industrial management from Purdue University. Last, Fundex designs the allimportant packaging, a critical element of retail sales. All manufacturing is done in Asia.

Surviving an electronic age

Consolidation isn't the only thing putting pressure on traditional toy and game makers. The Internet, video games, iPods and other electronics have all taken a Grinchy bite out of the industry.

The toy industry as a whole has been flat, but with a post-9/11 push to stay home and focus on family activities, the game sector has been growing about 5 percent annually for four years.

Fundex has stayed in front of the curve by d eve l o p i n g games that foster a social a t m o s p h e r e , engage players and are fairly simple to play, Voigt said.

"We can't compete with the fast action of video games," he said. "But we have Mother Nature on our side. We appeal to that need for social contact."

"Companies that have survived in this environment are the ones that have come up with games that are compelling enough to keep bringing people back," said Maria Weiskott, editor of Playthings magazine, a toy and game industry publication based in New York. "With the number of things demanding people's attention these days, that's not easy to do."

Fundex has an eye on board games with a DVD element, but Voigt is proceeding with caution.

"We wanted to watch this trend for the first two years. That's when fads die out," Voigt said. "We're considering it. We just haven't found the right application yet."

Its very non-Wall Street approach is what has kept the company flying, Lombardi said.

"This company is about getting back to basics," he said. "From the games they've developed to the way they run their business, that's the approach that has put them on the radar."

Saying no to IPO

It's safe to say visions of IPOs aren't dancing in Chip Voigt's head along with sugar plums this holiday season.

In 1996, Wall Street slammed Fundex's attempt to go public, analysts saying the company's earnings were paltry and growth plans unambitious.

With a wink of its eye and perhaps a twist of defiance, Fundex would not bend for Wall Street compliance. Voigt said now he can see staying private was the best move.

"Remaining private, we can manage our company for the long term, and not shoot for results quarter to quarter that Wall Street demands," said Voigt, whose father, Carl "Pete" Voigt III, founded Fundex in 1986 and handed it off to his son three years ago. "We've definitely taken the best path for our company."
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