SAN FRANCISCO -- Teddy Ruxpin, the talking teddy bear made by Worlds of Wonder Inc., delighted children and sparked dreams of big profits for investors, but industry analysts say that the toymaker's management was blinded by its early success.

Worlds of Wonder filed for reorganization under Chapter 11 of the federal bankruptcy law earlier this week, climaxing a stunning fall for the three-year-old company that was among the fastest growing in U.S. history with $93 million in sales its first year and $327 million its second.

Indeed, Silicon Valley has not seen such a dramatic rise and fall since the collapse of video game pioneer Atari Inc., the company for which Worlds of Wonder's 40-year-old chairman, Donald Kingsborough, previously worked.

Atari, based in Sunnyvale, lost $800 million in 1983 and the first half of 1984 before it was revived by Jack Tramiel, and analysts wondered whether Kingsborough could effect the same kind of turnaround for Fremont-based Worlds of Wonder.

"They are going to have to rough it through between now and February's Toy Fair {in New York} and try to convince the trade that they are a survivor," said David Leibowitz, an industry analyst for American Securities Corp. in New York.

Kingsborough has been trying without success to raise capital or work out a merger with another company and is banking heavily on a resurgence in sales, analysts said. "I'm not too optimistic on them getting financing or a deal with another company" said Mark Friedman of Boston's Homans, McGraw, Trull, Valeo & Co.

"He's been looking for at least three months," Friedman said of Kingsborough. "If he could make a deal, I think he would have made it by now."

Worlds of Wonder listed assets of $313.6 million and liabilities of $312.1 million in its Chapter 11 filing, which protects a company from creditor lawsuits until it develops a plan to put its finances in order.

"This was a company with visions of grandeur," said Leibowitz. "The roller-coaster ride was far too steep on the way up and the freefall has been sudden. It's not been a pleasant thing to watch."

Thousands of investors saw the company's stock price plummet on the over-the-counter market from a high of $29 a share in June 1986 to $1.12 1/2 just before the bankruptcy filing was announced.

Worlds of Wonder had hoped to be bailed out of its financial woes, or at least to buy more time, with the help of big Christmas sales and an array of new products.

But toy sales in general have been sluggish so far this year, and neither Worlds of Wonder nor any of other company has come up with a hit to rival the success of Teddy Ruxpin or the company's second winner, Lazer Tag, said Leibowitz.

For the first six months this fiscal year, ended Sept. 30, Worlds of Wonder had a net loss of $53.5 million on sales of $72.7 million, compared with year-earlier net income of $2.8 million on sales of $85.2 million.

Kingsborough said Worlds of Wonder will continue operating and developing new toys while a new business plan is worked out.

Friedman criticized Kingsborough for creating expectations that could not be met.

"He was just assuming they would do $400 million, $500 million, as if there was no doubt," the analyst said.

That enthusiasm led to expensive advertising campaigns and higher costs that helped bring the company down, Friedman said.

"Based on the company's success the previous two years, they felt they could conquer the world," said Leibowitz. "They built up staff, made a large engineering and sales effort and that sent fixed costs through the roof."

"Management lost credibility on Wall Street," Friedman said. "And their relationship with retailers was not that great. They weren't trusted on delivery dates."

"The bottom line is what the company did, didn't work, so they must not have known what they were doing," he said.

Worlds of Wonder responded to its mounting debt in recent months by slashing staff. At its peak, the company employed about 600 people. There are now about 150 workers in Fremont and 60 in Hong Kong.

The company has been hit by several creditor lawsuits in recent weeks, including a $15 million breach-of-contract suit by a Hong Kong contract manufacturer that assembles Teddy Ruxpin and Lazer Tag.