Bloomberg News

THQ Has Profit on PC Games; Forecast Comes Up Short

May 10, 2007

THQ Inc. (THQI:US), maker of the ``Stalker: Shadow of Chernobyl'' video game, reported fiscal fourth-quarter profit of $6.5 million on sales of games for personal computers and said results this period will miss analysts' estimates.

Net income of 9 cents a share compared with a loss of $8.65 million, or 14 cents, a year earlier, the Agoura Hills, California-based company said today in a statement. Sales rose 16 percent to $172.1 million in the period ended March 31.

The lower-than-expected forecast is partly a result of the release in late June of ``Ratatouille,'' a game based on the movie by Walt Disney (DIS:US) Co.'s Pixar, said Michael Pachter, a Los Angeles-based analyst with Wedbush Morgan Securities. Most sales from the game will come in the fiscal second quarter, he said.

``The fact that you have a movie coming out on the next to last day of quarter, you should anticipate they'll have a staggered shipment,'' said Pachter, who rates the shares ``strong buy'' and doesn't own them. ``They maintained guidance for the year.''

The company also canceled a new version of the ``Saints Row'' crime game that was scheduled for release this quarter. THQ will work instead on a new game based on the franchise for release next fiscal year, Chief Executive Officer Brian Farrell said. The decision will cost about 2 cents a share of profit in the quarter, Chief Financial Officer Ed Zinser said.

```Saints Row' is a great franchise for us and we think the bigger opportunity is the multiplatform launch,'' Farrell said on a conference call.

Forecast

Shares of THQ fell $1.65, or 4.8 percent, to $33.04 in extended trading. They declined 8 cents to $34.69 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading (THQI:US) and have gained 6.7 percent in the past year.

THQ forecast a fiscal first-quarter loss of 26 cents a share excluding stock-based pay, on sales of $110 million. Analysts project a loss of 3 cents, the average of 13 estimates (THQI:US), on sales of $148.6 million.

Shares of THQ fell $1.63, or 4.7 percent, to $33.06 in extended trading. They declined 8 cents to $34.69 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading (THQI:US) and have gained 6.7 percent in the past year.

Last year, THQ reported a first-quarter net loss of $12.1 million, or 19 cents a share, on sales of $138.8 million. Results included 3 cents in costs for stock-based pay.

2008 Outlook

The company reiterated its forecast for the year ending in March 2008, predicting profit of $1.34 to $1.44 a share, excluding stock-based pay costs of 23 cents, and revenue of as much as $1.15 billion.

In the fourth quarter, THQ benefited from two new personal computer titles: ``Stalker,'' in which players battle mutants, and the war game ``Supreme Commander.'' The titles are part of THQ's strategy to expand beyond games for consoles such as Microsoft Corp.'s Xbox machines, said Colin Sebastian, a San Francisco-based analyst with Lazard Capital Markets.

The strategy also was reflected in THQ's acquisition, announced yesterday, of Universomo Ltd., a Finland-based developer of games for mobile devices, to expand its wireless business, Sebastian said.

Fourth-quarter profit excluding some costs totaled 15 cents, exceeding the 14-cent average estimate of 19 analyst estimates compiled by Bloomberg. Sales exceeded their $148.6 million average projection, rising from $148.1 million.

Sales in the latest quarter also received a boost from older titles, including the crime game ``Saints Row'' and ``Cars,'' based on the movie from Disney's Pixar unit, Todd Mitchell, an analyst with Kaufman Bros. in New York, wrote in a May 8 report.

(THQ began a conference call at 5 p.m. New York Time. To listen call +1-800-286-8010. The pass code is 95909642.)

To contact the reporters on this story: Michael White in Los Angeles at mwhite8@bloomberg.net.

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net.


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Companies Mentioned

  • DIS
    (Walt Disney Co/The)
    • $89.88 USD
    • -0.35
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