Bloomberg News

THQ Narrows Loss on Tax Credit; Sales Miss Estimates

August 01, 2007

THQ Inc. (THQI:US), maker of the ``Stalker: Shadow of Chernobyl'' video game, reported a narrower first- quarter loss, benefiting from a tax credit and sales of the ``Ratatouille'' title. Revenue missed analysts' estimates.

The net loss narrowed to $9.27 million, or 14 cents a share, from $12.1 million, or 19 cents, a year earlier, the Agoura Hills, California-based company said today in a statement. Revenue fell 25 percent to $104.5 million in the period ended June 30, shy of the $112.6 million average estimate of 19 analysts.

Sales of two titles released in March, ``Stalker'' and ``Supreme Commander,'' fell short of company forecasts, said Evan Wilson, a Portland, Oregon-based analyst for Pacific Crest Securities. A year earlier, revenue was bolstered by ``Cars,'' a game based on a film from Walt Disney Co.'s Pixar. THQ's profit forecast for this quarter also missed estimates.

``The revenue result was slightly disappointing,'' said Wilson, who rates the shares ``outperform'' and doesn't own them. ``Even though they reiterated their forecast for the year, earnings guidance for the second quarter was below expectations.''

Shares of THQ fell $1.70, or 5.9 percent, to $27.06 at 1:14 p.m. New York time in Nasdaq Stock Market trading (THQI:US), the most since January. They have fallen 17 percent this year.

Excluding a tax credit and stock-based compensation costs, the first-quarter loss was 19 cents. Analysts projected a 26- cent loss, the average of 19 estimates compiled by Bloomberg.


The company said it shipped more than 1 million copies of ``Ratatouille,'' which is also based on a Pixar film.

This quarter, THQ projects sales of about $240 million, little changed from a year earlier, and profit of 10 cents a share, excluding stock-based compensation expense of 7 cents. On that basis, the company earned 25 cents a year earlier.

Analysts were predicting second-quarter profit of 22 cents a share, excluding options costs, the average of 18 analysts' estimates (THQI:US) compiled by Bloomberg, on sales of $240.2 million.

For the full year ending in March 2008, THQ predicted sales of $1.12 billion to $1.15 billion and profit of $1.34 to $1.44 a share, excluding stock-based compensation costs of 23 cents.

To contact the reporter on this story: Michael White in Los Angeles at

To contact the editor responsible for this story: Jennifer Sondag at

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