THQ stock slides 17% as analysts pile on

Publisher's share price takes substantial hit following dismal holiday earnings announcement; Pachter, Schachter, Greenwald offer mixed reactions.

THQ has been in transition for quite some time. After struggling through much of 2008, the publisher took drastic action to realign its costs in November, announcing the closure of five internal studios and substantial layoffs and unveiling its new shift in focus from quantity to quality.

The pains of that transition were brought into the spotlight yesterday, when THQ reported a dismal October-November quarter marked by a $192 million loss and expanded restructuring that extended its headcount reduction to 24 percent of its staff, or 600 employees. The effect of yesterday's earnings announcement was immediate. THQ's stock price suffered a precipitous drop today, falling 17.87 percent by market close to $3.40 per share, having recovered from a day low of $2.45.

What this means for THQ going forward is a matter of dispute among industry analysts. Through the eyes of Signal Hill Capital Group's Todd Greenwald, THQ isn't likely to make up any ground during its next fiscal year thanks to what he believes to be a weak upcoming lineup.

"The loss of Saints Row 2 (2.6m units) will be hard to compensate for--we don't think Red Faction or Darksiders will come anywhere close," said Greenwald. "Furthermore, WWE appears to be a franchise in decline, especially as the PS2 platform dies off, and Pixar's Up should underperform WALL-E (which underperformed Ratatouille, which underperformed Cars...). While UFC will help, it is licensed, externally developed, and will have to be heavily marketed for it to succeed, so profitability may be limited."

Greenwald also sees a flaw in THQ's efforts to better align itself under Nintendo's best-selling console and portable. "Furthermore, THQ's large lineup of kids/family-fare/mass-market titles will be hard-pressed to stand out in a crowded Wii/DS market, and are very susceptible to price cuts," he said.

UBS Securities analyst Ben Schachter also believes that THQ's restructuring efforts will mean nothing unless the company can create more attractive games. "While the steps to right-size the business for a lower revenue base continue to move the company in the right direction, none of it will matter unless the company can get things right with its games," said Schachter. "This has been THQ's primary problem for the last two years."

Schachter was far more optimistic on THQ's 2009-2010 release slate, noting that success will hinge on Nintendo's systems. "We're somewhat encouraged by what we've seen thus far of the FY'10 line-up (particularly UFC) and expect success on the Wii/DS may be the ultimate determinant into whether FY'10 is a successful year for THQI or another disappointing one," he said.

Wedbush Morgan Securities' Michael Pachter also believes that it is too early to give up completely on THQ, thanks to the publisher's promising restructuring efforts. "While THQ has repeatedly disappointed investors by generating losses in six of the last seven quarters (with another loss expected in the fourth quarter), we think that the company is about to turn the tide," said Pachter. "Its restructuring is deep, and...we note that the elimination of marginal SKUs should help THQ to improve margins sufficiently to drive results back into profitable territory."

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Discussion

21 comments
Sparty_On
Sparty_On

MMA video games suck I have a played few and Computer always beat me I could do nothing. I like Saints Rows 2 it's a pretty good game the only thing I don't like about the game is the camera is too close I wish Saints was like GTA with the camera just my opinion.

YoJim8obaJoe
YoJim8obaJoe

companys that spam the same game again and again with little to no improvement deserve to go bust,their wrestling games are still near identical to the PS1 versions,they still look ugly,very slow,terrible clipping and still use set animations for everything.

onep
onep

If the gameplay is right for the new UFC game, they'll make $$$. MMA is the next snowboarding in terms of bastard sport turned mainstream.

edub272
edub272

First off, UFC definatley has potential, i know graphics don't matter too much but they look great which shows they're interested in fully fleshing the game out and paying attention to detail. That said, i could see it sucking too. SDvs.Raw is gonna sell less and less as less people watch and like the WWE, plus the franchise is getting old for everyone. Nothing they can put in that game would surprise anyone, not much potential. WILDCARD: Red Faction Guerrilla, interesting game, looks cool but I think people would be more interested if it was a FPS, but it has potential. THQ needs to worry about making games people will be interested in and then make the game actually good to avoid further losses. otherwise you can make all the layoffs you want but nobody's going to buy your game.

DecadesOfGaming
DecadesOfGaming

I don't care, the reason why darksiders is on my tracking list is because I would appreciate updates about the game and NOT trash like this !!!

sieg6529
sieg6529

the only gaming-related stock that doesn't blow monkey chunks right now is GME.

JacksSmrkngRvng
JacksSmrkngRvng

Im very aware of that. But as a publisher THQ takes responsibility for everything they push out of their door with their name on it. Now, do you have anything to actually contribute to the discussion?

lightning_kf
lightning_kf

@AdemaSlipknot Too bad we always see the proverbial dumb@$$ who makes that ridiculous mistakes.

AdemaSlipknot
AdemaSlipknot

@JacksSmrkngRvng You do know that THQ has nothing to do with the SDvR engine, since THQ doesn't develop it, right? The engine for SDvR is ALL Yukes. THQ only publishes it.

JacksSmrkngRvng
JacksSmrkngRvng

There is NO way the first UFC game will get an 8 or a 9. They havent gotten that rating on a Smackdown game since 07 and they have been doing that franchise for how long? Just because "Diana" White may be overlooking it means nothing, I wasnt aware he knew how to program video games. There is so much the engine must be capable of its mind boggling. To transition smoothly from standing to grappling, to positioning for subs where a matter of inches means escaping or being caught in a choke or an armbar. How is the engine going to be programmed so you can switch a fighter on the ground to work from an open or closed guard? A half guard? Butterfly guard? Rubber guard? How is the control scheme going to be set up for the bottom fighter to control his legs and arms as well as moving his head as all three play a huge roll in defending from the bottom position. MMA being unscripted makes the engine so much different that pro wrestling as MMA has an infinite number of factors that can change the outcome of a fight. There is a reason that you have never seen a remotely good MMA game so far and its more than the fact up until recently it had a limited fan base. I am a huge MMA fan and would love nothing more for this game to be amazing but sadly I get the feeling the engine will be not to much different than the crap THQ has been throwing at us in the recent SvR games. I have a feeling it will be dumbed down and simple like pretty much every other MMA game so far. Geez, I have friends that think the Pride Fighting game was better than Here Comes the Pain just because its an MMA game. Maybe thats the market THQ is targeting.

_AbBaNdOn
_AbBaNdOn

THQ is disney's -------. You guys need to sever all ties from them and get back to making REAL games. I just got a x360 for 2008 xmas and I have to say Volition and Saint's Row kicks the living crap out of Rockstar and GTA. I own every GTA so its not like im a Rockstar hater. Saints Row 2 just has better mechanics in every way possable. Better vehichle controls, better character customization, better gun and melee combat. I miss the stripclub and hooker interactions from GTA though. I can't wait for a Saint's Row 3!!! Other than that I havent see THQ make a good game in forever. WWE wrestling games are a freaking joke.

Monkelf
Monkelf

omg jacks i fell asleep reading your novel

Inconnux
Inconnux

UFC game sounds interesting but you couldn't give me a WWE game.

Pete5506
Pete5506

I hope they can pull out of this slump

vaejas
vaejas

@JacksSmrkngRvng: Welcome to GameSpot! Learn to love the line break. br/ br/ br/

ShadowXStorm
ShadowXStorm

UFC will not be a 6.5 to 7.5 game it will be a 8 or 9, trust me the work they are putting into this game is thrilling Diana White isn't going to let THQ screw this MMA game up again.

JacksSmrkngRvng
JacksSmrkngRvng

WTH, that was my first post here why did it not recognize and seperate my paragraphs?

JacksSmrkngRvng
JacksSmrkngRvng

[This message was deleted at the request of the original poster]

jrabbit99
jrabbit99

I can't wait for UFC unleashed