I think THQ is milking the WCW license so year over year comparisons will still be smashing despite a disappointing fourth quarter on the horizon. I believe Brian Farrell, like all good managers, is a realist. He knows its not logical for THQ to equal, let alone exceed fourth quarter 1998 with only 50% of the WWF license. 50% of WWF does not equal 100% of WCW.
As for other NEW titles/licenses in the pipeline making up the difference: Name one that you think will sell 500,000+ copies this Christmas. Remember, wrestling is 2 million+ seller all by itself. THQ would need two 500,000+ sellers just to make up the difference in lost revenues.
I expect Farrell will guide analysts estimates down when the fourth quarter of 1999 approaches. This should pose no problem if the stock shoots up to its deserved price of $50 by then. Even after a selloff, current buyers would still make a tidy profit.
We already know several titles that will be released in 4Q '99. One is a WWF game (I believe Tomy (?) already is working on it). In its last 8K, THQ said it intends to release a WWF game during 4Q, so it will happen. The installed base will probably be about 30% or more larger by the time that game is released, as compared with when Revenge was released. Assuming an equivalent percentage of the installed base buys the game, the "shortfall" drops to 35%. We may even see two WWF games from THQ, depending on what Acclaim does (N.B., Acclaim has adopted the THQ approach to managing earnings, and to match everything up it will likely have to release both its WWF games by July this year.)
Also since Revenge was released last October, THQ bought Rushware. THQ likely will release the WWF game internationally in 4Q through the new subsisidiary, and it likely will release many more games internationally as well. Granted, international WWF sales won't match domestic sales by any stretch of the imagination, but WWF is the more popular license internationally. Throw in another 10% (5% for THQ) for international sales and you need 30%.
We'll also likely have another Rugrats release to match up with last quarter's Rugrats sales, although THQ has been rather opaque in letting investors know how long it has that license. If it has the license, I would not be surprised to see fresh Rugrats games across all platforms (PSX, N64 and GB).
Thus, the question in my mind is whether the remaining 4Q releases from THQ (both international and domestic) can make up for the "shortfall." In part, that question is answered by how one thinks (1) Nuclear Strike (N64); (2) and (3) Brunswick Bowling (PlayStation and PC); (4) Road Rash (N64); (5) Danger Girl (PlayStation); (6) and (7) Bass Masters Classic (N64 and PlayStation); and (8) Nomenquest (N64), will stack up against THQ's "remaining" releases during last year's 4Q: (1) Rugrats (GB); (2) Bug's Life (GB) and (3) WCW Nitro (PC).
While some of the above will likely be released during 3Q, we undoubtedly will have other games (yet to be announced) released during 4Q. In the earnings CC, we will hear about the mountain of cash THQ is sitting on right now, some of which will be used to acquire new licenses, new games, and perhaps a new company or two. We'll hear more at E3, just like we did last year. We also may see Rushware's Star Wars release during 4Q next year. It will likely be timed to coincide with the European release of the Star Wars sequel, and usually that happens about 6 months after a U.S. release. In addition, we'll start seeing the re-release of 4 or 5 of Rushware's games domestically, and some of those will probably be in 4Q this year. Finally, there's the small matter of the "reserves" war chest Farrell has been amassing. If THQ starts to run into problems, just remember that Farrell can pull $.10 to $.15 out of his hat any time he wants by reducing the "reserves" by a couple percentage points.
In sum, Kombat, you're right. BF is a realist, athough conservative pragmatist is perhaps a more apt description. As a realist or pragmatist, he has said THQ will grow by 20% this year (I believe these comments were made during the Rushware CC). If you believe his conservative forecasts, then THQ will beat last year's 4Q this year. I actually don't believe Farrell. He consistently low balls his estimates. I think THQ will probably outpace last year by 30% - 40%, and by 4Q this year Farrell will be back again projecting 20% growth, just like last year. And just like last year (and now this year), there will be those who say that it will not be possible to match or exceed last year's 4Q numbers.