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THQ AŞ Message Board

  • kombatblitz kombatblitz Feb 12, 1999 2:29 PM Flag

    A Theory

    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.

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    • THQI will post a great 4th qtr. and provide VERY positive guidance for the coming year.

      • 2 Replies to jam_band_fan
      • 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.

      • I've posting my reasoning -- so be specific and poke some holes in it. Peace.