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Technology Stocks : THQ,Inc. (THQI)
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To: Madharry who wrote (12806)1/27/2000 10:49:00 AM
From: Scott Garee  Read Replies (1) of 14266
 
I don't think he was relating the two accounting issues, he was merely stating the short's ammunition. I, for one, am grateful to know what the reasoning has been behind their position. You may not agree with it, or like it, but 5M+ shares shorted means there are a lot of people who believe there are problems with the company.

I am comfortable with the reserves as they have set them. Management's track record has earned them the benefit of the doubt (in my eyes.) The success of WWF has given them quite a bit of slack in the reserves to pick up shortfalls in other products.

As for capitalizing development costs I am undecided. Are they setting a trend? Do non-game oriented software houses capitalize development costs? THQI's track record is good enough that I would allow them to ignore "game" when setting their business practices. If they are able to accurately judge the life of their products, then there is no reason to be overly concerned about their accounting practices. If they miss big on one or more products they will probably have to drop this practice or risk losing the street's confidence.

Frankly, their P/E is so low it doesn't appear to me that the stock is overpriced due to inflated financials anyway, so the whole argument of the possible downside of the issue is specious at best. If the company had an industry leading P/E I might place more weight (and concern) into this bin.
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