I vote for a stock buyback authorization of 1 million shares. THQ doesn't have to complete it, but certainly authorize it. That way if there is a further drop in the price, the company can scoop up shares at a discount. Not only does it look good to the Street, but it also reduces supply, increases EPS, counters dilution from options(!), and it is a good investment if THQ should decide in the future to buy another company with its stock (which would presumably be trading much higher by then). And with nearly $50 million in cash, and potentially $40 million more generated in 1999, and with a credit line of more than $25 million, the company can certainly afford to buy the stock.
But more importantly, THQ should track down at least 2 really good licenses and buy them for the long-term (at least 3-5 years). This could be one of THQ's most important achievements in 1999. Farrell said THQ wants to add 1-2 brands in 1999. As THQ adds more long-term franchises to its portfolio, the more faith people will have in THQ's long-term potential. And I'm not talking about BASS and Brunswick. Those are minor licenses, in my opinion. I mean something on the order of Rugrats, WCW or WWF. That's the best use of cash.
Todd |
