JB,
Nicely laid out. But I have two criticisms. First off, you effectively say Farrell knows how to run the business and then you give advice on what he should do (ie. prepare for losing licenses, pc arena etc). Second, I dispute your thinking on THQ being more fairly valued than EA. In this new investing world, PE should move towards growth rate. THQ isn't even close. And yes, in my example, EA would be overvalued but they are EA. Why do they receive that valuation? Franchises and brands, EA Sports for one.
Regarding the PC arena, I have to disagree. Example: We have two great games for PC coming out. How are we going to sell them? For 2 bucks a piece on OEM. We just spent 8 million on FX and we are OEMing it. Look at Activision. They overpay to publish these titles and it shows on the bottom line. Finally they are moving to a more reasonable PE.
You know what THQ's sole answer is IMHO? Acquisitions and reverse takeovers. That's the only way to do it here. You've got the best management in the industry. Go acquire. Go do reverse takeovers. If ego wasn't what it is in this world, THQ could compete with EA in 3 years. Reverse takeovers probably aren't going to happen and that's too bad. But THQ management squeezes more juice out of an orange than anyone. So that being said, you want them to acquire.
What do I see? I think ADRN for sure but I want bigger acquisitions. I want ATVI acquisitions. Imagine what Farrell and Co. would do with ATVI? I think we'll do a Car and Driver game with Jakks. And, I think we'll go after the ESPN sports license. THQ needs to get into this genre in a big way. Given its current relationship with Disney, that's the only way to do it.
Regards,
vc
PS - JB, no flame here. Thanks for the logical and rational discourse. |
