Got a chance to peruse some of the 10-Q last night. Most was as expected from the conference call.
It does seem to me that THQ propped the gross margin a bit in the quarter as compared to what they had done recently. The 10-Q mentions project abandonment in last years first quarter and the absence of these charges this year. Given that, this year THQ reserved only slightly higher than last year - $7M versus about $6M last year, with significantly higher sales.
Also, since the balance of the reserve only went up about $1M from December, the actual charges taken in the first quarter had to be around $6M. Seems like a pretty big number to me, but one that apparently is going to remain a mystery.
Also, I am a bit surprised about the decision both to buy PCP&L and use pooling accounting. It seems that we are moving more and more away from being a lean outsourcing publisher and more an internal developer. I am not sure that I am convinced this is great decision. Also, if memory serves me, one of the disqualifiers for pooling is that there can be no "contingent consideration". Seems to me that the options for PCP&L would fit this description. I will have to get out my old FAS and check up on that one.
All and all, I still like the companies lineup, prospects, and business; but think that there is additional risk in owning the company now. Hopefully Sinistar, Road Rash and the like will prove to have been money well spent in buying developers.
Kory |
