Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Emmo who wrote (13616)	3/8/2000 5:13:00 PM
From: NeverRight	Respond to of 14266

Since this thread has died down I thought I should stir things up. Before you all flame me remember I'm a long time long in THQI, who has seen six figure $'s disappear, partly because I took BF's assurances that everything was okay at face value. And I'm still long. Now I'm trying to understand where the stock is going. The shorts think it's going lower. Smackdown is out and the stock went nowhere. Is there any news that could possibly come out between now, and the disappointing 1stQ results that could propel this stock? Because without news, it could just drift lower and the negative comparison in the firstQ whether it's old news or not could send it further down. Are we going to revisit the 9's?

To: Emmo who wrote (13616)	3/8/2000 5:21:00 PM
From: Kory	Read Replies (2) \| Respond to of 14266

I don't see THQ's guidance in the same light as MSFT's and many other companies (including past guidance by THQ). While there is no doubt that an entrenched culture of "beat the estimate" exists in the market in general, Microsoft and others are usually guiding down earnings growth expectations, not guiding estimates down to 50% of previous years levels. If THQ were now somehow able to beat the results from last year, I think that there would be clear reason for lawsuits. You can't guide down estimates from $.50/share to $.25 cents and then less than two months later report $.50. I don't see it happening. They will probably beat the $.25 estimate and come in somewhere around $.26-$.29, but that will still be substantially below last years profits. And that is where the big question mark comes from - if THQ is only able to make $.25/share when they release their single largest PSX title ever, combined with significant re-orders of sold out WM2K and TS2 titles, how are they going to make $1.25, or five times that much, in the fourth quarter? They did not do that in 1999, where the 4th quarter was roughly 50% higher than Q1 in profits, not 500% higher. I do not believe this is an earnings guidance trick - it appears to be more serious than that. My guess is the following - THQ will report sales of something like $65 million and profits of $.26 a share for Q1. The press release will tout the success of the WWF games, but also note that something like a $6 million charge was taken for project abandonment. With this THQ will dump some of the GameFx failed development efforts and justify the lower profit reported despite strong sales. THQ will also reserve it's standard percent (9%?) of sales on WWF even though they don't need to on that particular title, and will use the extra $4-$5 million generated from this to make accomodation to retailers for N64 titles (Road Rash, Nuclear Strike, BassMasters, etc.) that are still sitting on the shelf. This will allow them to keep reserve levels around $20-$25 million, and will flush a lot of 1999's sell through problems away, and generate goodwill with the retailers to maintain ability to put product on the shelf. In the 2nd quarter, you will basically get a repeat of the 1st, expect with reorders only of WWF, so lower sales and profits, but further clean up the balance sheet. By fall and winter, THQ will have a relatively clean balance sheet and emptier pipeline, and be able to take a risk with initial shipments of the new Rugrats, Power Rangers, Scooby Doo, and PC games. This will allow THQ to make it's 2000 numbers of $2.00 a share, but a bunch of it is likely going to be sitting in the channel after next Christmas. If it sells through well, THQ may return to strong growth in 2001. If it doesn't sell well, we could easily get losses for Q1 and Q2 of 2001 to clean up the mess, and then we will start this all over. Either way, it will likely be impossible to tell in 2000 whether THQ can grow beyond making $2/share, with a lot of that predicated on the WWF remaining as popular as it is. Kory