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: Trippi who wrote (3998)	3/13/1998 2:13:00 AM
From: Jonathan Lebed	Respond to of 14266

MAJOR ANNOUNCEMENT!!!! Penny Wise Stock Picks is now open... members.tripod.com Jon

To: Trippi who wrote (3998)	3/13/1998 2:33:00 AM
From: Trippi	Respond to of 14266

Tom C -- thought you might want to quarrell with some of this logic from the RedChip review -- reinterating their price target of $40 by year's end -- grabbed it from the Fools THQ board: Analyst Comment: It would be na‹ve of us not to note that this announcement will likely lead to some downward pressure on the stock (10%-15% would not be unreasonable after the stocks recent run); however, we are remaining steadfast in our estimates and rating of the firm. As a result, we would view a dip in the price of the stock as an opportunity and would not consider such an event with alarm. The reasons: 1.THQ will continue to produce WCW games throughout 1998 and can continue to sell what they have produced through 2H99. As a result, we have no reason to waiver from our 1998 EPS estimates of $1.35. 2.THQ has been able to manage its impressive growth while constantly having to adjust its product offerings to changes in hardware (new platforms) while replacing previous best sellers in a particular quarter or year with new franchises and titles. So, while THQ had to replace 1996's popular Olympic Summer Games and Toy Story titles with WCW v. The World and WCW vs. NWO World Tour in 1997, these popular WCW titles will be supplanted by their sequels in 1998, and in 1999 Rugrats or one of THQ's other franchises will have to step in to replace the WCW franchise. In the software industry, success creates the greatest challenge (equaling or exceeding the prior year's performance with a new title). 3.Although THQ would have preferred to renew the license, it has built its business on a vast array of platforms, franchises, and titles. Predicting the success or failure of a title is difficult if not impossible. As a result, there is always a tremendous risk associated with the software industry. THQ has typically minimized the risk by putting together a solid slate of titles that occasionally results in a hit. So, while THQ would have gladly accepted the opportunity to continue the license beyond Dec. 29, 1998, the loss of WCW does not change its business dramatically in the short-term and may have little if any impact over the long-term. Even with the WCW license, there is no guarantee that future titles will be as popular as those introduced in 1997. The Company had already reduced its reliance on the WCW franchise in its own models for 1999. The loss of the license only serves to confirm its expectations that other franchises and titles will have to take the lead role in 1999 and beyond. The issue facing the stock is one of perception vs. reality. Perception: THQ built much of its recent success on the back of the WCW franchise in 1997 and the loss of the license will have an impact on its ability to produce results in 1998 and beyond. Reality: 1998 results should not be impacted by this announcement in anyway and the impact on 1999 results is as uncertain as the ability to predict which title will be THQ's best seller that year since the games have yet to be developed. Admittedly it may be difficult for THQ to experience the multiple expansion that we had used in projecting our $40 target price, but we believe management has demonstrated its ability to work through similar challenges in the past.

To: Trippi who wrote (3998)	3/13/1998 3:54:00 AM
From: Tom Caruthers	Respond to of 14266

Trippi, Whoa there killer. I am not trying to pick a fight. Just discussion of a problem. I told you in the last post that I did not think THQI was a dead company. Just a vulnerable one. OK. Your entire argument is based on estimates of analysts who have for the most part, completely missed the boat on THQI's previous earnings. The fact of the matter is that the success of WCW took them by surprise. Which goes to show that it is difficult to predict hits. Now you are using these same analysts as your shield. Yes, they are conservative. And you may use this as further support of your argument. But you are forgetting several things. THQI has been enjoying the success of having relatively little competition in N64, as compared to the Playstation. The big name titles have consistently sold more than a million units plus a piece. Now Nintendo has lowered its licensing fees, making their cartridge-based platform more attractive to game developers. The huge profits that companies have been enjoying have attracted a lot of competitors...hence ERTS entry into N64. Others will follow. The point is....those who control content will be successful. ERTS has a huge library of games to port over to the N64. ERTS has a lot of sports games....not Diddy kong racing, Mario world and other games which don't appeal to the sports nut. This directly competes against THQI's main product...WCW. Where is THQI's content? Any of it proven yet besides WCW? Also, without the retailing leverage of WCW, it will be more difficult for THQI to place games at retail. Why do you think Qwest will be successful? People thought Pax would be a huge hit. It is true, Pax was a profitable venture, but not what THQI expected and certainly not the HUGE profit maker that was implied earlier. Do I have solid numbers on this? No. But based on what management has said, this is likely the case. Why do you think Rugrats will be successful? Have you even seen the product yet? Yes, I believe the Disney games will be good sellers, but not until the movies come out. A bug's life is coming out in November, no? Speculation on the success of Qwest is premature. Without the wonder hit driving earnings, it will be difficult to predict the stability of THQI's earnings. To make forward estimates of earnings when there is this type of limited visibility, no matter how conservative, in this short-lifespan, hit driven business, is fool-hardy. What sells well is what has sold well. That is fairly predictable. To start from scratch is an entirely different matter. And THQI still has to prove that it has something that will sell well other than WCW. To ship a game and record it as revenue and earnings is one thing. To actually derive a steady stream of earnings from a title like WCW is another There is no question in my mind that THQI will blow away estimates in this next quarter yet again. How much of this is related to WCW reorders, we will find out. The greater percentage of sales due to WCW, the worse off it is for THQI. Show me where the earnings growth is coming from. Their ports to the SNES and Genesis platforms...that will fade away slowly. There is a huge installed base, but come-on. Playing SNES is hardly "cool" anymore when all of your friends are playing Playstation and N64 which are selling for only $150. They are unlikely to even get reorders from those games. Pax won't get a heck of alot of re-orders either. That is heading to the bargin bin. I have to give Farrell credit. He finds money in the least likely areas. I guess it is a wait and see process. Don't tell me I'm WRONG yet. I guess we'll wait and see. THQI will probably bounce based on reassurances from analysts. But their business will speak for itself. We shall see. Tom C.