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

To: JoCo who wrote (6455)	6/27/1998 3:54:00 AM
From: Todd D. Wiener	Read Replies (4) \| Respond to of 14266

JoCo- I don't know what connection, if any, that Bear Stearns has with THQ. I've already said that I don't expect a takeover of THQ while the stock is at current levels. I also don't see the reason for any kind of secondary (tertiary?) offering, as the company is flush with cash. Thus, the only 2 reasons I can see for a Bear Stearns relationship are M&A and research coverage. The latter is much more likely than the former possibility. It's my opinion that THQ would be unwise in trying to merge with a competitor, such as ATVI, for example. For one reason, most of THQ's competitors have a higher market value (for reasons I don't understand), and they all have higher sales. THQ has the greatest employee efficiency (as measured by sales or profits per employee) in the entire industry (by far). The next in line are MWY and ERTS. These are the only 3 stocks that I would consider buying (of the US companies). The reason that BROD, AKLM, GTIS, etc. have had trouble with profitability is that they have too many employees. If THQ were to merge (or ultimately acquire) one of these companies, it would need to eliminate many of the employees or suffer similar problems. Therefore, I think that, aside from niche acquisitions of small developers, THQ is best served by acquiring licenses and properties, rather than whole companies. For example, THQ could (purely hypothetically) buy the Duke Nukem property from GTIS. This would be preferable to buying GTIS (again, assuming that THQ could do it). However, I've said before that Farrell, like all of us, is an investor. I think that THQ would be more interested in obtaining a license (Rugrats, WCW) at a low initial cost, and building its value, than they would be interested in buying an already popular video game property such as Nukem. It's just like us: We could cash out of THQ and spend all that money buying ERTS shares. Sure, we get a leader and a proven winner, but we're paying a lot more upfront, and we may have much less room to run. That's why we buy THQ. And that's why Farrell and THQ buy undervalued licenses and build value. In summary, if Bear Stearns is involved, I'd suspect its going to initiate coverage at some point (perhaps following Q2 reporting). I think that THQ's acquisitions will remain low cost and high value (a l GameFX). That's the way a good investor should invest. Todd