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: Kory who wrote (9290)	1/12/1999 3:54:00 AM
From: OGM	Read Replies (1) \| Respond to of 14266

I would actually prefer that THQI didn't "smooth" their profits. It would mean that their EPS numbers would be more erratic and (hopefully) make their price more erratic. This would cause (1) more opportunities to buy on irrational weakness, (2) some institutional buyers to stay away from the stock until revenues are larger, under the theory that it has small company-style uneven growth and therefore should be given a lower valuation. This would allow us to snap up more shares at a lower price while the company performs -- WE would know the company is great, they wouldn't realize it until it got bigger down the road. Institutional investors tend to use volatility in price as a proxy for risk. This is the wrong proxy in my opinion, but it creates great buying opportunities. If you're in this stock for the long haul -- and I would argue this company is a major keeper -- then this effect would allow us to get more shares at lower prices. Since the company will continue to perform on the fundamentals (which are excellent and improving), the stock price would catch up anyway once institutions and the beta-proxy advocates realize that the long-term growth is excellent, regardless of the short term earnings and price volatility. For the long-termers and the contrarians, I'd love to see the smoothing go away.

To: Kory who wrote (9290)	1/13/1999 12:40:00 AM
From: Marc Newman	Read Replies (2) \| Respond to of 14266

Kory, there certainly is a big difference between your case one and case two. It looks like there were some more issues in this Microsoft case than just over-reserving. Kelloggs is kind of the poster child for taking an annual "one-time" restructuring charge. I think THQ is crossing the line into being too conservative. This isn't a turnaround story anymore. As a shareholder, I'd rather have the earnings less smooth and more "true." Because, like OGM, I think I know enough about the upcoming releases that I know what I'm getting into. I would really like THQ to get a hell of a pop if the true sales came out. I have little accounting knowledge besides what I pick up month to month from these threads, but it seems to me that with THQ's conservative initial shipments and the huge sell-through of the hits this Christmas the reserve is way too high. Kory, what's your opinion about THQ's options if a ton of the reserves are technically for WCW titles that will be sold-through by June 30? Is it a choice of letting some of that money start to flow down or will we see one hell of a June quarter? Or can THQ legally just flow money down for quarters to come, even though there are no WCW games being sold? If THQ is using money that was reserved for WCW to add to eps in Q3, would it have to note this in the quarterly report? Or does THQ only have to report WCW revenues and thus could legally claim zero WCW revs after June 30? Have I confused you yet? Also, doesn't THQ have $2 million of remaining NOL that is expiring and has to be used this quarter? Marc