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

To: gofrank150 who wrote (10125)	3/2/1999 10:51:00 PM
From: Todd D. Wiener	Read Replies (4) \| Respond to of 14266

Chris- If almost all of the $17 million in inventory was Thunder, then that should mean that THQ is not planning on shipping much WCW in Q2, and not much Q1 aside from Thunder. After all, didn't Gysi say that most of the year-end inventory had already been shipped? If so, knowing that THQ had to have any 1999 WCW shipment in inventory or production (which I assume would be counted as inventory works in progress) on December 29, 1998, how can you expect 600,000 Nitros? And how about Q2 shipments of WCW? I'm not counting much Q2 WCW at all. The only way around this is if the $17 million inventory consisted of units with a cost of less than $10. For example, in THQ's inventory, a finished product has a cost of approximately $10 for a PSX game. Therefore, if $15 million of the inventory was Thunder, there could be 1.5 million units shipped, ONLY IF THE INVENTORY CONSISTED SOLELY OF FINISHED PRODUCT. Now, what if most of the inventory was work in progress? And what if the work in progress inventory carries a cost of, say, $2 per unit, because Sony hadn't completed the manufacturing yet? In this case, there could be substantially greater than 1.5 million units of completed product available for shipment in Q1 and Q2. Still, because Gysi said most had been shipped, I doubt there will be much, if any WCW, in Q2. And based on my estimates for Q2, THQ doesn't need WCW. If there's minimal WCW shipment in Q2, we can assume that THQ underestimated demand for WCW units, and decided to favor inventory management over higher sales. The only other way I can see that THQ could ship WCW in Q2 is if their unit costs are contained in the inventory reserves, which may be unreserved for Q2 revenues. Comments? Todd