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: Marc Newman who wrote (10245)	3/15/1999 7:50:00 PM
From: Todd D. Wiener	Respond to of 14266

Marc- X-band was only part of the problem (only $2 million in 1994). THQI had terrible inventory management 5 years ago, and they had inadequate reserves and allowances. They shipped too much product into the marketplace (poor quality games, in most cases) at a time when the 16-bit market was already declining. They were caught with lots of inventory of outdated games, not to mention the high level of returns that the company needed to make payments for (retailers returned product that wasn't selling, and THQI had to buy back the units). All in all, the company had to write off a huge amount of inventory and sell a lot of other titles at close-out prices (44% of 1994 sales were closeout). These were the main reasons for the large losses in 1994. The reasons for the large losses in 1993 were largely due to the closure of THQI's unprofitable toy division. During both years, THQI had high SG&A expenses, coupled with low gross profit margins and declining sales. Today, the company's operating structure is obviously much better, with lower costs and better inventory management. Also, THQI is not going to stock up on outdated games as the current market declines. And with the backward-compatible nature of the PS2, PSX games will not decline very quickly. Also, the N64 market is still strong. And unlike last time, new consoles are arriving before the existing consoles suffer declining sales. This indicates that the market will not turn down, but suffer a flat year, at worst. And THQI, which has been growing at 4 times the market's pace, is likely to continue its strong growth. Todd