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Wrestling Deal Off for THQ

Software: Shares tumble on news that WCW licensing pact won't be renewed.

March 12, 1998| From Bloomberg News

THQ Inc.'s shares fell more than 24% on Wednesday after the company said it would not renew its licensing agreement with WCW World Championship Wrestling.

The Calabasas-based interactive entertainment software developer's shares fell $7.94 to close at $24.50 in Nasdaq trading.

Electronic Arts Inc., a San Mateo-based publisher of game software for such systems as Sega Genesis and Super Nintendo, said after the close of trading that it had won an exclusive licensing agreement with World Championship Wrestling.

THQ's existing license expires Dec. 29, and allows it to continue selling products on hand through June 29, 1999.

Analysts said the news will have no impact on earnings for 1998 or the first half of 1999.

"Clearly, it's a relationship that THQ would have liked to continue," said Ken Trbovich, an analyst at Red Chip Review, an independent equity research company.

"I'm not surprised to see the stock take a short-term hit like this, particularly after its recent run-up."

Last month, THQ stock traded at a 52-week high of $32.75.

"Ultimately, I think the fall in the share price has more to do with perception than reality," Trbovich said. "They'll have to find something to supplant the [WCW] title, but that's the nature of the game software business, and they've done a good job in managing these kinds of transitions the past."

THQ President and Chief Executive Brian J. Farrell declined to comment on why the company wasn't renewing its license, or which company initiated the move.

Electronic Arts said it plans to ship its first title under the new five-year agreement in mid-1999. A spokeswoman declined to disclose financial terms of the deal.

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