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THQ Posts Double-Digit Gains Amid Robust Video Game Sales

Despite third-quarter growth, the Calabasas firm revises outlook for 2003 as retailers report weak console sales.

October 22, 2002|Alex Pham | Times Staff Writer

With unprecedented numbers of American homes equipped with video game consoles, game publisher THQ Inc. posted double-digit increases in profit and sales but surprised investors by throttling back guidance for its growth in 2003.

The Calabasas-based publisher of such games as "Red Faction" and "SpongeBob SquarePants" reported $4.8 million in net income, or 12 cents a share, in its third quarter on sales of $97.3 million. That's up from $3.2 million in profit, or 9 cents a share, on $68 million in sales in the same period last year. The earnings met expectations of Wall Street analysts surveyed by Thomson First Call.

Even so, shares of THQ, which released results after the stock market closed, lost nearly 30% of their value to $16.25 in after-hours sessions after gaining $1.70 to $23.17 on Nasdaq in regular trading.

THQ Chief Executive Brian Farrell cut his outlook for the industry's growth to 10% to 15%, down from previous estimates of 20% to 25%. He also projected that THQ's revenue would grow just 9% in 2003 to $585 million, while profit would remain flat at $1.40 a share.

Farrell said the revision resulted from feedback THQ received from retailers that reported that although Sony Corp.'s PlayStation 2 consoles are selling well, Microsoft Corp.'s Xbox and Nintendo Co.'s GameCube are struggling.

In spite of weaker growth, Farrell said he expects THQ to maintain or increase market share next year. THQ is the fourth-largest independent game publisher, with 6.2% of the market.

"If there's weakness, it's a market weakness," Farrell said. "The three platforms just aren't driving the market to the extent retailers anticipated."

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