THQ Inc. didn't share much of the video game industry's holiday joy, reporting a 75% drop in fiscal third-quarter profit Tuesday.
Hurt by lagging sales of two high-profile titles and underperforming projects that were canceled, the Calabasas-based game publisher posted sales of $509.6 million in the quarter ended Dec. 31, up 7% from a year earlier. Net income tumbled to $15.5 million, or 23 cents a share, from $62.1 million, or 91 cents, a year earlier.
"They made games with blockbuster budgets that didn't have blockbuster results," said Michael Pachter, an analyst at Wedbush Morgan Securities. "So they went from making a lot of money to making a little money."
THQ, the developer of "WWE SmackDown vs. Raw" and "Cars Mater-National," took a $27-million charge to cancel two projects under development, shut down a development studio and write down assets for games that the company had high hopes for but that did not sell well, including "Juiced" and "Stuntman."
For its fiscal year ending March 31, THQ expects to earn a nickel a share on sales of $1.03 billion. The year before, it earned $1.24 a share on $1.03 billion in revenue.
THQ shares, which dropped 11 cents to $19.50 in regular trading, lost an additional 25 cents in late trading after the earnings release.
Although video game sales jumped 28% in 2007, THQ's revenue grew just 1%, Pachter said.
THQ Chief Executive Brian Farrell said his company took steps to bolster its performance this year. The company appointed two executives to focus on improving game quality and making sure projects land on time, Farrell said.
In addition, Farrell said he expected the slate of games to be stronger than last year's. Upcoming titles include "Saint's Row 2," "Red Faction 3," "de Blob," a "WWE" sequel and "Frontlines: Fuel of War," a console game that lets more than 32 opponents play simultaneously online.
"This is about generating hits," Farrell said in an interview. "We've done it before, and we'll do it again."