THQ swings to a loss in first quarter
THQ Inc.’s earnings took a beating in the first quarter as sales of its marquee wrestling title, UFC Undisputed 2010, came in below expectations despite scoring positive reviews.
The Calabasas video game publisher said sales slumped 39% to $149.4 million in the quarter ended June 30 from $243.5 million a year earlier. It posted a net loss of $30.1 million, or 44 cents a share, compared with a $6.4-million gain, or 9 cents a share, in 2009.
THQ sold 2.7 million copies of UFC Undisputed 2010 from its release May 25 through the end of the quarter. Though that’s comparable to last year’s unit sales of 2.9 million for Undisputed 2009, much of this year’s sales came after THQ slashed the game’s sale price when it became clear in the weeks after launch that fewer players were willing to pay full price this year.
“We didn’t capture the broader audience that bought the game last year,” THQ Chief Executive Brian Farrell said. “The hard-core fans loved it. But if we just get the hard core, that’s not enough.”
The company’s 2009 revenue also got a big boost from its first-quarter launch of Red Faction: Guerrilla, a shooting game that garnered rave reviews and strong sales. The sequel, Red Faction: Armageddon, isn’t due out until next March.
Since embarking on a major restructuring operation a year and a half ago to focus on fewer, stronger titles, THQ has been struggling against brutal economic head winds that have buffeted the entire game industry. Sales of console games in the U.S. were down 8% in the first six months of this year to $3.5 billion, from $3.8 billion during the first half of 2009, according to NPD Group Inc.
“THQ still has an opportunity to turn things around,” said Colin Sebastian, an analyst with Lazard Capital Markets. “It’s just that the current environment is not allowing them to reap the benefits of their restructuring. Now we’re all sitting on our hands waiting to see when the industry gets better.”
Shares of THQ, which fell 20 cents to $4.38 in regular trading, gave up an additional 14 cents in after-hours trading to $4.24.
While investors wait out the storm, Farrell said, THQ is taking steps to adapt. For example, it’s considering longer intervals between releasing UFC sequels. It’s also aggressively adding online components to its top-tier games to boost incremental revenue from online subscriptions or sales of downloadable content.
alex.pham@latimes.com
