THQ to stop making children’s video games for consoles
THQ Inc., once one of the largest publishers of video games for children, said it will no longer produce licensed kids titles for traditional game consoles.
Instead, the Agoura Hills company announced it will double down on making hard-core games such as Saints Row: The Third, a Mob-themed game that sold 3.8 million copies since its release Nov. 15.
“THQ will be a more streamlined organization focused only on our strongest franchises,” THQ Chief Executive Brian Farrell said in a statement Wednesday.
The news did not help THQ’s stock price, which fell 3 cents, or 4.2%, to 71 cents Wednesday. Shares slid below $1 for the first time, to 90 cents from $1.46, on Dec. 8, when the company disclosed that disappointing sales of its uDraw game would lead to a 25% hit on fourth-quarter revenue. They have remained below $1 since then.
With younger audiences migrating to free games on social networks and mobile devices, bailing out of the marker for children’s console games is the right move for THQ, said Michael Pachter, an analyst with Wedbush Securities.
But the company’s dwindling cash could make it difficult to finance the sort of high-budget hard-core games it wants to stake its future on, he said.
THQ had $51 million in cash and short-term investments as of September, when it last reported its financial performance. That’s down from $119 million in June. Holiday sales typically help replenish the coffers of many game publishers, but with uDraw dragging down revenue, THQ will probably have less cash than planned.
In addition, THQ could have trouble borrowing in the current risk-phobic capital climate, “so the precarious cash position is a problem,” Pachter said.
THQ is set to update just how much cash it has left Feb. 2, when it reports its fourth-quarter earnings.
