THQ Predicts Higher Sales, Lower Profits On WWE Re-Org

Major game publisher and developer THQ has announced updated guidance for its fiscal 2006 fourth quarter, which ended on March 31, and expects sales higher than previously predicted, but profits to be reduced, due primarily to a change in development strategy for its World Wresting Entertainment games, and the "below-plan performance" of the current-generation title Full Spectrum Warrior: Ten Hammers. Specifically, THQ expects to report net sales of approximately $150 million for the quarter, above its previous guidance of $135 million, but the company expects to report a net loss per share of approximately $0.13, compared with previous guidance of earnings of $0.02 per diluted share. Explaining these changes further, THQ announced that it has entered into a long-term, strategic agreement with Japanese game developer YUKE's for developing games based on the WWE wrestling brand, including the upcoming WWE SmackDown vs. RAW 2007. THQ holds a minority interest in YUKE's, which has developed wrestling games for the company since 1999. However, it appears that THQ was also staffing up internal development to produce wrestling titles, and as a result of the new development agreement, the expected fourth quarter loss per share includes $0.08 of software development expense related to the cessation of that development. In addition, the company's results are expected to include $0.06 per share of higher-than-expected price protection and software development expense for Full Spectrum Warrior: Ten Hammers, the disappointing-selling sequel to Pandemic's hit console title. "As we continue to manage through the platform transition, our outlook for fiscal 2007 and the long-term remains positive," said Brian Farrell, THQ president and CEO. "We expect significant video game industry growth over the next several years and believe we are well positioned to continue to gain share in this expanding market." Overall financial year results for THQ were unaffected, with net sales in the range of $900 to $950 million and earnings per diluted share in the range of $0.90 to $1.00. The company's shares bumped down slightly to $27.20 in after-hours trading. Official fourth quarter and fiscal year results for THQ are due on May 6th.