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THQ Earnings Call Gives Little Reason for Confidence

| 6 Nov 2012 13:57
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Wedbush analyst Michael Pachter says THQ could be about to go bankrupt.

THQ recently announced game release delays for some of its most anticipated titles, and its earnings call - in which it discussed its current financial position and plans for the future - gave little reason to think that things are about to change for the troubled Darksiders and Saints Row developer. Though the company is exploring its options, Wedbush analyst Michael Pachter has said that unless things improve, THQ is on its way out.

"Should its financial position continue to deteriorate," Pachter said, "we expect THQ to raise financing through an equity sale that could lead to dilution of existing shareholders We expect creditors to be asked to renegotiate terms at a discount; if they are unwilling, bankruptcy is possible."

THQ President Jason Rubin did little to lighten the gloom during the investment call. Quick to remind investors that when he joined the company "there was a certain number of titles already too far along in the development cycle for me to have much of an impact," Rubin went on to say that Darksiders 2, though favourably reviewed, didn't do that well.

"Observing this and other recent industry releases," Rubin said, "one is left with a firm understanding that in the current marketplace, only the absolute top tier of releases is making impact on the game consumer."

"As mentioned in today's press release," said THQ CFO Paul Pucino, "we are no longer providing net sales and earnings guidance. And we are withdrawing our previous guidance for fiscal '13 in our projected operating model."

CEO Brian Farrell said that a lack of revenue, combined with mounting debt, had forced THQ to turn to financial advisor Centerview Partners "to evaluate our strategic alternatives." One of the first things Centerview told THQ, according to Farrell, was not to answer any questions until after the review was over.

That left those listening in with little to inspire them, no reason to think things would improve in the short term, and no means of asking THQ what it intended to do next.

Source: Seeking Alpha THQ Transcript, VG24/7

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