THQ loss shrinks, but shares down on forecast

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SAN FRANCISCO -- Video game publisher THQ Inc. reported a smaller quarterly loss Wednesday and its shares fell 5.5% as weak revenue and a forecast of higher marketing costs triggered earnings' concerns.

The publisher of such games as "Ratatouille" said it expected a profit of 10 cents a share in the current quarter, excluding one-time items, and sales of $240 million.

The average forecast of analysts was fmor 20 cents a share on revenue of $238 million, according to Reuters Estimates.

"Our revenue guidance was right in line. What the Street didn't anticipate was an additional $10 million in marketing for 'Stuntman' and 'Juiced 2'," Chief Executive Brian Farrell said in a telephone interview.

THQ shares fell $1.55 to $27.21 in early afternoon trade on Nasdaq after falling as low as $25.92 in morning dealings. The stock has fallen 16% so far this year, compared to a decline of 3.3% for Electronic Arts Inc. and 5% for Take-Two Interactive Software Inc.

"It's all just timing of expenses and timing of revenue," said Wedbush Morgan analyst Michael Pachter. "In a down market you can't have anything change, you better deliver what people expect."

For its fiscal first quarter ended June 30, THQ posted a net loss of $9.2 million, or 14 cents per share, compared with a loss of $12.1 million, or 19 cents a share, a year earlier.

The results included stock-based compensation expense of 5 cents a share and a tax benefit of 10 cents a share that the company booked earlier than expected.

Revenue fell to $104.5 million, down 25% from $138.8 million a year earlier and short of the $112.7 million expected by analysts.

"The June revenue was the majority of the disappointment," said Evan Wilson, an analyst with Pacific Crest Securities who has an "outperform" rating on the shares.

Much of THQ's portfolio consists of licensed games based on television shows or movies, including those from Disney-Pixar , which made the "Ratatouille" animated feature.

Those games tend to smooth out the company's revenue in the middle of the year when overall industry sales are usually weak, but they are also less profitable since THQ pays licensing fees.

THQ's lineup for the rest of its fiscal year includes several original properties such as "Stuntman" and "de Blob" that are expected to perform strongly.





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