THQ Q3 net income down 75%

THQ has announced third quarter fiscal 2008 financial results, showing net income down 75 per cent to USD 15.5 million.

The company reported net income of USD 62.1 million for the same period last year.

Sales, however, were up 7 per cent to a record USD 509.6 million, driven primarily by WWE SmackDown vs. Raw 2008 which sold 5 million copies.

Cars: Mater-National and MX vs. ATV Untamed - which will launch in Europe and on the Nintendo Wii in the US in March - also contributed to strong sales.

"During the holiday quarter, we were pleased with the record performance of WWE SmackDown vs. Raw 2008 and the successful launch of our internally developed game MX vs. ATV Untamed," said Brian Farrell, THQ's president and CEO.

"We continue to strengthen our product development capabilities to support our long-term strategy of creating new owned intellectual properties. We look forward to launching Frontlines: Fuel of War at the end of this month.

In fiscal 2009, we are well positioned for increased sales and profitability with strong owned intellectual properties such as Red Faction and Saints Row and well-known licensed franchises including WWE, UFC, Disney/Pixar and Nickelodeon."

Last month, THQ revised its guidelines for Q3 and the fiscal year, announcing that it had cancelled the PS3 version of Frontlines: Fuel of War and the PS2 version of Destroy All Humans: Big Willy Unleashed.

At the same time, it announced its decision not to pursue the Juiced and Stuntman franchises and the closure of its Concrete Games studio.

THQ's Q3 results include approximately USD 27 million in non-cash charges related to the company's decision to cancel those projects in development and the write-down of the value of certain intellectual properties as part of its product quality initiatives, as well as approximately USD 20 million in accelerated amortization expense.

In today's reporting, THQ reaffirmed its financial outlook for the fourth quarter of fiscal 2008. It expects to report net sales of approximately USD 200 million and a GAAP net loss of approximately USD 0.13 per diluted share.

For the fiscal year ending March 31, THQ expects net sales of approximately USD 1.04 billion and a GAAP loss per share of approximately USD 0.16

The company recently appointed former Tektronic exec Colin Slade as its new CFO, replacing Edward Zinser who resigned last November.

Update: In a conference call to investors, CEO Brian Farrell said that he thinks the Wii cycle will be similar to prior Nintendo platforms, in which first-party titles had a head start but eventually third-party titles were able to close the gap. He expects THQ's share of the Wii market to improve during calendar 2008

On abandoning Stuntman and Juiced, he pointed to the former title having gameplay which didn't translate well into the next-gen and being "too ambitious" with the developers of the latter title, who were working on 6 SKUs simultaneously.

Farrell expects this year's Pixar movie, Wall-E, to be a more popular property than Ratatouille - its last Disney-Pixar game which underperformed. He also pointed to Red Faction, Saint's Row, de Blob and Darksiders as titles which THQ has high expectations for in fiscal 2009.

Noting that 2007 was an impressive year for hardware sales, Farrell said that Sony, like Microsoft, still has price moves it can make to increase console sales. In his opinion, the pipeline of PS3 titles in 2008 is more "robust" - and given Sony's share in Europe becoming more broad-based, he said that the PS3 was "still a very viable platform."

Farrell also said that a demo of Frontlines should appear on Xbox Live within the next week or two, and that the final game would be the first Xbox Live game to feature 32 players online.

The recently-cancelled PS3 version of Frontline, based upon the Unreal Engine, would have been at least 30 to 60 days behind the lead Xbox 360 and PC SKUs due to the fact that, in Farrell's opinion, the engine was not optimised for open-world play.