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WWE Deal Alters THQ Earnings

20 Apr, 2006 By: John Latchem

Video game publisher THQ has updated its guidance for the fiscal quarter ended March 31 and now expects higher net sales but lower earnings per share.

THQ expects to report net sales of approximately $150 million, above its previous guidance of $135 million, with loss per share of 13 cents, compared to previous guidance earnings of 2 cents.

The primary cause is 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.

THQ has entered into a longterm, strategic agreement with game developer YUKE's Co., Ltd. for developing games based on the WWE 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.

The expected loss per share is attributed to development expenses related to the cessation of internal product development for wrestling games. In addition, the company's results are expected to include 6 cents per share of higher-than-expected price protection and software development expense for Full Spectrum Warrior: Ten Hammers.

"YUKE's has consistently delivered WWE games that achieved tremendous critical praise and commercial success, with the most recent holiday 2005 title shipping in excess of three million units worldwide," said Kelly Flock, THQ EVP of worldwide publishing. "We are extremely impressed with what we've seen of their new games for next-generation systems and look forward to continuing to work with YUKE's to deliver high-quality, innovative WWE games for years to come."

"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."

THQ plans to report financial results for the quarter May 5.

The company reaffirmed its previous guidance for the fiscal year ending March 31, 2007. THQ expects to report net sales in the range of $900 million to $950 million.

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