THQ exits licensed kids games to focus on hard-core
THQ Inc., once one of the industry's largest publishers of video games for children, said it will no longer produce licensed kids titles for traditional game consoles.
Instead, the Agoura Hills-based company announced it will double-down on making hard-core games such as Saints Row: The Third, a Mob-themed game that sold 3.8 million copies since its release Nov. 15.
"THQ will be a more streamlined organization focused only on our strongest franchises," Brian Farrell, the company's chief executive, said in a statement released Wednesday.
The news did not help THQ's stock price, which fell 4 cents to 70 cents in morning trading following the announcement. Shares slid below a dollar for the first time, to 90 cents from $1.46 on Dec. 8, when the company disclosed that disappointing sales of its uDraw game would lead to a 25% hit on fourth-quarter revenue. Its share price has remained below $1 since then.
With younger audiences migrating to free games on social networks and mobile devices, bailing out of the market for kids console games is the right move for THQ, said Michael Pachter, an analyst with Wedbush Securities.
However, the company's dwindling cash pile could make it difficult to finance the sort of high-budget hard-core games it wants to stake its future on, he added.
THQ had $51 million in cash and short-term investments as of September 2011, when it last reported its financial performance. That's down from $119 million last June. Holiday sales typically help replenish the coffers of many game publishers, but with uDraw dragging down revenue, THQ will likely have less cash than planned.
In addition, THQ could have trouble borrowing in the current risk-phobic capital climate, "so the precarious cash position is a problem," Pachter said.
THQ is set to update just how much cash it has left on Feb. 2, when it reports its fourth-quarter earnings.
-- Alex Pham
Image: Screenshot of SpongeBob SquarePants: Battle for Bikini Bottom, a game published in 2004. Credit: THQ