THQ Inc. on Thursday said it expects to report a fourth-quarter loss of 13 cents per share next month due to a change in development strategy for its World Wresting Entertainment games and the disappointing performance of one of its major titles.
Shares of the Agoura Hills-based maker of interactive entertainment software fell $1.99, or 7 percent, to $25.25 in after-hours trading following the preliminary earnings announcement, and dropped an additional 0.55 percent to $27.09 in Friday trading.
THQ plans to report results for the quarter ended March 31 on May 5. The company said it expects to report a net loss per share of approximately 13 cent per share, compared with previous guidance of earnings of 2 cents. It also expects to report net sales of approximately $150 million, above its previous guidance of $135 million.
THQ has entered into a long-term, strategic agreement with Japanese 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. Since the company will now outsource all WWE game development, the company expects 8 cents per share of expense 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 one of its major titles, “Full Spectrum Warrior: Ten Hammers”.
“Full Spectrum Warrior’ was performing well below plan, probably because it got mediocre reviews and came out when current-generation console sales are down 30 percent,” Wedbush Securities analyst Michael Pachter told Bloomberg News.
THQ reaffirmed its previous guidance for fiscal 2007, and expects to report net sales in the range of $900 to $950 million and earnings per diluted share in the range of 90 cents to $1.
“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,” Chief Executive Brian Farrell said in a statement.
