THQ Bear's Rebuttal
David Forrest ([email protected])

Did you know that on a split-adjusted basis, THQ fell from as high as $95 a share all the way to $1 5/8 about five years ago? Why do I mention this? Just to give you an idea of how incredibly hard this company fell because it had a series of things go wrong, from financial mismanagement to a tough game market. It should be some indication to you that when things go wrong in the video game publishing market, they really go wrong. But, I guess this time will be different.

What David Haines fails to realize in his bullish case is that he spent most of his time waxing nostalgic about the past. Wall Street, and Main Street for that matter, don't care about past achievements, they're focused on future results. Let's look at his statements about the future:

"Most analysts are predicting strong growth for the industry right through the year 2000." "Analysts have consistently been too low with estimates each quarter."

Let me get this straight, I'm supposed to listen to the analysts when they tell me that growth in the industry will be explosive, but not listen to them when they tell me that THQ will come in with modest results. Which is it? Let's not just conveniently listen to the analysts when they tell us what we want to hear. Quoting Farrell: "1998 is shaping up to be a year of excellent growth in revenue and earnings."

Well, ya didn't really expect him to say he thought it was gonna be awful, did you? :)

"THQ has announced over 30 titles including WCW Thunder... Quest 64... Mulan... and A Bug's Life"

WCW will face increasing competition from WWF and the WCW license is in jeopardy. Quest 64 may do well, but some reviews say it's weak. Mulan will be far from a blockbuster, and A Bug's Life is a crapshoot. Maybe it will be huge, but right now, I'm not all that turned on by bugs.

"I am most certainly bullish on THQ and see the stock trading at $45 by the end of the year, if not higher."

Perhaps the boldest statement of all. For the sake of all the shareholders, I hope I'm wrong, and I hope they all make an absolute bundle, but given the uncertainties I see with the title selection this year, I'm very skeptical.

Finally, David's argument doesn't even address the problem of hardware platforms and cartridge manufacturing. THQ can't expect any more deals from Electronic Arts as EA has an exclusive deal with Nintendo for all N64 games. EA has also stated that it won't release any more Super NES titles. Doesn't THQ get it that the bigger names (Disney and EA) that it has relied on until now for a consistent revenue stream have publishing arms that will pump out their own CD-ROMs and not need THQ?

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