THQ’s stocks have plummeted 46 per cent following the release of its Q2 financial report, in which it told investors that it intended to delay all of its planned fourth quarter releases. It also revealed that a mergers and acquisitions consultant had been hired to discuss other potential strategies.
The publisher reported net sales of $107.4 million with a net loss of $21 million for the period ending September 30. It was an earnings drop of $39 million year-on-year, but the company reined in its losses after last year’s disastrous $92.4 million.
Shares fell $1.52 as a result, closing at $1.50 compared to the previous day’s $3.02.
THQ has been struggling to reverse its decline since last year, gaining a new president – in the form of Naughty Dog founder Jason Rubin – in May after Danny Bilson left to pursue other interests and closing a number of studios.
In the earnings call, THQ announced delays to the releases of Metro: Last Light (pictured), Company Of Heroes 2 and South Park: The Stick Of Truth, saying it needed more time to the realise the games full potential. The resultant shift necessitated the appointment of mergers and acquisitions consultant Centerview Partners, however.
“When I joined THQ the company made a public commitment to quality titles,” said Rubin. “We always expected that in some cases this would mean that more time would be needed to make sure that every title is of the highest possible quality. Our fourth quarter releases are the first titles that I have had the ability to materially impact, and experience told me that the games needed additional development time to be market-ready.”
Rubin said that the publisher had ten games in development for release beyond fiscal 2013, including a new Saints Row title, Crytek’s Homefront 2 and an as yet announced game from Turtle Rock Studios.
“I firmly believe releasing our fourth quarter titles without extra time for polish in the current environment would lead to underperformance that could in turn lead to future additional capital shortfalls,” Rubin continued.
“But extending development schedules in order to make the best possible titles also has financial implications. Yet there can be no doubt which path has the greatest chance of leading to the long-term success of the company. We must follow the course that generates the highest quality games, and will establish THQ as a mark of quality for the consumer.”
A rousing sentiment, no doubt, but not rousing enough to maintain the company’s share value, clearly. While that value has recovered a little, THQ is in serious danger and facing a potentially crippling lack of capital with which to invest in future projects.
While Crytek’s involvement in Homefront 2 bodes well for that game’s success, the first Homefront’s poor reception will throw up a marketing challenge. Similarly, a Saints Row sequel will likely perform well for the company – Saints Row: The Third has now now sold over four million units – but it will face stiff competition from Grand Theft Auto V. But THQ will have to get these games to market in order to reap any returns, of course, and there’s a very real chance it could face bankruptcy before that’s possible.