THQ is going to have a hard time offloading its remaining inventory of uDraw video game tablets.
The accessory, which debuted with a big marketing splash for the Xbox 360 and PlayStation 3 this past holiday after a healthy Wii debut the year prior, failed to ignite consumer interest, resulting in a sell-through of fewer than half the units THQ manufactured.
Its failure was a surprise to the company, given its healthy Wii sales and the results of two independent studies that suggested the company was addressing a sizable untapped market by expanding its uDraw lineup.
"We were confident that uDraw would resonate again this holiday, given last year's robust sell-through," CEO Brian Farrell told investors in a conference call on Thursday.
"Our confidence was misplaced."
The company's overestimation is staggering. In all, THQ has sold through 1 million units to stores, many of which are still there, often in the bargain bin. That leaves it stuck with 1.4 million more left unsold in its warehouses.
The result of this misstep, according to the company, is a reduction of $100 million dollars in sales for its crucial holiday quarter, $80 million of that directly related to its excess inventory of uDraw hardware, and $20 million related to its software and a hit taken on selling some of its inventory at a loss.
In terms of income, the company attributes over $30 million of its $54.6 million operating loss just to the uDraw.
Hardware production has of course ceased, and software support for the device seems to be dead as well. THQ says it has developed a plan to move that remaining inventory through retail channels, but other than that, the company has "no other remaining commitments with respect to uDraw," according to Farrell.
"We were looking at uDraw as a bridge to this core and digital future, and that bridge turned out to be a plank that we walked off of," said Farrell.