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Pachter: THQ Due For Rebound Following

Pachter: THQ Due For Rebound Following "Miserable" Fiscal 2008

May 5, 2008 | By Brandon Boyer

Ahead of THQ's year-end results due May 6th, Wedbush Morgan's Michael Pachter has said that while the company may have had a "miserable" fiscal 2008, its product lineup of unique Wii games, and a new Saints Row and Red Faction may bring it back in line with its "stellar" fiscal 2007.

"THQ has mightily disappointed investors over the past six months," said Pachter, a time period that saw third quarter results that showed profits down sharply from $62.1 million to $15.5 million, the cancellation of its Stuntman and Juiced franchises, and the closure of internal studios.

Despite this, he added that the company "can significantly exceed expectations in FY:09." In particular, Pachter says it appears that "THQ's lineup in FY:09 is quite similar to its lineup in FY:07, with several areas of improvement."

"In both years," he says, "the company has games based upon its WWE, Nickelodeon, Bratz and Pixar licenses; in both it has a Saints Row game. It also has a very strong lineup of new content this year, with Ultimate Fighting Championship, Red Faction 3, Darksiders and an interesting Wii lineup comping against Barnyard and Monster House games that were released in FY:07. All of this happens in the context of industry growth that is expected to be +40 - 50% greater than the level from FY:07."

"We believe," he continued, "that the overall Nickelodeon lineup will perform at least in line with the level generated in FY:07. We expect flat to slightly down performance for the Bratz and Pixar lineups overall, in the context of a much larger industry with more console and handheld SKUs produced, but note that WALL-E is not as compelling a property as Cars in FY:07," and says its licensed deals should bring in sales in line with fiscal 2007's.

On top of that, Pachter says new games and owned IP should bring in increased sales, up $80 million for its Wii games like de Blob, a 'modest increase' of $25 million for the new Saints Row, and $140 million from Red Faction and UFC.

Pachter concludes that while guidance and consensus estimates may be "exceedingly conservative" following "the fact that THQ failed miserably in FY:08, with horrible performance from its big franchises that year," the company is set to deliver "$200 - 250 million of growth from its lineup in FY:09."

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