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Perry Rod




11/16/10 at 8:00 AM CST



READ: 838






Strong Sell

THQ: Welcome to the Jungle

The once mighty shovelware developer, THQ Inc., has found itself surrounded, deep in enemy territory.

With the rise of the Wii and Nintendo based products, THQ has been forced to move away from children's products and is trying to succeed with what the industry calls, "core titles."  These are risky high development cost titles for an older demographic that often either break out or make no operating profit at all.  Internal developers at THQ's Kaos Studios in New York are working frantically on THQ's make-or-break title, Homefront, while THQ runs low on cash.  Kaos Studio's previous title was rated in the mid 70's and Homefront is a brand new brand, so they have their work cut out for them.  The title appears to have high expectations relative to last year's fourth quarter title Darksiders, which earned ratings in the mid 80's and generated modest sales.  Analysts expect earnings of .34 compared to .06 in the previous fourth quarter.

Years ago, family based casual gaming was mostly concentrated on a single platform, the PS2.  Now, it is fractured onto many consoles with stronger competition from first parties like Nintendo and Microsoft.  That has left THQ desperate to succeed in an even more difficult market that competes with high quality products by well capitalized publishers.  So can a new title like Homefront succeed when millions are already armed with Activision's Call of Duty and Electronic Arts' Metal of Honor?  It's possible, but it will take some pretty extraordinary game playing.

More likely, THQ is heading toward more game delays, more mediocre sales, and more debt.  Investors should proceed with caution.  THQ can easily get blown into bits playing this game.

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