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Greenwald blasts THQ over performance

Signal Hill analyst casts doubt over publisher's chances for recovery

Todd Greenwald, senior research analyst at Signal Hill Capital Group, has issued a note to investors blasting THQ over its latest set of financial results and casting serious doubt over whether or not the publisher has the means to get itself out of the tight position it's in.

He branded the USD 192 million loss as "disappointing, to say the least" and noted the results were "despite the stronger than expected release of Saints Row 2," without which "sales would have been down over 40 per cent year-on-year."

He was also unhappy with the company's inability to provide any guidance for Q4, and stated his belief the its strategy for the next financial year "appears cloudy at best," comparing it unfavourably with Electronic Arts.

"While Electronic Arts results were characterised by a disastrous FY09, complemented by a more promising FY10, we can't say the same about THQ," he wrote. We are sceptical that the FY10 line-up is even that much stronger than FY09.

"The loss of Saints Row 2 (2.6m units) will be hard to compensate for - we don't think Red Faction or Darksiders will come anywhere close. Furthermore, WWE appears to be a franchise in decline, especially as the PlayStation 2 platform dies off, and Pixar's Up should underperform WALL-E (which underperformed Ratatouille, which underperformed Cars...)."

As a result Signal Hill is expecting a 5 per cent decline in THQ revenues for the next financial year, and lowering estimates for the next quarter substantially: "While the cuts seem drastic, we just don't think that THQ has the titles that can succeed in this retail environment, where retailers are keeping inventories leaner and leaner and heavily favouring the top 20 sellers."

THQ's share price was down almost 15 per cent to USD 3.52 in after-hours trading, following a 2 per cent fall by the close of trading yesterday.

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Phil Elliott