THQ Forecasts Second-Quarter Sales Below Estimates

THQ Inc. (THQI) fell 9 percent in extended trading after the video-game publisher announced a $90 million debt offering and forecast second-quarter sales that fell short of analysts’ estimates.

With no new releases during the period, revenue will fall to $85 million to $95 million from $151.6 million a year ago, Agoura Hills, California-based THQ said today in a statement. Analysts had forecast sales of $121.7 million, the average of 14 estimates in a Bloomberg survey. The convertible senior notes will be due in 2014.

The debt will be used for general corporate matters, THQ Chief Financial Officer Paul Pucino said on a conference call today. Mike Hickey, an analyst with Janco Partners Inc. in Greenwood Village, Colorado, called the debt offering unnecessary.

“That’s definitely why the shares are weak,” Hickey said in an interview. He recommends investors buy the shares and said he doesn’t own any.

THQ fell 72 cents to $7.79 in extended trading. The shares rose 9 cents to $8.41 in regular Nasdaq Stock Market trading before the results. The shares have doubled this year.

Cost Cuts

In May, THQ said it secured a $35 million secured credit line from Bank of America Corp. That followed cost cuts, including eliminating a quarter of its staff. The company has $155 million in cash and short-term investments, Pucino said on today’s conference call.

THQ reported first-quarter net income of $6.4 million, or 9 cents a share, compared with a loss of $27.2 million, or 41 cents, a year earlier. Excluding some items, profit was 10 cents.

Sales rose 77 percent to $243.5 million in the period ended June 30. Excluding changes in deferred revenue, sales totaled $233.9 million, topping the $219.2 million average estimate of 14 analysts surveyed by Bloomberg.

THQ’s “UFC 2009: Undisputed,” introduced on May 19, was the top-selling game that month and the second-best selling game in June, according to NPD. The results follow five straight quarterly losses and a restructuring that included eliminating a fourth of the company’s staff.

U.S. video game industry sales, which more than doubled over three years to $21.3 billion in 2008, have declined as consumers bought fewer games and consoles amid the recession. In June, U.S. video game sales fell 31 percent, the biggest monthly decline since September 2000, according NPD Group Inc. The drop was the fourth consecutive monthly slide.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.

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