(All figures in US dollars)
Back in November THQ lost over $115 million and announced a plan for "business realignment," including studio closures and layoffs. Well, the situation hasn't exactly improved at the publisher. Today, the company posted a holiday quarter loss of $191.8 million, as net sales dipped from $509.6 million to $357.3 million.
"We delivered high quality games to market this holiday season but fell short of our revenue and profit targets in this challenging environment," said Brian Farrell, THQ president and CEO. "We are taking highly targeted actions with the objective of investing in games with the highest franchise potential and returning to profitability. We have executed on our previously announced plan to reduce our cost structure by $120 million. Given continued economic weakness, we plan to reduce costs by an additional $100 million."
THQ said that part of the additional cost reduction actions include reducing product development spending by an additional $70 million "through studio dispositions and other project and headcount reductions." The company will also decrease sales, marketing and corporate expenses globally "through headcount and other cost reductions, with targeted savings of an additional $30 million annually." All told, THQ now expects to reduce its planned fiscal 2010 spending by $220 million and headcount by roughly 600 people or 24% of its workforce, which is up from the previous estimate of 250 people or 17%.
"Our focus for next fiscal year is to return to profitability and to generate cash. Our fiscal 2010 plan will reflect the benefits of our focused product strategy and strong actions on costs," noted Farrell.
Although THQ's holiday quarter failed to meet expectations, the publisher did have some sales highlights, including 2.6 million units sold to date for Saints Row 2, 4 million units shipped for WWE Smackdown vs. Raw 2009, 700,000 units shipped for de Blob, and 1.2 million units shipped for Big Beach Sports.
"Established franchises like Saints Row and WWE SmackDown vs. Raw, as well as new franchises such as de Blob and Big Beach Sports for the Nintendo Wii, give us confidence in our strategy going forward," added Farrell. "We have several compelling games set to launch in the coming months, including Warhammer: Dawn of War II, WWE Legends of WrestleMania, our first games based on the popular Ultimate Fighting Championship, and Red Faction: Guerrilla. In this environment, we are focused on what we can control: delivering high quality products, investing in a targeted product pipeline, and aggressively managing costs."
THQ is not providing guidance for the current fourth fiscal quarter ending on March 31. However, the publisher warned, "The company continues to experience a cautious retail and consumer environment. As a result, THQ expects fourth quarter results to be significantly below its previous expectations."
In related news, THQ today also appointed a new CFO following the leave of absence taken by Colin Slade during the previous quarter (it's now become an "indefinite" medical leave). Effective immediately, Paul J. Pucino will serve as THQ's Executive Vice President and Chief Financial Officer.
"Paul's strong financial leadership, corporate strategy expertise and deep experience with technology companies will be invaluable as we execute on our recently announced strategic plan and business realignment actions," said Farrell.
"THQ has strong franchises and a solid strategy," said Pucino. "I look forward to working with Brian and the rest of THQ's management team to implement the necessary changes to improve THQ's competitive position and profitability."
Pucino was previously executive vice president and CFO of Classmates Media Corporation, a wholly-owned subsidiary of United Online. From 2005 to 2007, he was the CFO of publicly traded internet services company Digital Insight, which was merged with Intuit in February 2007. In the past, he also served as executive vice president and CFO of Tekelec, a publicly traded developer of internet and telecommunications networking equipment.
