New Video Game Platforms Arrive Just in Time for THQ By CARLOS MARTINEZ Staff Reporter THQ Inc. isn’t the last tech company left standing, but it is one of the few success stories of the Valley’s tech industry in 2001. With revenues in 2000 far surpassing those of a year earlier ($347 million compared to $303 million in 1999), THQ was poised to continue a sharp growth mode. While the company saw its net income dip during the same period (from $31.3 million to $18.2 million) it did manage to make a profit, a statement that two out of five publicly owned companies in the Valley couldn’t make this year. Such numbers are in contrast to other tech firms that have seen revenues fall, market share dwindle and morale falter in 2001. “It’s not like other tech industries where you have companies with overstocked inventories who aren’t buying your product,” said Shawn Milne, an analyst with SoundView Technologies. “It’s video games and people can’t get enough of them.” So much so that THQ is on track to top revenues of $370 million for the year, if it at least matches last year’s fourth-quarter performance of $190 million. “This is shaping up to be a great holiday season,” said Brian Farrell, THQ’s president and CEO. “We are particularly enthusiastic about the release of WWF Smackdown! Just Bring It, WWF Raw and Monsters Inc.,” said Farrell, referring to the more than 60 video titles the company has issued during the holiday season. Farrell said the company is benefiting from the popularity of the new Xbox and GameCube consoles, which are driving sales of new games made by THQ and its competitors. The company’s growth spurt during 1999 was helped by the popularity of video games and new consoles. However, last year’s lack of availability of the Playstation 2 console drove the company’s revenue down, only to see it pick up again this year, THQ’s Farrell said. Anthony Gikas, an analyst with U.S. Bancorp Piper Jaffray, said the company has had its ups and downs in the past due to strong competition from other gamemakers and its own struggles in developing popular games. Crispin Boyer, features editor of Electronic Gaming Monthly, said THQ will continue to ride the wave of video game popularity. “It’s an industry that is oblivious to the tech downturn,” Boyer said. “People want to get the latest and best games and it doesn’t matter how much it costs.” With two new game platforms hitting the market this fall Microsoft Corp.’s Xbox and Nintendo Co.’s GameCube THQ is already providing games for those consoles, with yet more in the offing. Wall Street’s enthusiasm is also evident in the company’s stock price which has been heading steadily upward since April 2000 when it traded as low as $14 a share. On December 21, it closed at $51.50 a share, with a 52-week high of $65.10 and a 52-week low of $16.88. THQ’s stock price is up 52 percent since May 1, even taking into account a $140 million stock offering that closed last month. Gikas predicted THQ would earn $1.95 a share next year, with a $65 target for the stock next year. Gikas, who rates the stock a “strong buy,” said THQ will likely reach revenues of $380 million for the year and $470 million next year, led mostly by sales of games being readied for the popular Xbox and GameCube consoles.