NEWS - Monday, April 28, 2003

THQ Sees Year on Track, Expects Price Cuts

LOS ANGELES (Reuters) - The chief executive of games publisher THQ Inc. said on Monday that business this year was on track to meet its expectations, with a new handheld game device helping sales, amid high hopes that console prices will be cut soon. In a telephone interview with Reuters, Brian Farrell said Nintendo Co. Ltd.’s new Game Boy Advance SP handheld device was selling well and, despite short supply, was boosting the market for Game Boy games, where THQ is the top publisher aside from Nintendo. "Business is holding up as we expected," Farrell said. "We think the year is playing out just like we said." The Electronic Entertainment Expo kicks off the week of May 12 in Los Angeles, and Farrell estimated there was about a 50 percent chance Sony Corp. , Microsoft Corp. and Nintendo would cut the price of their consoles. Sony and Microsoft cut the price of their competing game consoles, the PlayStation 2 and Xbox, to $199 from $299 at last year’s show, while Nintendo cut the price of the GameCube to $149 from $199. Farrell said retailers were pushing for substantial price cuts, on the order of last year’s $50 markdowns. "I think they are pounding on the table for the hardware price reductions," he said. "Retailers would like a clean price cut, from the ones we’ve talked to." But at the same time he said some sort of intermediate price cut could not be ruled out. "Can you rule out sort of a medium move? No," Farrell said. "I’m not a big fan of a moderate price move." GAMECUBE PICKING UP In February, THQ canceled a number of games as it reworked its lineup after a disappointing holiday season. One-third of those games were for Nintendo’s GameCube, which has failed to sell as well as expected. In March Nintendo released the hotly anticipated game "The Legend of Zelda: The Wind Waker" with the hopes that it would improve the console’s flagging fortunes. "The numbers have improved domestically since Zelda," Farrell noted. "We never soured on GameCube. We just reallocated based on what we saw happening in the market." THQ was one of several game companies to warn last December that its holiday results would be far below expectations because of the shortened holiday shopping season and more cautious orders by retailers. After an appreciation of nearly 99 percent in 2001, THQ stock fell 59 percent in 2002, in part because of the weak holidays and in part because of cautious forecasts about the potential for industry growth. But the stock has gained nearly 7 percent in 2003, in line with other publishers. Farrell said 10 percent to 15 percent dollar growth in software sales was still likely for 2003, especially with the $49.99 price for top games holding steady. "I don’t see any move to change that," he said. But at the same time, the executive said that as the industry moves toward its traditional summer doldrums, it is more important than ever for game companies to show off strong games and whet appetites for the holidays. The game industry’s major trade show known as E3 begins in Los Angeles on May 12.

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