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Analyst: THQ's Future Aligned with Nintendo, Microsoft

Following analyst meetings with management, Lazard Capital analyst Colin Sebastian has suggested that publisher THQ is expected to align more closely with Nintendo and Microsoft platforms in the coming years, also noting that internally developed THQ game
Following THQ's recent announcement of its second quarter fiscal 2008 results, which saw slightly reduced revenue of $229.3 million, and a loss of $7.0 million on poor performance of Stuntman and Juiced, analyst group Lazard Capital hosted investor meetings with THQ's management to discuss the company's more positive outlook for its fiscal 2009 product lineup. Notably, Lazard's Colin Sebastian stated: "We expect THQ to remain more closely aligned with Nintendo and Microsoft platforms over the next couple of years, reflecting THQ’s historical strength on handhelds (GBA and DS), increasing development slate for Nintendo’s Wii, early success with titles on the Xbox 360 (e.g. Saints Row) and a slower ramp on the PS3." He later commented: "Specifically, the company believes that paying closer attention to product quality and marketing strategy, combined with an improved release lineup and overall industry growth, should help drive acceleration in revenues and operating margins next year." Sebastian noted that THQ's next title based on a Pixar property, Wall-E, is "expected to have broader consumer appeal" in comparison with Ratatouille, owing to the oft-cited fact that Wall-E's character, a robot, may be more favorably received than Ratatouille's rodent hero. As Sebastian notes, THQ is also looking ahead optimistically to upcoming sequels to its owned IPs Saints Row and Red Faction, and the new UFC-licensed title slated for late 2009. In addition, key franchise WWE Smackdown will see another installment this holiday season, and Sebastian adds the franchise "is benefiting from strong growth of the WWE brand internationally." As a result, Lazard expects THQ's portion of revenues from internally owned and developed games to increase, and, following personnel growth during the last console cycle, THQ expects that 40 percent of its revenues will come from its internal studios this year, up from 30 percent in fiscal 2006.

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