After a period of net losses and negative cash flow, THQ Inc. may be taking the steps needed to turn its businesses around.
The Agoura Hills video game publisher announced last week that it will stop producing licensed kids’ games and has laid off a portion of its work force.
Now investors are waiting to see when the company can get its finances out of the red, said Atul Bagga, an analyst at Lazard Capital Markets in San Francisco.
“Unless they get really aggressive about cutting their expenses, it’s going to be hard to get back to profitability,” Bagga said. “I think what people are looking at is how fast the company can restructure the business to they can get to profitability and positive cash flow.”
THQ will stop developing kids titles based on popular franchises such as Pixar’s “Cars” movies and Nickelodeon’s “SpongeBob SquarePants.” Instead, the company will focus on hardcore games such as its “Saints Row” franchise.
THQ was once one of the largest publishers of children’s video games. Bagga said those titles have struggled as their young audience has shifted to playing mobile and social games.
A company spokeswoman declined to comment. The day after the announcement that THQ was halting titles for kids, the company confirmed in a statement that the restructuring will result in an unspecified number of layoffs from the administration and publishing departments.
“As recently announced, the company is exiting the kids’ licensed games category, and is focusing on its core game franchises and developing its digital initiatives,” THQ said in the statement. “The streamlined organization reflects the company’s new strategy.”
But analysts worry that the company might not have the cash to develop expensive hardcore games.
THQ reported a net loss of $92.4 million on revenue of $146 million for its fiscal second quarter. The company had $51 million in cash, down from $66 million in the same period the previous year.
The company is expected to report low holiday sales of its uDraw tablet when it announces its fiscal third quarter earnings Thursday. In December, THQ laid off about 30 employees from the division that develops the accessory.
Image Split
Video game developers accustomed to using Image Metrics’ facial animation technology to make their characters more realistic will have to look for the service under a new name.
The Santa Monica company announced earlier this month that it is spinning that technology off into a separate company called Faceware Technologies. The new company will work with video game publishers, such as Activision Blizzard and Electronic Arts, to animate faces in their titles, much as Image Metrics had done for years.
Image Metrics will now focus on a slate of consumer products that it began developing last year. They include PortableYou, an app that lets users create virtual avatars of themselves.
Robert Gehorsam, Image Metrics’ chief executive, said the split is important because the two technologies focus on different customers.
“This transaction is a great opportunity for both Image Metrics and Faceware Technologies Inc. because each company can focus on delivering exceptional products and services to its target customers and enable both companies to unlock faster growth potential in each market,” he said in a statement.
Ron Ryder, Image Metrics’ chief financial officer, will take charge of Facewear during the transition.
Hiring Notes
ReachLocal has appointed Nathan Hanks company president. Hanks co-founded the Woodland Hills online marketing company and was previously chief operating officer. … XAP, a Culver City developer of online college application software, has appointed Peter Knepper chief executive. Knepper had served as interim chief executive since September. … Nimble, a Santa Monica business technology company, has hired Jason McDowall as its director of product. McDowall was previously director of product management at SalesForce.com.
Staff reporter Natalie Jarvey can be reached at [email protected] or at (323) 549-5225, ext. 230.
