THQ Sees Red, Hands Out 600 Pink Slips

After missing Q3 analyst expectations by a wide margin, THQ [THQI] will lay off 24 percent of its workforce—roughly 600 employees—to save $100 million in its next fiscal year.

While the company was not specific on where the reductions will come from, it mentioned a $70 million development reduction through “studio dispositions.”

THQ reported a net loss of $192 million, or $2.86 per share on revenues of $357.3 million for Q3, which ended December 31. That compares to a net income of $15.5 million, or 23 cents per share, on revenues of $509.6 million in last year’s Q3. The loss is well short of the average 7 cents per share THQ was expected to earn by analysts.

Factors contributing to the loss included lower sales at a lower price point of its titles, particularly on Wii, according to newly named EVP/CFO Paul Pucino. He replaces Colin Slade, who remains on an indefinite medical leave of absence. THQ would not provide guidance on its Q4 results, but said the company expects them to be “significantly below” expectations.

“We delivered high quality games to market this holiday season but fell short of our revenue and profit targets in this challenging environment,” said THQ President/CEO Brian Farrell. “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.”

“Clearly, this is one of the most challenging times in my 18 years at THQ,” Farrell said in a conference call with investors.

Unlike Electronic Arts [ERTS], which is looking to focus more on the mass-market-friendly Wii, THQ is shifting toward more core gamer titles, such as Saints Row 2, Red Faction: Guerrilla and Darksiders.