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THQ delays its games, faces uncertain future

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South Park: The Stick of Truth (Credit: THQ)

Struggling publisher THQ is looking even more vulnerable after the company announced plans Tuesday to push back the release of its three biggest upcoming releases and suspend all earnings guidance for the foreseeable future.

The company also announced it had hired an adviser to help it review its options and find new ways to raise money. Investors were quick to punish the company's stock, with THQ shares plunging 42 percent Wednesday morning.

THQ technically beat analyst's earnings expectations for the quarter, but the delays of Company of Heroes 2, Metro: Last Light and South Park: The Stick of Truth (which was moved out of the company's fiscal year, meaning it won't launch until at least next April) were unwelcome surprises.

Company president Jason Rubin was blunt about the state of the games.

"Unfortunately, when I joined THQ, I did not find the 3 titles that had been … scheduled for the release in the fourth [fiscal] quarter of this year in the same strong state of production as Darksiders 2," he told analysts in a conference call. "Company of Heroes 2, Metro: Last Light and South Park: The Stick of Truth were all challenged and were guaranteed to fall significantly short of their design specs if they were forced to make their announced release schedules."

However, he added, "given the appropriate resources, THQ is as strong as ever."

It's the first half of that sentence that has people concerned. THQ has already drawn $21 million from its line of credit and its cash reserves are down to $36 million. It has tapped Centerview Partners to help it explore "strategic alternatives" -- a business phrase that often means the company is shopping itself around for a buyer or thinking about going public.

Analysts piled on after the earnings announcement.

"THQ's FY14 lineup carries potential, but the big question is, can it make it to next year?" asked Eric Handler of MKM Partners.

Wedbush's Michael Pachter was even harsher.

"Management has a track record of over-promising and under-delivering, and the company has been in turnaround mode for the last five years," he said. "The recent developments disclosed on Monday's call … increase our doubt that a turnaround plan can be executed before the company runs out of cash. … We have little faith in management's ability to properly execute its turnaround plan, and believe that it is underselling the dire situation that the company faces. Management declaring that 'given the appropriate resources, THQ is as strong as ever' as it did on Monday's call is misleading and disingenuous."

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