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Troubled THQ fires 240, cuts CEO salary in half

Plugged In

THQ is taking some drastic measures after a string of sales disappointments.

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Saints Row The Third (THQ)

The game publisher, once the industry's third largest, has laid off 240 employees and cut its CEO's salary in half for a year, according to an SEC filing. This follows a recent announcement that the company's stock might be removed from the NASDAQ stock exchange.

It seems THQ's restructuring efforts have been going on for a while now. The company has cut over 700 jobs since 2008 and vowed several times to back away from the children's licensed game market.

The latest promise sounds more definitive, though. Last week, the company said it was exiting that market and would focus exclusively on core games. That's what led to the layoffs.

In addition, THQ president and CEO Brian Farrell will be taking a 50 percent cut to his base salary, from $718,500 to $359,250, for a one-year period beginning February 13, 2012. Farrell also agreed to reduce the payment he will receive if he resigns or is terminated without cause to one-third of the previous amount.

While the delisting threat sounds dire, that sort of note from Nasdaq is often the Wall St. equivalent of the check engine light. It's issued whenever a stock trades below the $1 mark for 30 consecutive business days. THQ hasn't topped a buck since Dec. 8.

To put that fall in perspective, THQ traded in the $34 range five years ago.

The publisher has 180 days — roughly six months — to turn things around and keep its stock above the $1 mark for a minimum of 10 consecutive business days. Then all's well. It hopes this restructuring plan will give some confidence to investors, but it's got a long way to go.

While action romp Saints Row: The Third has been a moderate hit for the company, THQ has had more misses in recent months. The uDraw tablet for the Xbox 360 and PS3 was a disaster, selling so poorly that the company was forced to lower its quarterly revenue guidance nearly 25 percent in December. Controversial shooter Homefront landed with a thud last year, and the once-dependable Warhammer has hardly lit the gaming world on fire.

That string of missteps has analysts wondering whether the company will be able to turn things around.

"We believe THQ continues to lack a critical mass of high quality games with multi-million unit sales status and has yet to show any ability to execute this console cycle," says Eric Handler of MKM Partners. "While we recognize the need to get smaller before growing again, we lack conviction in when (or if) that upturn may come."

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