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A long road to recovery for once-mighty THQ

A long road to recovery for once-mighty THQ Exclusive

July 2, 2012 | By Chris Morris

Brian Farrell knows his company has something to prove.

Once the industry's third-largest publisher, THQ has tumbled in a very public fashion. Monday's announcement that the company's board has approved a 1-for-10 reverse stock split should stave off the threatened Nasdaq delisting, but it's just one step in a very long road.

"We want to show the shareholders that the heavy lifting is done," says THQ CEO Farrell. "The last six months have been an exercise in great pain and suffering. We feel like we're getting there. We've taken a lot of negative things in the press - and frankly a lot of that was deserved. This company has changed. We have strong, new leadership. Look at our fourth quarter earnings. ... It's starting to come together."

While the reverse split will take care of one very public problem, it's not a cure-all. Some investors have questioned whether THQ pulled that trigger too quickly, rather than asking Nasdaq officials for an extension to the deadline (a request that is typically granted by the exchange).

Farrell won't say whether THQ made that request, noting that while the company has had discussions with Nasdaq, he doesn't want to make those talks public. However, he notes, the stock price is just one component of a larger issue at the company.

That couldn't be truer. While a reverse split eliminates the delisting threat for a while, at least, if the company can't deliver on earnings and quality products, the stock won't stay at a reasonable level for long. With titles like Metro: Last Light and South Park: The Stick of Truth both garnering praise at E3, THQ is hopeful that it can deliver games that will strike a chord with players.

"I've been doing this long enough to know that the end of the day, the product will drive the stock price," he says. "When it will happen, we don't control that. So the focus is on getting great products both in the near term and the long term."

To some extent, those games will be the AAA titles that are the prime battleground for core players today. THQ is already planning a new Saints Row installment for next year and Crytek is working on the follow-up to Homefont.

But Farrell says THQ's not betting its entire future on AAA.

"I think there's a real opportunity in the changing business models we see happening in the marketplace for a smaller and more agile company like us to position ourselves quite differently," he says. "We think there's a real opportunity - particularly in the digital space on the core gamer side [and] especially on emerging platforms like the PC and some of the things we see coming down the road, where there's an opportunity for core games that are not just [made with] the highest budgets, but [offer] alternate pricing and business models There's a place to attract the core gamer there."

Of course, vision and opportunity only get a company so far, especially when it's facing skepticism from investors, analysts and players. Actually bringing those plans to fruition is the hard part.

Farrell acknowledges that the company's biggest problem in the past has been "spotty execution" - and says he realizes that's a luxury THQ can no longer afford.

"We don't have a lot of room to run, so we've got to execute flawlessly," he says.

A lot of that execution comes from the studios, of course, but as CEO, Farrell is ultimately held responsible. And in a gaming universe that is filled with executives who are so visibly competitive (such as Activision's Bobby Kottick and EA's John Riccitiello), Farrell can come across as almost mild mannered.

That style has sometimes been interpreted as a lack of fight, but Farrell says it's purposeful.

"We have a very deliberate approach," he says. "I learned mine from my dad. I think people would agree I'm an intensely competitive person. I don't like losing at all, but it doesn't mean you have to be an asshole. ... There is a purpose to our style but people that mistake that for a lack of intense competitive desire are severely mistaken."

Farrell has also taken a few very public lumps from developers who were laid off from THQ in its recent house-cleanings for his management decisions. Similarly, investors have called for his head as well.

While he acknowledges his accountability for the company's situation, he says those who are expecting him to resign are going to be disappointed.

"There is no question who is responsible for where THQ is right now. That's with me," he says. "That said I feel equally responsible for getting this company out of it.

"When I first took this company over and in other times in our 21-year history, we've been in some tough spots with some angry shareholders and angry employees. I understand. I don't like it either. I'm a shareholder. But I feel responsible to fix it. And I'm committed to do it until I'm relieved of my duties. That's the way I'm built and I'm going to keep pushing forward to get this company to where it needs to be. That's the mission and I think the actions speak for themselves. I think the path we're on right now is a good one. I don't expect any one to believe that until we do it - but my intention is to do it."

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