The tide's about to turn for video game publisher THQ.

AT first glance, this hasn't been a great few months for Agoura Hills video game publisher THQ Inc. Its first quarter earnings showed revenues Off 12 percent and its operating loss increased to just under $21 million. And last week, THQ disclosed that it had become a target over the growing Securities and Exchange Commission probe of stock option grants. Its Santa Monica-based rival, Activision Inc., was targeted weeks ago.

So what's the good news? Expenses and total costs dropped about 4 percent, but more importantly, the firm is getting in synch with the arrival of next-generation game consoles. Sales of games based on "Cars" were better than the company's previous games from Pixar, "Finding Nemo" and "The Incredibles." When THQ debuts a version of the game that is compatible with the Microsoft Xbox 360 and Nintendo Wii, sales are sure to surge.

THQ, along with Santa Monica-based Activision and Electronic Arts, should see sales rise even further in November when Sony debuts its third PlayStation unit, further ushering in the next generation of game consoles. For months, the video game publishers have suffered as consumers stopped buying games for their old consoles. By the end of the year, the changeover should be complete, just in time for the holidays. For THQ and its rivals, the worst is likely over.

BY DAN COX

Staff Reporter