Midway Announces Disappointing Results, Outlook

Chicago-headquartered publisher and developer Midway Games has announced results of operations for the three month period ended September 30, 2005, and is showing a disappointing quarter with a significant loss, albeit one in line with recent changes to its full-year forecast. Midway's overall revenue for the quarter was $29.5 million, a 74% increase over 2004 third quarter net revenue of $17.0 million, but the company's loss for the quarter was $29.1 million. According to the firm: "The greater-than-anticipated net loss is due to several factors including accelerated amortization and writedowns of capitalized product development costs primarily associated with both third quarter and fourth quarter 2005 releases." Highlights for the quarter included the release of Mortal Kombat: Shaolin Monks, which made Top 10 lists in America and England, as well as the release of The Suffering: Ties that Bind and Midway Arcade Treasures 3 in North America, and the acquisitions of development studios Ratbag and Pitbull Syndicate, in Australia and England respectively. Looking forward, Midway announced that it has revised its revenue expectations and profits down further, in part due to re-scheduling the release of certain products into 2006 from the fourth quarter of 2005, as well as lower-than-expected retailer reorders for several recently released titles, including The Suffering: Ties That Bind and L.A. Rush. Midway now expects net revenues of approximately $145 million, compared with the previous estimate of $200 million. The net loss for the year is now scheduled to be approximately $95 million, an increase from Midway's prior expectation of a net loss of approximately $60 million. Midway CEO David Zucker commented of the results: "While we are disappointed with sales of some of our products this year, we continue to be excited about the progress we are making on, and the prospects for, our 2006 and 2007 products. We expect to further expand our product portfolio by leveraging established franchises, creating new owned properties, and building new relationships with licensors such as Warner Brothers and TNA. We intend to focus on building a business that can thrive during the console transition and provide a foundation for success early in the next cycle." Midway stock closed slightly up on the day, and was down 1% to $18.72 in after-hours trading.