Last week Midway cautioned investors that it was going to miss its target for the third quarter, and today the company roughly met those lowered expectations.
For the third quarter of 2005, which ended September 30, 2005, Midway reported a $29.1 million loss on revenues of $29.5 million. Last week the company had projected revenues of $30 million and losses of $29 million. While the revenues were roughly in line with original projections, the sizable losses were not, and Midway blamed them on poor retailer reorders of The Suffering: Ties That Bind and L.A. Rush. It wasn't all bad news, as the company's sales jumped 74 percent year-over-year from 2004's Q3 showing of $17 million.
A few details of interest to gamers emerged from the investor conference call that accompanied Midway's quarterly report. First of all, Seattle-based developer Surreal Software (The Suffering series) is working on "a major new property" for next-gen systems. On a possibly related note, the company also said that it is making big investments in multigenre action games, the go-anywhere, do-anything sandbox style of gameplay. Finally, the next installment of NBA Ballers is set to arrive in the first half of 2006
Midway president and CEO David F. Zucker blamed the company's rut on getting off to a bad start in this generation of the console wars, a mistake the company believes it can correct for the next generation.
"During the first half of the console cycle, product quality, average markets, and poor decision making hurt Midway," said Zucker during the conference call. "Upgrading our marketing, improving our performance in Europe, and raising the quality of our games--we believe we accomplished all three of these things."
Looking forward, the company projected a $20 million loss on $65 million revenue for the fourth quarter. That's a significant letdown after the company's fourth quarter last year, where it posted $17.6 million in profits on revenues of $77.2 million. That quarter was the only profitable showing for Midway in its last 11 quarters.
As for why its fourth quarter looks glum, Midway blamed lowered expectation for sales of L.A. Rush, as well as the delay of products from the end of 2005 into 2006. During today's conference call with investors, the company specifically named Mortal Kombat: Deception Unchained on the PSP and the European versions of Gauntlet: Seven Sorrows as delayed titles that affected the bottom line.
In the wake of the company's quarterly report and this morning's announcements of the company's Spy Hunter game featuring The Rock and exclusive deal with upstart wrestling promotion TNA, Midway shares gained $.51, trading up almost 3 percent to $18.98 by the close of trading. In after-hours trading, however, the stock was off $.26, or 1.37 percent, to $18.72.