Midway growth slows, Fear & Respect slips to '06

Reporting revenues for the quarter ending March 31, 2005, Midway Games failed to electrify Wall Street. Net revenues for the first quarter were only $13.8 million, compared with $20.1 million for the same period in 2004. Midway suffered a net loss of $15.9 million for the quarter, versus net loss of $14.2 million for the quarter a year ago.

Of note during the quarter was the company's increased product-development expenditures against next-gen technologies--$27 million, which is 65 percent more than the same quarter a year ago.

However, the shortfall didn't surprise analysts given the company shipped just three SKUs in the quarter: Mortal Kombat: Deception for the GameCube and the budget-priced remake of NARC for the PlayStation 2 and Xbox.

Looking ahead to the rest of this calendar and fiscal year, Midway CEO David Zucker said, "Our view on revenues has not changed. We continue to expect net revenues of approximately $225 million for the year, representing an approximately 40 percent increase over the 2004 revenue levels." He did amend expected losses, saying, "We now expect a net loss of approximately $47 million for the year...an increase from our prior expectation of a net loss of approximately $38 million."

For the current quarter, ending June 30, 2005, Zucker said he expected net revenues of approximately $40 million with a net loss of approximately $25 million.

Big titles the company is hanging hopes on in 2005 include LA Rush, Mortal Kombat: Shaolin Monks, The Suffering: Ties That Bind, Gauntlet: Seven Sorrows, Edd 'n Eddy: The Mis-Edventures, and Blitz: The League--all slated for the back half of the year.

The only surprising news in today's earnings call was the delay to Fear & Respect, which was due later in the year. The crime actioner, which is being directed and cowritten by film director John Singleton and features the voice and likeness of rapper/actor Snopp Dogg, is now expected in 2006.

Zucker boasted of E3 news that he called "significant for us." Midway will, according to Zucker, be unveiling a next-gen title he says will drive "significant coverage in the media." He did not mention Unreal Tournament 2007, the next PC shooter from Epic Games, which Midway today announced it would publish in 2006.