Midway lowers outlook after grim Q3

Reporting a $33.5 million loss during July-September quarter, publisher says PS3 game delays will affect its holiday revenues; Stranglehold ships 1 million units.

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He may play the unstoppable supercop Inspector Tequila in Stranglehold, but action star Chow Yun-Fat couldn't save Midway Games' third fiscal quarter. For the three months ending September 30, the troubled publisher reported a $33.5 million loss on $36.7 million of revenue. During the same period in 2006, it lost $22.5 million on $27.4 million in sales.

The losses came in part because of the staggered released schedule of Stranglehold, the first next-generation console game Midway has self-developed from the ground up. Although the Xbox 360 and PC editions of the third-person shooter--which is also the sequel to the film Hard Boiled--were released in early and mid-September respectively, complications with the Unreal Engine 3 led to the PlayStation 3 version to be delayed until the end of October. Despite the delay and subdued reviews, Stranglehold still shipped over 1 million units worldwide.

Though Stranglehold's late arrival on the PS3 hurt Midway's third quarter, the delay of two other games for the platform contributed toward causing the company to lower its guidance for its full fiscal year, which ends on December 31. In early October, Midway said it no longer expects Unreal Tournament III to ship for the PS3 in time for the holidays. (The game is gold for the PC and will ship on November 19, and will arrive on the 360 next year.) The PS3 edition of BlackSite: Area 51 will also trail its PC and 360 siblings (due November 12) by nearly a month, which narrows its Christmas retail window to just two weeks.

"Midway is lowering its financial outlook for the full year 2007 primarily to reflect the movement of certain Nintendo Wii and DS titles out of this fiscal year, mainly in the European territories, as well as lower expectations for PS3 product sales due to delayed release dates resulting in shorter holiday selling periods," said the company in a statement. It did not name the Wii and DS games specifically.

Midway now expects $80 million in net revenue for its fourth fiscal quarter, with a loss of approximately $0.21 per share. For the full year, the company now anticipates $160 million in net revenue, with a net loss of approximately $0.95 per share. The new figure is a $65 million decrease from the $225 million in full-year revenue the company said it expected back in August.

"We remain confident that our technology strategy and product plan position us to grow both revenue and market share as we move into the heart of this console cycle," said CEO David Zucker in a statement. "In the coming months, as we reveal more details on our strong lineup of new IP and major franchises for 2008, we expect to show investors how we plan to realize significant growth in 2008."

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