Midway Q2 losses more than double to $34.8M

Listing publisher sees spurt of red ink in April-June quarter thanks to increased development costs, more losses predicted.

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Today, the once-mighty Midway Games reported another lackluster quarter. The Chicago-based publisher suffered a $34.8 million loss, or $0.38 cents per share, on net revenues of $23.4 million. The shortfall was more than twice the $14.3 million, or $0.16 per share, Midway lost on revenues of $31.8 million during the same quarter last year.

In an after-earnings report conference call, interim CFO Ryan O'Desky blamed the shortfall on increased development costs. He told analysts that Midway used $32.9 million in cash on operations during the quarter, while "cash invested in next-generation technologies and product development projects totaled approximately $26.2 million." For the entire quarter, O'Desky said "capitalized product development costs [were] approximately $73.2 million, an increase of $11.6 million from the previous quarter." While hardly welcome, the losses were less than analysts' expectations.

Another major reason for Midway's poor April-June quarter was its slim release schedule, which saw only NBA Ballers: Chosen One hit US and Canadian PlayStation 3s and Xbox 360s. The publisher also released Unreal Tournament III for the 360 in Europe, but its July North American ship date just missed the end of the quarter.

Besides the 360 UTIII, Midway plans to release its first TNA iMPACT! wrestling game for the Wii, 360, PS3, and PlayStation 2 this quarter in September. However, the company's guidance still predicts a loss per share of $0.37 on net revenues of $52 million. Also, more than four months after longtime chief David Zucker's exit, the company is still looking for a permanent CEO, president, and CFO.

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