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Midway Announces Disappointing Q4, Yearly Results

Midway Announces Disappointing Q4, Yearly Results

February 23, 2006 | By Simon Carless

February 23, 2006 | By Simon Carless
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U.S. publisher and developer Midway has announced its financial results for the last fiscal quarter of 2005, ending December 31, 2005, as well as the full fiscal year. The Mortal Kombat publisher showed a particularly disappointing holiday season, with net revenues for the 2005 fourth quarter at $69.8 million, down 9.6% from 2004 fourth quarter net revenues of $77.2 million.

Even worse, 2005 fourth quarter loss was a significant $37.8 million, compared with a 2004 fourth quarter profit of $17.6 million. In addition, it was noted that the 2005 fourth quarter results include a $10.8 million charge related to the restructuring, including the closing of more than one development studio, announced in December 2005. Overall, Midway lost $112.8 million for the entire 2006 fiscal year, with revenues of just $150.1 million.

Midway president and CEO David F. Zucker suggested that the hardware transition had adversely affected the publisher's holiday season, commenting: "Midway's fourth quarter results reflect the challenging industry environment that has affected nearly all software publishers at this point in the console transition."

However, he attempted to put a positive spin on the situation, suggesting: "Nevertheless, Blitz: The League achieved breakout success for us, and our first Cartoon Network release, Ed, Edd n Eddy, performed well in the quarter." Notably not mentioned by Zucker was Q4 launch Gauntlet: Seven Sorrows, an apparently troubled project that lost project leads John Romero and J.E.Sawyer before the game's completion, and has not sold well at retail. The urban racing title L.A. Rush, also launched in Q4 as one of Midway's marquee holiday titles, also failed to sell through in significant numbers, adding to Midway's loss.

Going forward, for the year ending December 31, 2006, Midway expects revenues to grow approximately 3% to $155 million, with a reduction in net loss to approximately $66 million, still a significant sum, but presumably part of Midway's heavy concentration on still in progress next-gen product development. Midway's Zucker concluded regarding the future: "We intend to continue to build new incremental revenue streams through emerging technologies such as dynamic in-game advertising, and through the monetization of our library of intellectual property on platforms such as the Microsoft Xbox Live Arcade for the Xbox 360."

He also suggested: "We believe we are establishing a best-in-class next generation product development platform across all of our internal studios. We expect our investments in these areas in the fourth quarter and throughout last year to benefit our future next generation releases."

Midway's New York Stock Exchange-traded shares, though ending the day up slightly, took a significant dive in after-hours trading following the news, being down around 8% to $10.00 as of press time.


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