NEWS - Wednesday, November 2, 2005

Midway Has Tough Financial Quarter

Midway drops projections as key titles miss targets Tough quarter for ambitious US publisher, but Zucker remains optimistic for ’06 Publisher Midway has been forced to drop its financial targets for the third quarter and the full year significantly after titles including The Suffering: Ties That Bind and LA Rush failed to meet sales expectations. The company has dropped its full-year revenue projection to $145 million, down from the previous estimate of $200 million, and expects to make a loss of $95 million - a major increase over its previously estimated loss of $60 million. Looking at the quarter which ended on September 31st, the firm has yet to announce final results but is expecting to hit its revenue guidance of $30 million - albeit taking a loss of $29 million, up from the $19 million loss it predicted in August. Investment analysts at Wedbush Morgan Securities dropped their rating of Midway to "Sell" on the news, although analyst Michael Pachter commented that "we remain admirers of the company’s portfolio of owned properties, its management, and its development prowess." The lackluster commercial reception for The Suffering: Ties That Bind and LA Rush is fingered as a key reason for the shortfall, with the former being a particular blow since Midway had hoped to build last year’s surprise hit The Suffering into a successful ongoing franchise. However, the company has also taken this opportunity to accelerate the rate at which it’s writing down development costs for third and fourth quarter releases, so a tough couple of quarters should help to spruce up the company’s financials going forward. "While we are disappointed with sales of some of our products this year, we continue to be excited about the progress we are making on, and the prospects for, our 2006 and 2007 products," commented president and CEO David Zucker. "We believe that our recent financing has provided the flexibility and financial resources to meet our goal of developing high-quality games with better game concepts as we move through the upcoming console transition." Midway has recently been linked with a possible takeover bid for British publisher SCi, which also owns Eidos - an acquisition which would give the heavily North American focused firm a large base of operations in Europe and a range of powerful franchises.

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