Redstone's Midway Foray Goes Beyond Personal Interest

Then there's Redstone. The media mogul apparently is intent on getting into the video-game sector one way or another. Redstone said Thursday that Viacom had considered, but ultimately rejected, making an offer for Electronic Arts, according to published reports.

Meanwhile, since November, he's purchased more than 26 million shares of Midway's stock, helping send its price up more than 300%.

Strange Buy Brings New Blood

At first glance, Midway may seem a strange buy. Although the company makes the popular Mortal Kombat franchise, it has posted a loss in 17 straight quarters. Midway's market cap, revenue and breadth of titles are dwarfed by the likes of Electronic Arts and Activision.

Redstone's method of purchasing the company has been even more perplexing. Instead of offering to buy the company in one fell swoop through a tender offer, he has made numerous open-market purchases since November. While he initially bought the stock at less than $3 a share, his latest purchases have been at more than $11 per share.

"It's hard for me to question his judgment -- but in this case, I do," said Pachter.

A representative of Redstone's National Amusements declined to comment on Redstone's purchases of Midway stock, directing inquiries to the mogul's office at Viacom. Viacom spokeswoman Susan Duffy pointed to Redstone's public statements that he feels he can improve Midway's performance by bringing in new talent.

Redstone is already taking steps in that direction. Last month, he nominated both his daughter Shari Redstone and Kenneth Cron, the interim CEO of Computer Associates (CA), to serve on Midway's board.

Nicastro's departure presents another opportunity to reshape Midway. Duffy declined to say whether Redstone had a role in Nicastro's departure. A Midway representative did not return calls seeking comment. In a statement, Nicastro said his resignation, effective immediately after the company's annual meeting on June 10, was due to "personal and professional reasons."

Regardless, Redstone promised in the statement that Midway would replace Nicastro soon after the company's annual meeting.

While the new blood may help, Midway could become more valuable if it got its hands on the Viacom properties, a distinct possibility. Activision last summer cancelled its agreement with Viacom to develop games based on the entertainment giant's Star Trek franchise. More enticingly, THQ's contract with Viacom to produce games such as those based on SpongeBob Squarepants and Rugrats will expire next year.

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