Video Game Sales Get Split Decision

Like those of EA, Midway's (MWY Quote) results were disappointing to some analysts. Sales of the company's console titles fell 7% in December from the same period a year earlier. While the company's retail sales in the fourth quarter were up 80% over the same holiday period in 2003, Wedbush Morgan analyst Michael Pachter warned that Midway's revenue for the quarter was likely to fall short of his expectations. Pachter lowered his revenue outlook for the company from $93 million for the quarter to $78 million, and brought down his earnings estimate to 20 cents a share from 27 cents a share.

Midway's sales were "lower than the assumptions used in our model, given the weaker-than-expected performance of Mortal Kombat Deception, along with weak catalog sales," Pachter said.

(Midway was not a recent investment banking client of Wedbush Morgan.)

But not all the news was depressing. Indeed, Activision had a lot to cheer about in December. The company's retail sales were up 43% to $189 million in December, boosted by sales of its Call of Duty and Tony Hawk Underground 2 titles. The company ended the holiday quarter with retail sales up 37% over the same period a year earlier.

Activision already upped its forecast for its fiscal third quarter, but based on its December results, several analysts predicted it could beat even those raised expectations.

"Given the strong results, our revenue estimate for Activision may be a bit light," Russillo said.

(Activision has not been a recent investment banking client of Merrill Lynch.)

Like Activision, Take-Two and THQ also saw strong results in December. With its mega-hit Grand Theft Auto: San Andreas still posting strong sales totals -- the title was the No. 2 seller in December, garnering $75.9 million at retail -- overall sales of Take-Two's titles jumped 30% in the month to $128 million.

Meanwhile, THQ saw its retail sales jump 22% to $152 million. The company saw continued strength from its titles based on the recent The Incredibles and SpongeBob SquarePants movies.