Loss Widens at Midway Games

Midway Games'(MWY) second-quarter loss widened, falling short of expectations, as sluggish sales of its Unreal Championship 2 game combined with development cost write-downs.

In addition, the pushing-out of certain titles will hurt the company's third-quarter and full-year results.

The video-game maker said after the bell Thursday that its loss widened to $29.9 million, or 35 cents a share, from $9.5 million, or 17 cents a share, a year, earlier.

Net revenue fell to $36.9 million from $47.3 million a year earlier.

The results missed the consensus estimate expected by Thomson First Call's survey of a loss of 28 cents a share and revenue of $41.2 million.The second quarter results were below previously provided expectations primarily due to lower-than-forecasted sales of Unreal Championship 2, as well as the write-down of capitalized product development costs for upcoming releases and the need for additional reserves for markdowns.

For the third quarter, Midway expects net revenue of about $30 million, with a loss of about $19 million. First Call was expecting third-quarter revenue of $55.4 million. Midway said it expects to ship The Suffering: Ties that Bind for PlayStation 2, Xbox, and PC at the end of September, although due to the timing of its shipment at the end of the quarter, it expects to recognize the associated revenue in the fourth quarter.

Midway also lowered revenue expectations for the full year due to rescheduling the release for Rise & Fall: Civilizations at War to the first quarter of 2006 from the fourth quarter of 2005. Midway now expects net revenue of about $200 million, as compared with its previous estimate of $225 million. Additionally, the company now expects to lose about $60 million for the full year, a widening from its prior expectation of a loss of $47 million.

Ironically, on the strength of an earlier announcement Thursday that Midway acquired Australian game developer Ratbag in primarily a stock transaction of about 419,000 shares, the company's stock closed up nearly 4% Thursday to $13.84.

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