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Midway Q3 Earnings Disappoint, Company Lowers Guidance For Year

Midway announced Q3 results today after the market closed, posting a loss of $11.3 million -- more than twice the loss it posted last year -- on an 86% increase in revenues, to $52.6 million.
The loss, which amounts to 25 cents per share for the quarter, was worse than analysts had predicted. The company blamed the results on poor sell through of its sports titles for the Xbox and Gamecube, and while the company didn't cite specific titles, the company is probably referring to NFL Blitz, MLB SlugFest 20-03, and NHL Hitz 20-03, all of which shipped during the quarter. The company said that reorders were lower than expected, forcing it to set aside more money for receivable reserves (price protection if it lowers the games' prices) and prompting Midway to accelerate the amortization rate of its capitalized product development costs. The bad news was further compounded by Midway's lower guidance for the year. It expects revenue to come in at $217-267 million (down from $295-310 million), and expects pre-tax earnings between a $12 million loss and a profit of $13 million (down from an earlier profit estimate of $25-33 million). The lowered guidance was blamed on disappointing GameCube and Xbox product sales in the current quarter of 2002, the decision to delay the launch of Mortal Kombat: Deadly Alliance in the U.K. until next year, and the lower Q3 results. Looking forward, Midway expects to ship 17 new SKUs during the Q4, including Defender, Dr. Muto, Justice League: Injustice for All, and Mortal Kombat: Deadly Alliance.

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