Midway can’t win for losing, it seems. Although there was good news amongst today’s Q3 financial results, most of the positives were buried under announcements of sales deficits and hardware-driven release pushbacks.
Compared to this same time last year, the publisher is selling more games — which is good. Overall sales numbers for the three months prior to September 30 are up about $6 million from where they stood in 2006 — $27.4 to $36.7 million.
Footing the lion’s share of the income was John Woo’s trigger-happy Stranglehold, which performed exceptionally well in the five weeks following release. As a matter of fact, Midway reports selling more than 1 million units — impressive, considering that the PS3 version of Stranglehold isn’t even hitting Europe until later in November.
But, despite the reassuring box-office draw of stylish gunplay and doves in flight, the publisher is actually losing money at a greater rate than it was one year ago. Overall net losses over the July-September period for Midway declined from $22.5 million in 2006 to $33.5 million in 2007, leaving shareholders with an unhappy $0.95 deficit on their per-share investment.
In an investor conference call immediately following the official announcements, Midway CEO David F. Zucker and VP of Publishing Miguel Iribarren laid the blame for the bad news (at least in part) on release-date pushbacks. These pushbacks, they said, are necessitated by a currently inadequate hardware install base for Midway’s Wii games as well as problems relating to the complexity of programming for the PS3.
“The demand for Wii product has put a pretty big strain on Nintendo’s production capacity” says Iribarren, “and that has in turn, for us, turned into longer lead times for some of our Wii products. [D]uring the holidays [this fact] has resulted, for us, in reduced ability to get product to shelves. [F]or front-line releases that’s largely solved, but it’s a bigger issue for re-orders right now.”
“We ran into some technical issues developing for the PlayStation 3″ conceded Zucker “[which] have taken more time to finalize than we expected.” The CEO went on to state these issues were now largely ironed out within the company’s internal development structure, and that future multiformat titles will ship “day and date” simultaneously.
Although sales numbers for 2007 will be admittedly low, the publisher does expect to rally once its games finally go out the door. For now, investors will have to adjust their expectations to a reduced 2007 income forecast of $160 million — a net loss of around $0.95 per share.
“We remain confident” says Zucker “that our technology strategy and product plan position us to grow both revenue and market share as we move into the heart of this console cycle. In the coming months, as we reveal more details on our strong line-up of new IP and major franchises for 2008, we expect to show investors how we plan to realize significant growth.”
