| Midway Games (MWY) 8 1/16 -11/16: This entertainment software company reported its fiscal Q4 results after the close yesterday, and suffice it to say, they have failed to impress investors. True, MWY topped the First Call consensus estimate by $0.04 in reporting a loss of $0.39 per share, but that was still well below the $0.12 per share loss posted in the yr-ago period. In addition, revenues fell 56% to $24.7 mln. Of course, the disappointing comparisons will come as no real surprise to investors who recognize that the entertaiment software industry has been handcuffed by the transition to new technology platforms and increased pricing pressures. With the much anticipated release of Sony's PlayStation 2 in October, though, hope has been blossoming that the industry cycle is on the verge of turning up in noticeable fashion. Whether MWY is going to be able to capitalize fully on that upturn is the big question weighing on the minds of investors. Frankly, there was little in the company's earnings press release, or on its conference call, that would instill much confidence in its current prospects. Aside from the fact that home gaming conditions have been weak, that demand in the coin-op industry has been weak, and that MWY has released few "hit" games in the past six months, it will have only one PS2 title-- Ready 2 Rumble Boxing, Round 2-- on the shelves when that product launches. While MWY expects to have four PS2 titles out by the end of FY01, it acknoweledged that it sees the industry's transition period lasting until next summer, and that comparisons should continue to be negative for the September and December quarters. On the bright side, it does have over 30 titles in development for new consoles scheduled to launch this fall and next fall, but given the lack of success of recent software designs, one must be leery about MWY's ability to ramp up the quality of its product offerings. Interestingly, MWY was asked on the call about its willingness to merge with another industry player. It certainly didn't rule out that possibility, saying it would depend on the circumstances. Considering that Viacom CEO, Sumner Redstone, has been an active purchaser of the stock since April, you can bet merger speculation will be a steady source of support for the stock, no matter how uninspiring the company's prospects seem to be.-- Patrick J. O'Hare, Briefing.com |
