Southwest Securities Cuts Estimates for Midway Games

Midway Games (MWY

) posted 35 cents second-quarter loss per share, vs. 17 cents loss. Southwest Securities cut its estimates.

Analyst Arvind Bhattia says second-quarter results were below expectations. He says revenue was $36.9 million, vs. his $40.6 million forecast, while he had forecast a loss of only 29 cents. He notes sales in the quarter were driven by two new releases, Area 51 and Unreal Championship 2 (UC2), although sales on that title were disappointing.

Bhattia adds that gross margin was 5%, well below his 12% estiimate; Midway Games attributed this to lower-than-anticipated pricing on UC2 and higher reserves. He notes higher selling and marketing expenses also contributed to the EPS shortfall. He maintains a neutral opinion on the stock.