Midway is in the midst of a major loss.

• Last quarter they lost $38.4 million
• last month they lost 3 top level execs
• this month they cut a ton of staff

What does it all mean? Well here’s what I think it means.

It means they are trimming the fat, the rats are abandoning ship and everything MUST GO!

It’s a fire sale without the fire or the sale at present. Well there’s a fire alright, under the seats of the people in charge. In its recent quarterly report it also stated it expects to lose another $38 million this quarter.

So what’s happening over at Midway?

They’re preparing to be purchased that’s what it looks like to me. They are cutting overhead to the point that titles in development are now stalled since there’s no one left to work on them. They have high level positions opening up with no one filling them.

Midway is becoming an empty husk, a skeletal mass. That means empty and light, quickly and easily purchased by someone for a small price. This is far beyond a simple cost-cutting plan to turn a profit. No this is full on

RED ALERT RED ALERT RED ALERT (cue red flashing lights and sirens)

Midway has had a long and storied history of developing entertainment machines. From Pinball to video games for the last 50 years Midway has been there. But the end may be in sight.

They have multiple divisions that could be broken up and sold

Divisions

• Midway Amusement Games
• Midway Home Entertainment
• Midway Technical/Customer Support
• Midway Games Ltd
• Midway Germany GmbH
• Midway Games SAS

There are also multiple studios that could be sold piece by piece.

Studios

• Midway Studios - Chicago
• Midway Studios - San Diego
• Midway Studios - Austin Inc.
• Midway Studios - Los Angeles Inc.
• Surreal Software
• Midway Studios - Newcastle

So why such a strange series of events of late? It’s a multi-national company with holdings in Germany, France the UK and the US.

Midway doesn’t look to want to break up the family. That means there needs to be a large player in the game to eat the whole thing in one gulp.

Vivendi?

EA?

THQ?

Ubisoft?

Vivendi just ate Blizavision and is probably full at the moment so they don’t look like a viable solution to consume Midway.

EA wanted Take-Two but was told to shove off. They recently acquired a Korean mobile gaming company but could still be hungry and are definitely large enough.

THQ is 2 years out from their last major expansion where they bought up several companies. They did just recently purchase Big Huge Games but could be in the market for another major expansion to put them on the level of EA and Vivendi. Midway could be the solution that they need.

Ubisoft has for the last three years running, been on the buying end of things. Ever since EA stole 19.9% of the stockpile. They have also been itching to expand and get up to par with the other major players, mostly EA who they see as a hostile owner of the company thanks to the December 2004 purchase of that stock.

Ubisoft is French but has offices in the US, Germany and many other countries. An acquisition of Midway by Ubisoft would further increase their license list and give them a presence in the UK as well as seriously beef up their interests in America.

Stock Prices today:

Ubisoft 65.51 € - ~46 million - 3billion € (~$4.5B)

THQ $16.68 - ~67 million shares - $1.2B

EA $47.50 - ~318 million shares - $15B

Midway $2.84 a share - ~93 million shares - $264M

The stock price of Midway has been on the rise over the last few months and increased drastically today even though they’ve lost tons of cash. It looks like someone is betting on the company being the target of a takeover. THQ would be hard pressed to buy, but could offer a lot in the way of a merger. Ubisoft could buy without a problem and EA could accidentally drop the market value of Midway out of its wallet and never notice it had gone missing.

Now I’m no insider or day trader. I am only looking at the information presented to me and extrapolating from it. I can’t be held responsible for anyone’s investment decisions so if you decide to invest you do so at your own risk. This was just an interesting story I thought you might be interested in reading.