Sumner Redstone, the executive chairman of both CBS (NYSE: CBS) and Viacom (NYSE: VIA), has been having a difficult time during the recession. Because of financial pressures, he's been forced to sell stock assets to cover some of his debt problems. Now comes word that he's jettisoned his controlling stake in Midway Games (NYSE: MWY).
Redstone, according to The New York Times, divested himself of his Midway investment. And what a miserable investment it was. If you've followed the story of Midway Games at all, you know it's been nothing but a loser. Losses, revenue declines, and questions about the quality of the publisher's software pipeline seemed to always plague the earnings reports.
Redstone's stake was once worth $700 million. Know what he sold that stake for? $100,000 plus the assumption of debt valued at $70 million. Talk about a lousy loss. Midway just couldn't compete against the likes of Activision Blizzard (NASDAQ: ATVI) and Electronic Arts (NASDAQ: ERTS). You've got to wonder what Redstone saw in the company.
It's too bad he never tried to take some of the big brands from Viacom and engage a little synergy. Of course, THQ (NASDAQ: THQI) has the license for the Nickelodeon games. I always marveled at the irony of that. Redstone had to sit back and watch as SpongeBob SquarePants sold games for a competing publisher. What was the point, then, of owning Midway?
In fact, here's some more irony: Electronic Arts distributes Viacom's Rock Band. Don't get me wrong, I understand why that's the case. But if Midway isn't a strong enough publisher to get the job done on something like Rock Band, then it seems that holding Midway wasn't logical.
Here's hoping this sale helps Redstone out with the restructuring of his finances. And as for Midway, you'll note that the stock is trading under a buck. On Monday, it closed at 33 cents per share. I don't need to say this, but I will anyhow: don't do anything with the stock. I'd personally look at Activision Blizzard as a way of playing the video-game industry.
Disclosure: I own Activision Blizzard; positions can change at any time.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
