No Great Acclaim

More Mortal than Kombat, Acclaim Entertainment (Nasdaq: AKLM) wrapped up another forgettable quarter. Through the first nine months of fiscal 2004, the company lost $0.30 a share as net revenues plunged by 37%. That stings because the video game developer put out 37 titles, five more than it released during the same period the year before.

Acclaim isn't a pretty sight. It's been two years since the stock traded above $5, and you'd have to go back six years to the last time Acclaim changed hands in the double-digits. Between its heavy debt burden, bloody financials, and negative book value, Acclaim needs more than just a hit.

Then again, it's certainly not alone. Acclaim is joined in the cellar by other fallen software publishers: Eidos (Nasdaq: EIDSY) of Tomb Raider fame, Atari (Nasdaq: ATAR), and 3DO.

For all that, it's a lucrative sector when done right. Market leader Electronic Arts (Nasdaq: ERTS) and cash-rich Activision (Nasdaq: ATVI) both have been stock recommendations in the Motley Fool Stock Advisor. Other software houses like Take-Two (Nasdaq: TTWO) and THQ (Nasdaq: THQI) have seen their shares climb better than 50% over the past year.

On the console side, a persistent Microsoft (Nasdaq: MSFT) is keeping Sony's (NYSE: SNE) dominance in check, and the promise of next-generation gaming platforms and the high-margin potential of digital delivery should be enough to keep an investor tuned into the sector.

This is in no way a fading industry. Just set aside the penny stocks like Acclaim and save those quarters for the arcade. The game is still going strong for those who know how to play.

Will Acclaim put on its game face or will it be the next to go under? What separates the winners from the losers in the field of video game publishing? Is Nintendo a fading platform? All this and more -- in the Video & PC Games discussion board. Only on Fool.com.

Rick may not be too encouraged by Acclaim's financials but that doesn't stop him from enjoying a game of Acclaim's All-Star Baseball with his son. He does not own any of the stocks mentioned in this story.