Four bucks for IMAX (NASDAQ:IMAX)? Are you kidding me? That's where shares of the big screen theater specialist opened this morning. The sad thing is that it deserved that 17% slide after posting horrible third-quarter results.

Despite a healthy backlog of new theater orders, the company didn't complete a single installation. Because erecting new screens has been a larger contributor to the company's top line than the more reliable film-based revenue, the idle installations dealt revenues a savage blow, tumbling 38% to $20.7 million. The company wound up losing $0.28 a share from continuing operations for the quarter after earning $0.05 a share a year earlier.

The lackluster showing is just the latest disappointment in the once-promising IMAX saga that has turned into a comedy of errors in recent months. The company was growing nicely when it put itself up on the auction block back in March.

Dreams of entertainment conglomerates, movie studios, and private equity firms bidding IMAX into the mid-teens were dashed in August when the company warned of a lack of adequate buyout bids saddled with accounting concerns, stemming from an SEC informal inquiry into the company's revenue recognition practices.

If there's any consolation in today's dreary report, it's that the prospects are brighter than its grim showing. The company expects to bounce back in the current quarter with five-eight installations, with at least another two dozen screens in its backlog for 2007. The company has suffered with its recent IMAX adaptations of Ant Bully and Open Season, but next year is promising with IMAX giving its bigger-than-life treatment to new installments in the Spider-Man and Harry Potter franchises.

IMAX is also going digital. The company has discussed this strategy in previous conference calls but is now committed to rolling out digital projection systems come 2008. The transition won't come cheap, but it's an important one for IMAX in particular and the theater industry in general. You already have companies like Thomson (NYSE:TMS) and AccessIT (NASDAQ:AIXD) working on digital solutions for traditional multiplex platforms. It's a big deal. It's more than simply saving on film prints. With digital delivery, IMAX can work with movie studios to enhance the experience and grow repeat business for the same title by adding things like blooper reels, bonus footage, and alternate endings a few weeks into theatrical runs.

IMAX is also ramping up its efforts to ink more joint ventures like the one it has with cinema giant AMC where exhibitors get cheaper systems in exchange for favorable revenue sharing deals with IMAX.

Digital delivery and joint ventures are great catalysts, but they also require money, and that's not a commodity to be squandered at a leveraged company like IMAX these days. So it doesn't surprise me to learn that the company is still on the auction block, now seeking out lower bids. Some lucky company is going to bankroll that promising future. Fresh ownership may also help as a way to distance IMAX from its recent miscues.

I just hope that IMAX doesn't settle for too little in perusing buyout bids, just as it was expecting too much earlier this year. If the company delivers as promised, and that's a big "if" given its recent financial underperformance, the share price should bounce back in three months after a sequentially explosive fourth-quarter showing.

Until then, someone pass the popcorn before this comedy of errors becomes a horror movie.

IMAX has been recommended to Motley Fool Rule Breakers newsletter service subscribers. No, it hasn't panned out that well, even though the average pick is comfortably beating the market.

Longtime Fool contributor Rick Munarriz is a movie buff, but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.