Film studio DreamWorks Animation SKG today said it would post a quarterly loss and said it is the target of a federal securities investigation.
DreamWorks Animation, whose shares fell 14 per cent to their lowest level since it went public in October, cut its second-quarter outlook as a result of disappointing sales of its home videos.
Dreamworks said it expects a second-quarter loss in the range of 7 cents to 9 cents per share, down from a previous forecast of "no profit." For the year, it cut its outlook to a profit 80 cents to 90 cents a share, down from $1.00 to $1.25 a share.
The producer of popular computer animated films like Shrekand Toy Storyhad previously expected to be at break-even for the quarter.
The company went public last year in a spinoff from the Dreamworks movie studio started by entertainment moguls Steven Spielberg, Jeffrey Katzenberg and David Geffen.
But since the initial euphoria on Wall Street, the studio has had disappointing sales of DVDs of Shrek 2, and weaker-than-expected box office performance of its latest film, Madagascar.
DreamWorks also said it has received a request from the staff of the Securities and Exchange Commission (SEC) and is voluntarily complying with an informal inquiry concerning trading in its securities and the disclosure of its financial results on May 10th, 2005.
The SEC said the informal investigation should not be construed as an indication that any violations of law have occurred, and Dreamworks said it intends to co-operate fully with the inquiry.
The company has been sued by investors who accused them of artificially inflating the outlook for sales of Shrek 2to pump up the share price ahead of the secondary offering.