Take-Two Sees 2009 As Cold Year In Hell (TTWO, ERTS)

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Take-Two Interactive Software Inc. (NASDAQ: TTWO) just joined the ranks of video game publishers with bad earnings. Real bad earnings. And thank heavens for non-GAAP accounting. The company posted a GAAP loss of -$0.10 EPS and non-GAAP earnings of $0.02 EPS; and revenue was $323.4 million.  Thomson Reuters (First Call) had estimates of $0.05 EPS and $325.77 million in revenue.  It gets worse.

For the next quarter, Take-Two sees a non-GAAP loss of -$0.70 to -$0.85EPS on revenue of $175 million to $225 million, while First Call had estimates of $0.22 EPS on $317.6 million in revenue.  In short, it is going tobe a cold snowy day for Christmas at the company.

Forfiscal-2009, the company now expects non-GAAP earnings of $0.00 to $0.20 EPS on revenue of $1.1 billion to $1.25 billion.  First Callhad estimates at $1.26 EPS and $1.39 billion.

In a separate note, Take-Two said that it signed a new employment agreement with Rockstar Games.  This is the studiobehind the blockbuster Grand Theft Auto game franchise, and while termswere not disclosed the agreement runs to Jan. 31, 2012 and includes keyRockstar members Sam Houser, Dan Houser and Leslie Benzies.

Take-Two has also agreed to fund future development of new intellectualproperty to be owned by a newly formed company controlled by keyRockstar Games team members and published exclusively by Take-Two.

Based upon the horrible guidance and based upon the lack of performance, they better have these guys working triple shifts.

Shares are down 22% at $9.40 in after-hours trading.  This maychallenge the 52-week lows if these levels hold as the 52-week tradingrange is $9.35 to $27.95.

Next year is looking like it is going to be a lean one.  Managementprobably wishes now that it would have been more friendly to theinterest by Electronic Arts (NASDAQ: ERTS).  Unfortunately, the company isnow in its own soup.  It doesn’t feel like there are any Rockstars there right now.

Jon C. Ogg
December 17, 2008