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Take-Two Restates, Reports Loss

Priya Ganapati

Video-game publisher Take-Two Interactive(TTWO - Cramer's Take - Stockpickr) restated its financial results for fiscal 2006 late Wednesday and blamed the higher-than-expected loss on the video-game industry's transition toward next-generation platforms such as Sony's(SNE - Cramer's Take - Stockpickr) PlayStation 3, Nintendo's Wii, and Microsoft's(MSFT - Cramer's Take - Stockpickr) Xbox 360 consoles.

Net loss for the fourth quarter of fiscal 2006 was $14 million, or 20 cents a share, compared with net income of $18.9 million, or 27 cents a share, the year before. Analysts were expecting earnings of 13 cents a share.

The fourth-quarter loss included $5.5 million for legal and other professional fees associated with the investigation, beginning in June 2006, of stock option grant practices.

Revenue for the quarter ended Oct. 31, was $266.6 million falling from $306.8 million for the same period a year ago.

For the third quarter, Take Two lost $91.4 million, or $1.29 a share, compared with a net loss of $29 million, or 41 cents a share, in the third quarter in 2005.

Revenue rose to $241.2 million from $169.9 million for the prior-year period in the third quarter ended July 31.

Comparisons with year-ago periods reflect restated results for the fiscal 2005 third and fourth quarters and fiscal year, the company said. Results may not be comparable with analysts' consensus.

Take-Two said its results were affected by the delays in the availability and consumer acceptance of next-generation hardware, and lower average selling prices of the company's software for older consoles.

Shares of Take-Two were off 30 cents, or 1.7%, to $17.50 in extended trading.

Net loss for fiscal 2006 was $184.9 million, or $2.60 a share, compared with net income of $35.3 million, or 50 cents a share, in 2005. Revenue was $1.04 billion, a drop from $1.2 billion in fiscal 2005.

The fiscal 2006 results include a noncash charge of $63.5 million, or 89 cents a share, primarily incurred during the third quarter to record valuation allowances for deferred tax assets.

Fiscal 2006 performance reflected higher development costs for its next-generation titles and the company's continued investment in building its sports business, the company said.

For the first quarter ended Jan. 31, Take-Two expects revenue in the range of $265 million to $275 million, with an EPS loss in the range of 33 cents to 35 cents, reflecting no tax benefit.

For the full fiscal year 2007, revenue is expected to be between $1.2 billion and $1.25 billion.

Take-Two said it expects to return to profitability in the fourth quarter and break-even for the full fiscal year 2007. The company also expects its 2K Sports division to be profitable in calendar year 2007.

Separately, the company said it has appointed Seth Krauss as executive vice president and general counsel, effective Mar. 12. Krauss was previously at Morgan Stanley, where he served as an executive director in the legal and compliance division.