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Take-Two Interactive Warns

For the full year, Take-Two is now predicting earnings of 95 cents to $1.20 a share -- $1.15 to $1.45 a share, excluding options costs -- on sales ranging from $1.35 billion to $1.45 billion. Analysts had predicted a profit of $1.35 a share on sales of $1.43 billion.

The company had previously predicted earnings of $1.05 a share to $1.30 a share -- $1.25 to $1.55 a share before options costs -- on sales of $1.4 billion to $1.5 billion.

In addition to reducing guidance last month and again Monday, Take-Two cut its third-quarter outlook in July after it pulled Grand Theft Auto: San Andreas from store shelves. The company's move came after the discovery of explicit sexual content hidden within the game and the decision by an industry rating board to change its rating on the title.

Shares of Take-Two closed regular trading up 68 cents, or 3%, to $20.65.

Several factors weighed into the company's decision to reduce its outlook for the just-completed year:

  • Take-Two delayed the European launch of Grand Theft Auto: Liberty City Stories, a version of its flagship title designed for Sony's (SNE - Get Report) PlayStation Portable handheld system.

    Although the company recently launched the title in the U.S. and has begun shipping it to the U.K., delays in "final product testing and submission" have forced the company to hold off on selling it in the rest of Europe until the beginning of its next fiscal year.
  • Sales of some older titles were lower than expected, as were orders of new games. On a conference call with investors and analysts, company executives blamed the sales problems on retailers being cautious about the holiday season.
  • Sales at Jack of All Games, the company's distribution business, were worse than expected. Company said they had not previously anticipated the softness they saw in the unit's sales.
  • The cautious holiday outlook also weighed into the company's fiscal 2006 guidance, Take-Two executives said. Further, the company brought down estimates to reflect the uncertainty about hardware sales next year.

    The three major console makers each plan to launch new game boxes over the next year. Not only do hardware sales tend to spur software sales at companies such as Take-Two, but also Take-Two also could benefit through distributing the platform via Jack of All Games.
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