Take-Two Struggles to Stay in the Game

"If you look at the trend in their earnings per share, you can see earnings decline steadily," says Bhatia. "They are likely to make money because of Grand Theft Auto IV but not a lot beyond that."

Bhatia estimates Take-Two will see its earnings jump in 2008 but could slip after the Grand Theft Auto IV buzz fades. Analysts polled by Thomson Financial expects earnings of 93 cents a share in fiscal 2008 and $1.30 a share in fiscal 2009.

Cost-Cutting Measures

Take-Two has tried to stay afloat through cost-cutting efforts. In its last quarterly results filing, Take-Two disclosed that it has "restructured its international operations to consolidate." The company has also realigned label and studio administrative functions and its third-party PC distribution in North American sales operations, among other things.

The move, it said, is expected to reduce fixed overhead costs by about $25 million on an annualized basis by the end of fiscal 2008, while it takes about $25 million of business reorganization and related charges for that period.

"Management has been trying hard to take the costs out of their business," says Sozzi. "They have laid off people in the sports business and consolidated many divisions."

Take-Two's challenges has had some investors shying from the stock, which is down about 5.5% this year and down 13% over the past two years. Shares of Take-Two were up 30 cents, or 2.1%, to $17.03 Wednesday.