Grand Theft Auto IV Sales Soar

Take-Two sells 6 million copies in the first week but it is not enough to impact EA's bid for Take-Two.
By Priya Ganapati ,

SAN FRANCISCO -- The first week of sales of video games publisher

Take-Two's

(TTWO) - Get Report

blockbuster

Grand Theft Auto IV

is on track with sales expectations but will have little impact on the $2-billion buyout offer for the company.

Take-Two said Wednesday it sold approximately 6 million copies of

Grand Theft Auto IV

in the first week of its release with an estimated retail value of about $500 million.

That is exactly in line with expectations, say three analysts, and is unlikely to affect industry leader

Electronic Arts'

(ERTS)

$2 billion, or $27.74-a- share, bid for Take-Two.

"Six million units is exactly in line with our expectations," says Arvind Bhatia, an analyst with Sterne, Agee & Leach. "It's a great opening for the game but it is not surprising."

"The $500 million in revenue is a little bit higher than expected but that could be because of greater sales of the special edition pack, which is priced higher, or the mix of domestic to international sales," says Bhatia. Sterne, Agee & Leach does not own shares or have an investment banking relationship with Take-Two.

Grand Theft Auto IV

sold approximately 3.6 million units on its opening day with a retail value of approximately $310 million globally, said Take-Two.

Analyst Michael Pachter of Wedbush Morgan agrees that

Grand Theft Auto IV

sales are

tracking in line

with expectations.

That means EA may have made the right assumptions in its proposal for Take-Two. If anything, it strengthens EA's case that Take-Two becomes less valuable to it over time, say analysts.

"

Grand Theft Auto IV

did good numbers but it eventually did what it was supposed to," says Bhatia. "Had it been eight million units or more in the first week, Take-Two might have had a case but the initial success though strong was as expected."

Bhatia expects Take-Two to sell 10 million to 12 million copies of the game in the first year of its release and about 18 million copies worldwide over the game's lifetime. Pachter estimates 9 million copies will be sold in the first year with about 20 million over the lifetime of the game.

Take-Two's stock has reacted little to the release and now the initial sales numbers of

Grand Theft Auto IV

. The market has discounted sales of the game and the success of the title has been built into the current stock price, analysts say.

Take-Two shares have been hovering around the $26 mark since EA's bid for the company became public on Feb. 24. Take-Two's stock jumped from $17.36 on Feb. 22, the last trading day before EA's offer became public, to $26.89 on Feb. 25.

Shares of Take-Two fell 4 cents to $26.33 in recent trading. EA was up 53 cents, or 1%, to $52.71.

"For better or worse, Take-Two's stock price is governed by what EA does with its bid," says Todd Greenwald, senior analyst with Signal Hill Capital Group. "Six million units makes for great headline but it is what EA has already taken into account while making its offer." Signal Hill does not own shares or have an investment banking relationship with Take-Two and EA.

EA could still raise its offer for Take-Two if Take-Two management and shareholders were to argue that EA's current bid undervalues the company.

"EA could raise its bid to the $28 to $30 range but they would do that only as a way to close the deal and not because

Grand Theft Auto IV

sold better than they had expected," says Greenwald.

EA's tender offer for Take-Two is set to expire on May 16 though most analysts believe the company will extend its deadline. EA will report its fourth-quarter results Tuesday. Its largest rival

Activision

(ATVI) - Get Report

, which is in the process of merging with

Vivendi Games

, will report results Thursday.

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