Take-Two Outlook Dims

The video-game publisher beats on EPS, plans big spending cut.
Publish date:

Updated from 5:15 p.m. EDT

The video-game publisher


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beat estimates in its second quarter, but sales fell from a year ago, and the company guided lower for the coming quarter, as it announced a restructuring plan to cut expenses by $25 million at the end of fiscal 2008.

The N.Y.-based company additionally on Monday reaffirmed guidance for fiscal 2007.

Revenue for the second quarter was $205.4 million, a decrease from $265.1 million a year ago, but better than analysts' polled by Thomson Financial forecast of $204.4 million.

Excluding charges related to reorganization and stock-based compensation expenses, Take-Two lost $29.7 million or 41 cents a share, compared with $37 million, or 52 cents a share in the second quarter of 2006. That beat consensus EPS estimates by 16 cents.

Take-Two said the decrease in net revenue reflected the significant sales contributed by one its games,

The Elder Scrolls IV: Oblivion

released in the year-ago quarter.


Grand Theft Auto: Vice City Stories


Major League Baseball 2K7

sold more than 1 million units each during the quarter.

The company's second-quarter earnings call is the first after a

shareholder revolt led to the departure of former CEO Paul Eibler and CFO Karl Winters and installed current CEO Ben Feder and Chairman Strauss Zelnick at the helm.

Shares of Take-Two were up 28 cents, or 1.5%, to $19.22 in recent after-hours trading.

For the third quarter, Take-Two said revenue would range from $195 million to $215 million, with EPS loss, excluding items, in the range of 60 cents to 65 cents. Analysts were expecting revenue of $249.1 million and a loss of 17 cents a share.

For the fourth quarter, Take-Two guided net revenue in the range of $520 million to $550 million, with EPS in the range of $1.35 to $1.40 a share.

Analysts forecast revenue of $489.3 million and earnings of $1 a share.

Take-Two reaffirmed its guidance for fiscal 2007 of revenue in the range of $1.2 billion to $1.25 billion and break-even shares vs. consensus of a loss of 4 cents a share on revenue of $1.22 billion.

The company also announced a restructuring plan for its international operations. It plans to consolidate and align the marketing, sales and operational functions according to business category rather than geography.

On the West Coast, Take-Two plans to consolidate the management, marketing and business development operations of the 2K and 2K Sports divisions.

Take-Two expects to reduce fixed overhead by approximately $25 million by the end of fiscal 2008. It also sees approximately $15 million of charges related to the restructuring through fiscal 2008, with roughly half of the charges expected in fiscal 2007.

Take-Two also announced that Lainie Goldstein, interim Chief Financial Officer, has been named to the CFO position. Goldstein had joined the company in 2003.

The company said it is in "active discussions" about "alternatives" for its accessories unit, Joytech, and distribution business, Jack of All Games -- two segments that analysts have long regarded as extraneous to the company's focus.

Take-Two said giving up its distribution business would help it focus on its publishing arm, which contributed 75% to total revenue in the quarter. The distribution business accounted for 25% of revenue in the second quarter.

That was, however, down by about 21% compared with the same quarter the year-before because of the decline of volume and average selling prices of older games, said Take-Two.

Sports-based games represented about 35% of Take-Two's publishing revenue in the second quarter. The company said it will no longer predict a specific time for profitability of the division and that

it remains committed to the division. Earlier Take-Two had said it expects the sports division to be profitable in this year.

Take-Two also confirmed it will release its much-awaited game,

Grand Theft Auto IV

, in October as announced earlier. The game, claimed Take-Two, would help significantly boost sales of the lagging PlayStation 3 console from


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