Updated from 4:53 p.m. EDT

SAN FRANCISCO -- Video game publisher Take-Two Interactive ( TTWO) posted a narrower-than-expected third-quarter loss and guided the full year in line with its revised expectations.

The company had cut its outlook last month on news of the delay of its key game, Grand Theft Auto IV.

Take-Two's loss for the third quarter was $58.5 million, or 81 cents a share, compared to a loss of $91.4 million, or $1.29 a share, in the third quarter of fiscal 2006. Analysts polled by Thomson Financial were expecting a loss of 80 cents a share.

Excluding items, the company's loss was $46.1 million, or 64 cents a share, compared to $19.4 million, or 27 cents a share, in the third quarter of 2006.

Revenue dropped to $206.4 million from $241.2 million a year earlier, but beat analysts' expectations of $200.6 million.

Shares of Take-Two were recently up 65 cents, or 4.1%, to $16.40 in after-hours trading.

The decrease in net revenue year over year is largely due to strong prior-year sales of titles from the company's blockbuster Grand Theft Auto franchise, said Take-Two. Take-Two had released the Grand Theft Auto: Liberty City Stories game for Sony's ( SNE) PlayStation 2 in June 2006.

Third-quarter sales were led by games The Darkness, Fantastic Four: Rise of the Silver Surfer, The Bigs and All-Pro Football 2K8.

Take-Two also confirmed it may have an unexpected hit on hands this year. The company said it has already shipped 1.5 million BioShock games released late last month . The company said it is exploring the idea of turning BioShock into a franchise and releasing more versions of the game for additional platforms. BioShock is currently available for PCs and Microsoft's ( MSFT) Xbox 360 console.

For the fourth quarter, Take-Two reiterated its guidance and said revenue is likely to be in the range of $275 million to $300 million, with loss in the range of 20 cents to 25 cents a share.

Analysts were expecting revenue of $287.9 million and a loss of 16 cents a share.

For fiscal year 2008, Take-Two expects revenue in the range of $1.1 billion to $1.4 billion and EPS of 80 cents to $1 a share. Analysts are expecting revenue of $1.43 billion and earnings of 88 cents a share.

For fiscal 2008, the company said its lineup includes Grand Theft Auto IV, Sid Meier's Civilization Revolution, the next in the Bully series and its sports titles, NBA 2K9 and NHL 2K9.

Take-Two also said it has created a new publishing label, 2K Play, dedicated to casual gaming. The company had partnered with Viacom's ( VIA) Nickelodeon cable TV channel for an expansive handheld and console video game licensing agreement involving Nickelodeon's properties such as Nick Jr. and preschool television hits, Dora the Explorer and Go, Diego, Go!

Dora and Diego, the two top-ranked television shows for kids aged 2 to 5, will be the first games under the new 2K Play label and are expected to be released this fall in North America.

Take-Two also reaffirmed that it is on track for its sports division , 2K Sports, to be profitable next year.

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