Rosy ForecastDespite the added financial pressures, analysts say Take-Two can pull through if it can carry out its launch of Grand Theft Auto IV on schedule. The forecast is rosy for Grand Theft Auto IV. Take-Two could sell 7.5 million to 8.5 million copies in the fiscal year 2008 ending Oct. 31 and 10.5 million to 11.5 million in the first full year, estimates Michael Pachter, an analyst with Wedbush Morgan, which does not own shares of the company or have an investment banking relationship with it.
Shaky GroundWhile Grand Theft Auto IV, is expected to give the ailing company a shot of adrenaline, it does show Take-Two's vulnerability as a company reliant on one blockbuster for its revenue. Because of the delay of the next Grand Theft Auto game, the company's earnings have drifted from $1.37 a share in fiscal 2003 down to 91 cents a share in 2004 and 50 cents a share in 2005. It ended fiscal 2006 with a loss of $2.60. At the end of fiscal 2007, Take-Two is expected to post a loss of $2.06, according to analysts polled by Thomson Financial.
Cost-Cutting MeasuresTake-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.