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Take-Two Interactive

(TTWO) - Get Take-Two Interactive Software, Inc. Report

Tuesday posted a narrower than expected quarterly loss and said it's extended long-term employment agreements with key members of its Rockstar Games creative team while also inking a new management deal with ZelnickMedia.

The company's adjusted profit outlook for its fiscal year ending in March 2012, however, is below Wall Street's current consensus view.

Take-Two, whose titles include the

recently released L.A. Noire


Major League Baseball 2K11

, posted a non-GAAP

generally accepted accounting principles loss of $14.4 million, or 18 cents a share, for the three months ended in March, on revenue of $182.3 million.

In the same period a year earlier, the company earned $3 million, or 4 cents a share, on an equivalent basis with revenue totaling $233.2 million. The average estimate of analysts polled by

Thomson Reuters

was for a loss of 39 cents a share in the March period on revenue of $148 million.

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"Fiscal 2011 was a very strong year for Take-Two," said Strauss Zelnick, the company's chairman and CEO. "We generated revenue growth and margin expansion that consistently exceeded expectations, and also took action to position the Company for even greater success over the long-term."

The company said Sam Houser, Dan Houser and Leslie Benzies of the Rockstar Games team agreed to renew their long-term employment agreements "on substantially similar economic terms," and that its management deal with ZelnickMedia runs through May 2015 and calls for Strauss Zelnick to continue as chairman and CEO and Karl Slatoff to remain chief operating officer.

The stock was initially halted after the closing bell for news dissemination and it's now trading up 1.6% at $16.35 in extended action with volume running above 460,000. It dipped as low as $15 though, according to

. Based on a regular session close at $16.10, Take-Two shares were up 34% so far in 2011 but they've pulled back since hitting a 52-week high of $17.58 on May 19.

For its fiscal year ending next March, Take-Two said it expects non-GAAP earnings of 10 to 35 cents a share on revenue of $1 billion to $1.1 billion vs. the current average analysts' view for a profit of $1.12 a share on revenue of $1.29 billion. For its fiscal first quarter ending in June, the company sees between breakeven results and non-GAAP earnings of 10 cents a share on revenue ranging from $325 million to $375 million. The consensus estimate is for a profit of 14 cents a share on revenue of $298.7 million in the June quarter, according to

Thomson Reuters


In addition, CEO Zelnick gave a preliminary forecast for the company's next fiscal year ending in March 2013, projecting non-GAAP earnings of more than $2 per share.

Wall Street was split on Take-Two ahead of the report with 9 of the 17 analysts covering the stock at either hold (8) or sell (1), and the remainder split between strong buy (6) and buy (2).

Sterne Agee saw the lower outlook coming, saying in a preview of Take-Two's quarter that guidance could be "materially below" the consensus view. The firm, which has a buy rating on the stock with a 12-month price target of $19, said many on Wall Street were likely expecting the guidance to be weak, and noted that the initial view doesn't likely include a contribution from

Grand Theft Auto V


Other reasons for the lower outlook include management's tendency to be conservative with the initial view, tough comparisons with the

Red Dead Redemption


NBA 2K11 titles

, and the question of what impact a potential NBA lockout would have on sales. The positive reaction to the outlook in late trades seems to reflect awareness of these factors.


None of the above reasons are new or surprising and we think most investors have been preparing for the possibility of weak FY12 guidance for months," said Sterne Agee in its research note on Monday. "Whether GTA V is released in late FY12 or a few months later, i.e., in early FY13, should not materially change the company's intrinsicvalue."

The firm's recommendation was for investors to buy Take-Two shares on any weakness following the report.


Written by Michael Baron in New York.

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Michael Baron


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