Thursday, September 2, 2010

Take-Two Tops Estimates on `Redemption,' Boosts 2010 Forecast


Take-Two Interactive Software Inc., publisher of the “Grand Theft Auto” video games, reported an unexpected third-quarter profit and boosted its earnings outlook on sales of the newest release, “Red Dead Redemption.” The shares rose as much as 21 percent.

Profit excluding some costs was 28 cents a share, the company said today in a statement. That compares with the average 8-cent loss estimated by 13 analysts in a Bloomberg survey. Take-Two forecast a 2011 profit of 60 cents to 70 cents, its first in a year when it didn’t deliver a new “Grand Theft” game. Analysts had estimated a full-year loss of 20 cents.

Trading in Take-Two shares was halted until 4:20 p.m. New York time after the results were announced. When trading resumed, they jumped as much as $1.90 to $10.75. Earlier they gained 29 cents to $8.85 in Nasdaq Stock Market trading. They have fallen 12 percent this year through the Nasdaq close.

“Red Dead Redemption,” more than four years in development, was created by Take-Two’s Rock Star studio, which also makes “Grand Theft Auto.” The game, with an average score of 95 out of 100 in reviews compiled by, is set in the U.S. Wild West during the early 20th century and lets players travel in a cowboy-movie landscape and hunt outlaws.

“Red Dead,” one of a handful of major console titles released this summer, benefited from strong sales of Microsoft Corp.’s newly redesigned Xbox game console and lower prices for Sony Corp.’s PlayStation 3, said Mike Hickey an analyst for Janco Partners Inc. in Greenwood Village, Colorado.

Hardware Sales

“The game’s exceptional quality and strong PS3/Xbox 360 hardware sales trends for the period contributed additional strength,” Hickey said in a note to investors. He has an “accumulate” rating on the stock.

The company said third-quarter net income was $5.92 million, or 7 cents a share, compared with a loss of $56.5 million, or 73 cents, a year earlier. Revenue more than tripled to $354.1 million from $94.9 million.

Chairman Strauss Zelnick, who took control of the New York- based company in 2007, has focused on reducing the number of titles produced and increasing their quality. After delays in development, Take-Two released “Mafia II” on Aug. 24 to strong initial sales, according to product-tracking firms in the U.S. and U.K.

Other new titles scheduled for release this year include “NBA 2K11” and the latest iteration of the popular “Civilization” PC game.

Some analysts in research notes before the announcement said gains for Take-Two shares will be limited until the release of the next “Grand Theft Auto” installment.

“The company’s inability to return to profitability and our belief that the valuation is being supported to some extent by premature expectations for GTA V in fiscal 2011 prompt us to be cautious on the stock,” said Todd Mitchell, an analyst with Kaufman Bros. in New York. He has a “hold” rating on the shares.