Take-Two Announces Preliminary Results, Lower Outlook

Prominent publisher and Rockstar/2K Games parent Take-Two has announced preliminary Q3 results, delayed because of an SEC stock option investigation, also revealing that analyst estimates are "too high" for the GTA publisher, as it continues to wea
Prominent publisher and Rockstar/2K Games parent Take-Two has announced basic financial information for its third quarter ending July 31st, showing increased revenues but no detailed information, due to its continuing stock option grant investigations. The company's stock dropped a dollar to $11.20 in after-hours trading after it revealed that it "will not report full financial results or file its Form 10-Q for the fiscal third quarter ended July 31, 2006 until the Special Committee concludes its investigation", following an SEC investigation into the backdating of stock option grants, a major issue over a multitude of public companies at present. However, it was not just the lack of specifics which concerned investors - Take-Two also commented that, "independent of any potential financial impact that may result from the Company's internal investigation of option grants, the current analyst consensus EPS estimates for its third quarter, and revenue and EPS estimates for its fourth quarter are too high." Reasons for this? The company specifically claimed that "the industry transition continues to negatively affect the Company's performance", as well as citing "increased professional fees related to regulatory matters" and "expenses for the relocation of the Company's international publishing headquarters to Geneva, Switzerland", presumably also related to the closure of Rockstar Vienna. The Company's fourth quarter results are also impacted by "the movement of a Rockstar PSP title based on a premier brand out of the fourth quarter". Preliminary net revenues for the third quarter were approximately $240 million, compared to $169.9 million for the third quarter of fiscal 2005., and Take-Two's cash position at July 31, 2006 was approximately $178 million compared to $141 million at April 30, 2006, both positive results, but no information on profit/loss specifics was communicated. The company's performance was led by titles including Rockstar's GTA: Liberty City Stories for PS2 and PSP and Table Tennis for the Xbox 360, as well as 2K Games' Prey for Xbox 360 and PC. Going forward, 2K's fourth quarter releases from Rockstar Games include Grand Theft Auto: Vice City Stories for PSP and Bully for PlayStation 2, both scheduled for release in late October, and 2K's games include Dungeon Siege: Throne of Agony for PSP; and Family Guy for PlayStation 2, Xbox and PSP, based on the Twentieth Century Fox television series. 2K Sports will introduce NBA 2K7 and NHL 2K7 for Xbox 360, PlayStation 2 and Xbox in the quarter. Finally, it was revealed: "Take-Two has received additional grand jury subpoenas issued by the District Attorney of the County of New York requesting documents in addition to those described in the Company's press release and Form 8-K filing on June 26, 2006. The additional requests include documents regarding stock options and other equity based compensation from November 2001 to the present; certain compensation, human resources and business expense documents with respect to the Company and certain of its current and former employees, officers and directors." Paul Eibeler, President and Chief Executive Officer, stated, "While the Company is addressing various regulatory matters, we continue to focus on creating content to well position ourselves for the improved industry conditions we anticipate in 2007. We are encouraged by the consumer response to our third quarter products and our diverse pipeline of future releases."

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