Take-Two: GTA Our 'James Bond', Nintendo Support Vital

Speaking in their first public conference call after taking control of Take-Two, chairman Strauss Zelnick and CEO Ben Feder outlined a 100 day plan for revitalizing the company, calling Grand Theft Auto the firm's 'James Bond', and noting that "wor
Speaking in their first public conference call eight days after taking control of Take-Two, chairman Strauss Zelnick and CEO Ben Feder outlined a 5 point 100 day plan for revitalizing the company - pledging the utmost integrity and transparency as the new management moved forward. The five point plan revealed by the executives that include assessing Take-Two's organizational structure, including the hiring of a new CFO after yesterday's departure of standing CFO Karl Winters. Zelnick also said the company would be reviewing and addressing costs structures, already "well underway," across all of Take-Two's divisions and looking at strategic alternatives, including stripping away any non-core, non-profitable, and marginal businesses. The third strategy was to maximize the values of all external relationships, with the executives confirming that they had already met with hardware and product licensors for all the company's core businesses, including its sports division, 2K Sports. Fourth, Take-Two will be revitalizing is process for greenlighting games to ensure that all titles in development have "market potential," and cutting those that don't meet the company's demands early. As part of this, Zelnick said that key franchises for Take-Two already in development, including GTA 4, BioShock and Manhunt 2, had already been looked at and were shown to be on schedule for 2007. Finally, the executives said that the new management was committed to bringing the publisher's litigation and regulatory issues to a close, the results of which the team said was already beginning to be shown, with today's relisting on NASDAQ, and meetings underway with district attorneys and the SEC. Financially, the company said it was making no changes to the standing guidance at this stage, and would be releasing new guidance information at least by the end of their first 100 days. However, they were open in admitting that the standing guidance for its 2K Sports division to return to profitability in calendar 2007 could very well fall short, but that they expected to turn that around in the medium-term. When asked what the prospects were for a permanent CEO and whether Feder was seeking the position, the two said that they were engaged in shorter term goals to stabilize the company and "boost and encourage morale," that it was "incumbent upon them to stabilize before bringing in a permanent CEO." The work they felt needed to be done were things they "don't want the CEO to focus on," said Zelnick, adding that they were there to "clean up" and make some "unpleasant decisions," and that they would only serve "as long as needed, and no longer than necessary." Asked specifically if the company had any long-term plans to foster growth to fill the shoes of Grand Theft Auto should the franchise popularity begin to wane, Zelnick said that while it's true that no franchise lives forever, he saw GTA as the company's 'James Bond' -- a franchise that will continue to reinvent itself, adding that last year's Bond film release was its highest grossing to date. Zelnick and Feder were also asked about the previously reported plans that the company's prior board had raised concerning lining up buyers for the company and if the new board were still engaged in those conversations. Zelnick responded that those processes were no longer ongoing, and said that to the best of their knowledge there were "clear issues that needed to be addressed" before buyers would continue those conversations. As to whether the new board were still maintaining those relationships, Zelnick would only offer, "I've never burned a bridge in my life." Turning to 2K Sports, Zelnick elaborated on the challenges the division met. "The nature of the sports business is different," Zelnick explained, adding that in addition to non-ownership of the IP, annual releases characterized by less driven by gameplay and more driven by features and brands, there was a "1000lb gorilla in the business that shall remain nameless." "The way to succeed," said Zelnick, was by "reviewing higher than the 1000lb gorilla's games," which, he noted 2K Sports titles were, though there was still time for the titles to be taken up by the average consumer. Sports consumers were more brand-driven than hardcore gamers, he noted, saying that it's 2K's plan to build that brand. Finally, asked about the company's traditionally weak relationship with Nintendo, Zelnick confirmed that "working with Nintendo is a priority," and in fact "all of next-gen is a priority," adding that the challenge was to tailor games to each platform and the type of consumer that was attracted to the platform, but that Take-Two was committed to creating "great games for Nintendo."

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