A report by the Associated Press indicated that Take-Two's shares dropped sharply after the company posted a significant second-quarter loss
that exceeded Wall Street expectations.
According to the report, company shares fell 18 percent to $13.81 in afternoon trading on the Nasdaq Stock Market. However, shares climbed slightly to $13.83 before the market closed.
Take-Two reported net loss for the quarter to be $50.4 million or $0.71 per share, compared to a net loss of $8.2 million or $0.12 per share in the prior year's second quarter - analysts had been expecting just $0.11 per share loss for this latest quarter. However, the company indicted a slight increase in net revenue to $265.1 million, compared to $222.1 million for the same period in 2005.
Take-Two noted that it continues to expect to return to profitability in its fourth quarter of fiscal 2006. However, Paul Eibeler, President and Chief Executive Officer of Take-Two, commented that the company is "taking a small break" from issuing guidance while business factors and conditions normalize.
UBS analyst Michael P. Wallace, who rates Take-Two "Neutral”, noted in the report that Take-Two's adjusted loss of $0.47 per share, excluding charges, was mostly due to writing off development costs. In addition, losses were also attributed to having paid out significant amounts for third-party exclusivity rights, but that it “got beaten to the market by Sony and has been outsold by them on the PlayStation 2," Wallace wrote in a note to clients.
"Without guidance from management regarding the breadth of the release slated next year and even potentially incomplete data for this year, we find it difficult to forecast earnings for the coming years," wrote Citigroup analyst Elizabeth Osur in a note to clients, which also recommend that investors sell the stock, according to the AP report.
Take-Two noted in its earnings announcement that while strong sales of 2005's Grand Theft Auto: San Andreas
made accurate comparison between this and the prior year difficult, the company nonetheless attributed the lower year to date results to continued retail weakness in both North America and Europe as the industry began to transition to new hardware platforms.