Take-Two financial results fail to meet expectations

After a widely reported slump in consumer sales for the 2005 fiscal period, Take-Two Interactive has posted its full year financial results - revealing disappointing sales and prompting a revision of its Q1 forecasts.

The parent company of Rockstar Games, 2K Games, 2K Sports and budget software arm Global Star reported USD1.2 billion in net sales and diluted net income per share of USD 0.53 for its 2005 fiscal year, and USD 308 million in net sales and USD 0.27 in diluted net income per share for its fourth quarter.

Previous guidance from the firm following its Q3 results had been more optimistic, with projections of USD 1.4 to 1.5 billion in net sales and USD 1.25 to 1.55 in diluted net income per share. The company has stated that the results are considered preliminary, citing the complexities of proper compliance with the Sarbanes-Oxley Act as a reason for a delay in full and properly audited results.

Paul Eibeler, President and CEO, stated: "Clearly, the holiday season did not live up to anyone's expectations. While it is difficult to assess the impact of the hardware transition on our industry in 2006, we remain confident in the resilience and future prospects of Take-Two and the global video game business."

Noticeable highlights from the fourth quarter included Rockstar's top selling PSP title, Grand Theft Auto: Liberty City Stories, which held the number one sales position throughout October and November in the US and has enjoyed a significant post Christmas sales surge in the UK.

A number of titles were delayed however, and will now not see a release until the second quarter of 2006, prompting a revision of the company's earlier Q1 forecasts. Take-Two now expects USD 230 to 250 million in net sales (compared to previous forecasts of USD 350 to 400 million) and a net loss per share (compared to previous estimates of USD 0.14 to 0.20 in diluted net income per share). According to the company statement, the revision is partly to "reflect the continued retail weakness for video game software during the holiday selling season in both North America and Europe."

The company has so far declined to provide estimates for the full 2006 fiscal period, stating: "Due to the continued uncertainties related to the retail environment and the timing and consumer acceptance of new video game hardware and software, as well as the timing of the Company's new product releases during 2006, Take-Two is not providing financial guidance for the fiscal year ending October 31, 2006."

However, with a large number of software titles scheduled for release in the second quarter on multiple hardware platforms, the publisher remains cautiously optimistic for the future.

Eibeler concluded: "We have assembled some of the industry's best development capabilities supported by strong financial resources, and we expect to capture market share in an expanding Xbox 360 installed base and from the anticipated introduction of the PlayStation 3 later this year. We are focused on driving both top and bottom line growth in the video game marketplace by producing high quality titles for a diverse and expanding audience."