Monday, March 1, 2010

Take-Two Interactive Software Inc. (NASDAQ: TTWO): Q1 Earnings Preview 2010

Take-Two Interactive Software Inc. (NASDAQ: TTWO) is scheduled to release its fiscal first-quarter 2010 financial results after the market close on Wednesday, March 3, 2010. Analysts, on average, expect the company to report a loss of 50 cents a share on revenue of $132.43 million. In the year ago period, the company posted a loss of 52 cents per share on revenue of $256.81 million.

Take-Two Interactive Software, Inc. publishes, develops, and distributes interactive entertainment software, hardware, and accessories worldwide. The company develops and publishes software titles for various gaming and entertainment hardware platforms, including PlayStation3 and PlayStation2 computer entertainment systems, PlayStation Portable system, Xbox 360 video game and entertainment system, and Wii and DS systems, as well as for the personal computer and games for Windows.

In the preceding fiscal-fourth quarter, the New York-based software firm reported a wider net loss of $21.99 million or $0.28 per share, compared to a loss of $14.95 million or $0.20 per share, in the prior-year quarter. Excluding items, the company's non-GAAP net income for the quarter rose to $7.0 million or $0.09 per share from $1.6 million or $0.02 per share in the same quarter last year. Net revenue for the fourth quarter increased to $343.4 million from $323.4 million in the prior-year quarter. Analysts, on average, expected the company to report earnings of $0.09 per share on revenue of $340.43 million.

Late in December, the video game publisher said that it has signed a definitive asset purchase agreement to sell its Jack of All Games distribution business to Synnex Corp. (NYSE: SNX) for about $43.25 million. To effect the change, the company also modified its first quarter and fiscal year 2010 forecast from the prior range to exclude Jack of All Games' business. Take-Two said the transaction, expected to be closed in the first calendar quarter of 2010, includes $36.50 million in cash and up to an additional $6.75 million based on the achievement of certain items.

Based on the revised forecast, for first quarter, Take-Two now expects a non-GAAP loss in a range of $0.45 to $0.55 per share, compared to the prior forecast that expected a loss of $0.40 to $0.50 per share. Revenues are now expected to range between $90 million and $140 million, down from the prior range of $210 million and $260 million.

For fiscal year 2010, the company expects non-GAAP loss from continuing operations in the range of $0.48 to $0.68 per share, compared to the prior guidance expecting a loss in the range of $0.40 to $0.60 per share. Revenues are now expected to range between $710 million to $910 million, down from the prior range of $1.0 billion to $1.2 billion.

According to NPD Group, sales of video-game hardware and software in the U.S. ended the year down 8% from the previous record-setting period. Holiday shopping failed to lift demand for games, as software sales slid 7% for the month of December compared to the same period the previous year.

The company released downloadable content for Borderlands, NBA 2K10 for the Wii, two games based on Nickelodeon’s Dora the Explorer, Ni Hao, Kai Lan, and New Year’s Celebration in the first-quarter.

Take Two is often criticized for relying heavily on the blockbuster title Grand Theft Auto series to turn in a profit. The game series has gone on to sell more than 80 million units over its life to date, making it one of the top-selling games in history. The franchise represented more than 46% of the company's total net revenue in its most recent fiscal year. The latest in the series- "Grand Theft Auto IV", a huge commercial and critical success, was released in April of 2008. The next full-fledged GTA sequel is now expected in 2011.

Billionaire activist investor Carl Icahn recently upped his stake in Take-Two to 12.3%, and the company agreed to nominate three new directors at his request. Analysts say Icahn could push for a sale of the company or at least agitate to improve its performance.

The company's stock currently trades at a forward P/E (fye 31-Oct-11) of 7.11. In terms of stock performance, Take-Two shares have gained nearly 47% over the past year.

Full Disclosure: None.
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