Friday, February 4, 2011

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

Take-Two Interactive Software Inc. (NASDAQ: TTWO) is scheduled to release its fiscal first-quarter financial results after the closing bell on Tuesday, February 8, 2011. Analysts, on average, expect the company to report earnings of 28 cents per share on revenue of $1.08 billion.

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 fourth quarter, the New York-based company's net income was $53.78 million or $0.58 per share, compared with a net loss of $23.5 million or $0.30 per share a year earlier. Revenue surged to $354.1 million from $94.9 million in the same quarter last year. Excluding special items, adjusted income from continuing operations was $64.0 million or $0.67 per share, versus income of $7.9 million or $0.10 per share a year ago. Revenue grew 32% to $373.7 million from $282.52 million in the same quarter last year. Analysts, on average, expected the company to post  earnings of $0.31 per share on revenue of $325.23 million.

At its last earnings call in December, Chairman Strauss Zelnick said in a statement that the company intends to deliver a diverse portfolio of high-quality titles. The company has plans to venture into newer areas of interactive entertainment business, and hopes to expand into Asian and Latin American markets.

For the quarter ending in December, the company expects adjusted earnings of $0.25 to $0.35 per share on revenues of $290 million to $315 million.

For the quarter ending in March, Take-Two anticipates adjusted loss of $0.60 to $0.50 per share on revenues of $100 million to $150 million.

For the full year of 2011 that ends in March, the company forecasts adjusted earnings of $0.50 to $0.65 per share on revenues of $1.0 to $1.1 billion.

The video game industry is undergoing a significant transition, with increasing contribution from digital downloads, used game sales, game rentals, subscriptions, social network games and mobile game apps as compared to retail sales. The consumer demand for video game is likely to increase with the gradual improvement in the overall U.S. economy for 2011. The sector has seen an increasing amount of its casual gamers shift towards gaming on smartphones or Facebook applications recently. 

Companies within the Multimedia and Graphics Software Sector have been making moves to adapt to a changing market. With packaged-goods sales declining sector-wide companies are starting to promote and develop their digital distribution businesses. Take-Two Interactive Software is focusing on products for new platforms, such as the Xbox Kenect, in hopes of increasing profits.

Take-Two's shares have outperformed those of its bigger rivals in the United States in 2010, but the volatile video video game sector has turned off many investors in recent years.

Take Two is often criticized for relying heavily on the blockbuster title Grand Theft Auto series to turn in a profit. 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 2012.

In December, Take-Two Interactive laid out its projected 2011 and 2012 release schedule for a number of the publisher’s most high profile titles: 

The list as announced is below:

L.A. Noire (Xbox 360, PS3) – Spring 2011
Top Spin 4 (Xbox 360, PS3, Wii) – Fiscal 4Q 2011
Major League Baseball 2K11 (Xbox 360, PS3, PS2, PSP, Wii, PC) – Fiscal 4Q 2011
Duke Nukem Forever (Xbox 360, PS3, PC) – Calendar Year 2011
Spec Ops: The Line (Xbox 360, PS3, PC) – Fiscal Year 2012
XCOM (Xbox 360, PC) – Fiscal Year 2012
BioShock Infinite (Xbox 360, PS3, PC) – Calendar Year 2012

Full Disclosure: None.
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