Monday, May 23, 2011

Take-Two Interactive Software (NASDAQ: TTWO): Q4 Earnings Preview 2011

Take-Two Interactive Software Inc. (NASDAQ: TTWO) is scheduled to release its fiscal fourth-quarter earnings after the closing bell on Tuesday, May 24, 2011. Analysts, on average, expect the company to report a loss of 41 cents per share on revenue of $145.72 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 third quarter, the New York-based company's net income was $40.9 million, or 45 cents per share, compared to $37.9 million, or 43 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 52 cents per share in the latest quarter. Revenue dropped 7% to $334.3 million from $360.4 million in the same quarter last year. Analysts, on average, expect the company to report earnings of 28 cents per share on revenue of $1.08 billion.

At its last earnings call in February, the company said that it now expects smaller than previously estimated non-GAAP loss for the fourth quarter. The company also raised its non-GAAP earnings forecast for fiscal year 2011. For the fourth quarter, Take-Two said that it now expects non-GAAP loss of 45 cents to 40 cents per share, and revenue of $130 million to $150 million. Previously, the company expected adjusted loss of 60 cents to 50 cents per share and revenues of $100 million to $150 million for the quarter.

U.S. retail video game sales declined more than they were expected to in March. Game sales fell 16% in the month compared to the same period last year. A litany of factors appears to be contributing to the decline of video game retail sales. 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. Shifting consumer preferences are partially responsible for the decline in video game sales. Video game makers are facing increased competition from mobile devices like smartphones and tablets. Rising 'app' game sales reflect a consumer preference for more mobile and affordable options. Similarly, improved used game and rental sales also reflect a more cost-conscious consumer. Social network gaming is also gaining popularity and is contributing to the decline in game sales.

However, 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 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.

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. In December 2010, 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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