Your Move, Activision

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Where you at, Activision (Nasdaq: ATVI)? The game's afoot, and it's your turn, but I don't think you even realize that you're playing.

Yes, Sunday's public revelation by Electronic Arts (Nasdaq: ERTS) that Take-Two Interactive (Nasdaq: TTWO) has rebuffed its cash-per-share buyout offers of $25 and $26 appears to be a two-character play.

It doesn't have to be, though. You know it, Activision. You just have to ask yourself a few very important questions:

• How much is Take-Two worth to me?
• Do I even want Take-Two?
• How much is Take-Two worth to my rival?
• Should I feign interest to get Electronic Arts to overpay?

Let's tackle the first two questions. With the success of the Guitar Hero and Call of Duty franchises, you may not need hot properties like Grand Theft Auto, Manhunt, and BioShock, even if they fill the slim testosterone gaps in your current titles.

However, the Web-delivered future is coming. You know it all too well, given the pending Activision-Blizzard deal. That union will bring you up to speed with the World of Warcraft wonder of high-margin online multiplayer communities.

A lot of Take-Two's franchises, like Grand Theft Auto and BioShock, and even some of the ho-hum commercially lamentable Take-Two properties like Bully, would fit right in with online community gaming.

Take-Two -- a timely recommendation for Rule Breakers subscribers a few months ago -- also has a thriving niche in lower-tier sporting titles. That may be backseat fodder for the EA Sports behemoth, but wouldn't it be welcome ammo for you, Activision?

If EA corners sporting games -- the way it did pro football games, when it struck an exclusivity license with the NFL -- won't EA have the flexibility to truly fatten its coffers with sports games that lend themselves perfectly to annual updates?

This brings us to the third question, posing the possibility that Activision might make a play for Take-Two, if only to keep it out of EA's grubby fingers.

Making a play for the play's sake
Take-Two is the last of the indies. THQ (Nasdaq: THQI) scores well with licensed fare but there's no Grand Theft Auto to get the high-margin juices flowing. Smaller players like Majesco (Nasdaq: COOL) and Atari (Nasdaq: ATAR) are too small to move the needle.

Take-Two under Activision means that it wouldn't be under EA. The stakes are meaty, especially with EA and Activision Blizzard now jockeying for market superiority.

However, even if Activision doesn't feel that it wants to expend the resources to acquire Take-Two, it can still enter the bidding war, if only to either get EA to pay more than it may have to for Take-Two, or smoke out another potential suitor like MTV parent Viacom (NYSE: VIA).

If Take-Two chuckled at EA's buyout offer at $26, pointing to April's release date of Grand Theft Auto IV as a potentially valuation-altering event, it probably wouldn't think much of Activision joining the fray at $29. However, that simple act would leave EA turning frenetic circles on the floor like Curly from The Three Stooges.

Let Activision get up to speed with sports-game engines? Let Activision bolster its healthy position in racing games by tossing in the naughty carjacking storylines of Grand Theft Auto?

Electronic Arts could bid $30 -- or even in the low $30s -- and the deal would still likely be accretive in the short term.

Activision's presence may also bring Viacom to the table, since the two companies are already duking it out in the battle of Guitar Hero vs. Rock Band. Remember, Viacom was rumored to be interested in Take-Two earlier this month (though at lower price points).

Either way, you've got a decision to make, Activision. Shoot or pass, but the ball is in your hands.