Foolish Forecast: Is Take-Two Still a Rock Star?

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Do a double-take on Tuesday night: Motley Fool Rule Breakers pick Take-Two Interactive Software (Nasdaq: TTWO) reports fourth-quarter earnings in the middle of a simmering takeover battle with Electronic Arts (Nasdaq: ERTS) -- and possibly a few other suitors. Check out the third-quarter results, then come back for a fresh look.

What Fools say:
Here's how Take-Two's CAPS rating stacks up against some of its peers and competitors:

	Market Cap (millions)	Trailing P/E Ratio	CAPS Rating
Electronic Arts	$14,670	N/A	***
Activision (Nasdaq: ATVI)	$8,021	29.8	*****
Konami (NYSE: KNM)	$5,270	27.8	***
Take-Two	$1,948	N/A	***
THQ (Nasdaq: THQI)	$1,210	213.7	**

Data taken from Yahoo! Finance and Motley Fool CAPS on March 10.

The CAPS crowd straddles the fence, with some thinking that the EA deal is in the books and others expecting the offer to fall through entirely. Who's right? Read on.

What management does:
It's been a while since Take-Two had a bona fide hit -- but that's surely about to change now that Grand Theft Auto IV is due to hit store shelves next month. The last multiplatform release in the money-making franchise came four years ago -- eons in the fast-moving entertainment software world.

Margins	7/2006	10/2006	1/2007	4/2007	7/2007	10/2007
Gross	24%	22.5%	24.4%	27.4%	26.4%	26.1%
Operating	(10.9%)	(13.8%)	(11.2%)	(10.5%)	(12.4%)	(10.1%)
Net	(14.1%)	(17.8%)	(16.9%)	(18%)	(15.2%)	(14.1%)
FCF/Revenue	(1.2%)	1.8%	(1%)	(3.9%)	(14.3%)	(8.7%)

Y-O-Y Growth	7/2006	10/2006	1/2007	4/2007	7/2007	10/2007
Revenue	(19.1%)	(13.6%)	9%	(1.6%)	(11.3%)	(5.4%)

Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Given the acquisitive back story, the results at hand hardly matter. Take-Two's share price originally jumped above the proposed but unwelcome $26-per-share buyout offer, but has declined steadily since then. That's a sign that investors large and small are losing faith in raised offers or competing bids, and I've found that these inklings are rarely far off the mark. In other words, expect an EA deal to go through, and buy this stock only if you're happy to unload it for $26 a share.

Of course, that's just this simple Fool's opinion. You could also grab a free 30-day Rule Breakers trial pass and see what our top analysts think. Fools don't always see eye-to-eye ...