Now we know why Electronic Arts
Take-Two came through with better-than-expected fiscal first-quarter results last night -- easily topping both its initial guidance and Wall Street's targets -- and raised its outlook for all of fiscal 2008 ahead of next month's release of Grand Theft Auto IV.
Revenue fell by 13% to $240.4 million, but analysts were looking for a 24% top-line plunge. The market clearly underestimated the power of recent Take-Two hits such as BioShock (with more than 2 million units sold worldwide) and Carnival Games (moving a million copies for Nintendo's Wii).
The quarterly loss widened to $0.52 a share, or $0.42 a share once you back out stock-based compensation and reorganization expenses. On that adjusted basis, Wall Street was looking for a $0.51-a-share deficit.
I guess you can't blame analysts, since they were simply sticking close to the company's guidance, which had targeted an adjusted loss of $0.50 a share to $0.60 a share on no more than $225 million in revenue for the period.
Take-Two's upped outlook now calls for the company to earn $1.35 a share to $1.55 a share in adjusted profits, on $1.25 billion to $1.4 billion in revenue.
The new numbers make one think that Electronic Arts was trying to perpetrate highway robbery by offering to buy Take-Two for just 16-19 times this year's profitability.
Take-Two rebuffed the offers at $25 and $26 a share. With Grand Theft Auto IV now just a month away, and subsequent episodic installments for Microsoft's
It can no longer woo Take-Two into believing that it's a one-product company, because it's not. BioShock 2 is now in development for next year. Carnival Games is getting a Nintendo DS makeover, with a miniature-golf version for the Wii faithful coming later this year.
EA is stuck. Activision
David Gardner recommended Take-Two Interactive -- twice -- to Rule Breakers subscribers. Where EA dawdled, he showed up early, while Take-Two's stock was still cheap. When will video game companies learn?