Gaming software developer Take-Two Interactive (NASDAQ:TTWO) has had a lot on its plate lately -- and most items have been quite unappetizing to investors. But hopes spring eternal, especially when the gaming industry is in the early innings of releasing its next generation of video game consoles. Tomorrow's second-quarter results will offer further insight into Take-Two's turnaround game plan.     

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts currently follow Take-Two: two are bullish, 11 are on the fence with hold ratings, and four have a negative take.
  • Revenues. Analysts are projecting second-quarter sales of $204.5 million, or nearly a 23% drop from last year's quarter.
  • Earnings. Analysts project negative second-quarter earnings of ($0.56) per share. Last year's second quarter also resulted in a bottom-line loss.

What management says:
Back in March, Take-Two announced a major reshuffle of its board of directors and also appointed a new Chairman and CEO. It is currently on the prowl for a new CFO. Investors are waiting for the new management team to put its stamp on the company and offset challenging operating results. 

What management does:
In addition to the weak sales and earnings trends, the company has had its fair share of other headaches, including a stock options investigation and inappropriate content found in its flagship Grand Theft Auto game. Numbers don't lie; the financials have been weak, with a steady trend of negative net margins for more than a year now.     

Margins

10/05

01/06

04/06

07/06

10/06

01/07

Gross

34.5%

29.7%

24.3%

23.4%

22.5%

23.9%

Operating

3.3%

(8.8%)

(12.4%)

(11.3%)

(13.9%)

(11.2%)

Net*

2.9%

(5.1%)

(8.9%)

(14.1%)

(17.8%)

(16.9%)
All 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:
With turmoil comes opportunity, and Take-Two is the clear turnaround play in the video game software industry. Electronic Arts (NASDAQ:ERTS) is the clear leader in the space, while THQ (NASDAQ:THQI) and Activision (NASDAQ:ATVI) are seeing new stock highs as gaming excitement builds with a new round of hardware platforms from Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), and Nintendo (OTC: NTDOY.PK).

Take-Two has yet to put its options investigation behind it, but it could see relief with the upcoming fall release of the latest Grand Theft Auto. Other than that, the market is starved for positive news flow from the company, and tomorrow will be one of the first opportunities for the new management team to fill investors in on its restructuring initiatives.

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Activision, Nintendo, and Electronic Arts are Motley Fool Stock Advisor recommendations, while Microsoft is a recommendation of Motley Fool Inside Value. Try any of our Foolish newsletters free for 30 days.

Fool contributor Ryan Fuhrmann is long shares of Microsoft but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.