Take-Two takes financial hit, delays games

After a lackluster FY2005, the publisher lowers Q1 guidance on Top Spin 2 and College Hoops 2K6 postponements, predicts late PS3 start.

While most people's New Year's Eve hangovers have faded, it appears Take-Two Interactive's has just begun. Today, the company announced its preliminary earnings for the fiscal year and quarter ending October 31, 2005. For the year, the company saw $1.2 billion in net sales and net income per share of $0.53, barely above the previous year.

CFO Karl Winters told analysts in a post-earnings conference call that the biggest cause for the tepid earnings was "R&D expenses, which related to our development studio acquisitions and incentive compensation related to key products that were shipped this year." Presumably, that figure also covered the higher costs of development for next-generation consoles.

For its fourth fiscal quarter, Take-Two reaped $308 million in net sales and $0.27 in net income per share, far below the same period in 2004. "Revenue was down primarily due to the large comp we were up against from last year's Q4 release of Grand Theft Auto: San Andreas for PlayStation 2," said Winters. "$236 million, or about 54 percent of last year's fourth-quarter total sales, came from that single title."

Winters also laid out which titles drove revenue during the quarter. "Grand Theft Auto: San Andreas for PlayStation 2, Xbox, and PC was approximately seven percent of Q4 revenue, while Midnight Club 3: DUB Edition for the PS2, Xbox, and PSP was approximately four percent of total revenue." Winters said that Grand Theft Auto: Liberty City Stories (PSP) and The Warriors (PlayStation 2, Xbox) accounted for three percent of Q4 revenue apiece.

In a statement, the company blamed the slump on "lower sales volume of software titles and a decrease in average selling prices of interactive entertainment products as the industry transitions to next-generation platforms." Take-Two also emphasized the preliminary nature of the numbers, saying it would take "additional time to finalize the company's year-end results."

However, the pain didn't stop with last year. Take-Two also announced that it is lowering its guidance for the first quarter of its 2006 fiscal year, which ends on January 31, to $230-$250 million in net sales--and a net loss per share.

There were several reasons behind the shortfall. Though Take-Two had three Xbox 360 launch titles--Amped 3, NBA 2K6, and NHL 2K6--and a solid PC hit in the form of Civilization IV, the company admits it had a lackluster Christmas in 2005. "Clearly, the holiday season did not live up to anyone's expectations," said Paul Eibeler, Take-Two's president and CEO, in a statement.

Another reason Take-Two won't make its previous Q1 FY2006 guidance is today's revelation that two major 2K Sports titles, Top Spin 2 (Xbox 360, DS, and Game Boy Advance) and College Hoops 2K6 (Xbox 360, PlayStation 2), have been pushed back from their January 2006 release dates. The official reason given for the delays was to "provide additional development time."

However, the news was not all bad. Besides announcing that its popular PSP game Grand Theft Auto: Liberty City Stories is being ported to the PS2, the company divulged that it is working on an "all-new" GTA for the PSP. It also said it was readying another, unnamed PSP game, as well as "a title based on a new brand for the Xbox 360 and a sequel of a Rockstar brand." The company will also release Elder Scrolls IV: Oblivion, The Da Vinci Code, Prey, 24: The Game, NBA 2K7, and other 2K Sports titles before Halloween.

Speaking with analysts, Eibeler said that the road ahead for Take-Two is very much open. "Our results this year will be impacted by a variety of factors," he said, "including the launch of three major console platforms--the Xbox 360, which is just under way, the introduction of the PlayStation 3, which we believe will occur near the end of our fiscal year, and the Nintendo Revolution sometime during calendar 2006."

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Discussion

31 comments
Yazu13
Yazu13

Have I even ever heard of Take-Two?

YukoAsho
YukoAsho

Nomad - It's not MS' fault. They can't force 3RD PARTIES to publish unready games. And the HD-DVD drive is only for movies, meaning approximately 3 people will care. In other words, calm the hell down.

Nomad013
Nomad013

the main reason i reserved an xbox360 to purchase at launch was to play the then launch title, topspin 2. then it got pushed back to january 06 which pissed me off...now it's being pushed back AGAIN? its not bad enough that microsoft is making all us early adopters look stupid by releasing an external hd/dvd drive for the system 6 months after the system's release after denying it for months... screw u microsoft...

hittin
hittin

Lets hope, Take2 release a good game this year.

woohooforme
woohooforme

That'll teach Take-Two to switch to decaf.

njsykora
njsykora

Lo and behold the PSP is deprived of its only real selling point.

fmcuk
fmcuk

Now, you can expect Vice City for your PSP!!!! (Updated contents: A new way to slaughter hookers, and a hidden Hot Tea zoophyllic stage)... Seriously, when Take Two will stop rehashing the same old crap, and selling it as new games? Thanks God Rockstar hate Nintendo consoles...(the GBA GTA was their final game for Nintendo systems), because their shareholders must be dreaming now on a DS GTA (a GTA for a console that REALLY sells itself...)

SavoyPrime
SavoyPrime

Well, at least we are getting a console version of Liberty City Stories. No need to waste my money getting a PSP just for that game afterall.

chrisdojo
chrisdojo

they're not going to be making too much $$$ with a game like top spin 2.....

OPOLO
OPOLO

This might mean I won't see Elder Scrolls IV: Oblivion for maybe another 12 months

reallaughingman
reallaughingman

i hate to see good companies struggle...i did my part i bought civ 4

NeonDarknessXRC
NeonDarknessXRC

it would be nice to have them support the revolution through wifi could you imagine GTA on the DS? they did it for the GBA why not the DS through its wifi connection?

forever_blank
forever_blank

That is quite interesting, that they mention the Revolution, it would be cool if they decided to develop something on it, my sypathy for the hard year... shame.

reddlibra69
reddlibra69

OOHH HOT DAMN!!! G.T.A. L.C.S. IS COMING TO PS2!!! THIS IS GREAT NEWS TO ALL G.T.A. FANS!!! THE GAME IS GREAT ON THE PSP AND IT IS GOING TO BE GREAT ON THE PS2!!!

Konfusion
Konfusion

This is refreshing news. Instead of having PS2 ports to PSP, it's a PSP game ported to PS2. Hehe! Anyway, I guess it's a good "plan B" to make up for the failed profit predictions... Anyway I hope they get back on track and cook up something good for Revolution!

Jorge_Cav
Jorge_Cav

So maybe they will make games for the revoluction lets hope they are good.

Gamemaster1588
Gamemaster1588

Oh great now instead of waiting until March for Oblivion I just know it will be out "Before Halloween" what the heck man......this sucks!!!

LordOfMidnight
LordOfMidnight

They really need to find something else other than the GTA franchise to appeal to people. That boat is already starting to sing as thier only profit maker.

davahsa
davahsa

If GTA is the sequel their talking about for the 360 then the war is all ready over. wow...

peterles
peterles

i never did really get to see hot coffee in action, what a shame

zerohour12
zerohour12

bizsumpark182 why do i think it wasnt even take twos fault that the hot coffee thing made it out on the games?

Atomic_Mutant
Atomic_Mutant

Their line up of games seems pretty loaded with potential for this year. I would bet that another blockbuster release in the form of the inevitable GTA game for next gen would put the company on top. The GTA phenomenon really buoyed the company to overrated territory in value I guess. I hope this little lean period does not prove detrimental to the development of their AAA titles, which completion and overall polish (adequate quality assurance, for example) are key.

mikekare79
mikekare79

Wow, so EA and Take Two both say PS3 fall release. Wonder if they know anything? I also can't wait for Prey, NBA 2K7, and 24: The Game for my 360.

bizsumpark182
bizsumpark182

I think that Take-2 will be able to bounce back from this. We all know that most of the trouble started with the hot coffee debate.

Donkeljohn
Donkeljohn

With some crazy-bad quarters strung together perhaps Take Two may be taken down by their competition.

tatu2004
tatu2004

wow a new GTA on ps2 can't wait.....

NeoJedi
NeoJedi

Well at least good titles are coming out in 2006 for Take-Two, so it should pick up their business.

SeraphofEvil
SeraphofEvil

I'm not a huge fan of Rockstar, but I am intrigued by them just mentioning the Nintendo Revolution. They haven't made a game for the Gamecube in a few years, and to even mention the Revolution means they are considering developing for it.

nexteyenate
nexteyenate

Liberty City stories is being ported to PS2.....now i have to stop making fun of people who go into Gamestop and ask for liberty city stories on the ps2