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Analyst downgrades Take-Two stock

Wedbush Morgan Securities' Michael Pachter says Grand Theft Auto IV can only carry publisher's stock so far, speculates that EA could be interested in buying 2K Sports.

Saying that Take-Two Interactive has "lost its way," Wedbush Morgan Securities analyst Michael Pachter this morning downgraded his assessment of the publisher's stock from "hold" to "sell."

"We think that Take-Two’s flagship franchise, Grand Theft Auto, will continue to generate significant profits but are less optimistic about the profit potential from its sports business and from 'everything else,'" Pachter wrote.

While this October's release of Grand Theft Auto IV is a sure-fire hit, Pachter said its sports division is unlikely to ever become significantly profitable, the rest of the company's portfolio is lacking, and its spending is out of control. He also expressed concern over the company's corporate drama in the past year.

Pachter said he likes the company's current management and doesn't think a different group of people could get the publisher in shape any quicker but still laments high turnover over the past two years. Among the departures he mentioned were Rockstar Games co-founder Terry Donovan, Take-Two founder Ryan Brant, and board member Barbara Kazcynski, who took parting shots at the company's management in her resignation letter. He also noted that it wasn't clear if Take-Two's stock option scandal woes were over just yet and said the resulting lack of quarterly financial reports while the company gets its books in order makes it difficult to assess the publisher's progress.

"We think that Take-Two's greatest asset is also its greatest liability," Pachter said. "The company has an environment conducive to creativity and reaps tremendous benefits from allowing its creative staff to work on what it thinks will work. This has resulted in the creation of the greatest franchise in video game history and a number of other highly rated and commercially successful games. It has also resulted in the inclusion of sexual content (hot coffee) in the company’s flagship brand, the decision to enter the sports business and compete with an 800-pound gorilla named EA, the decision to green light a slew of movie properties with consistently poor results, and several other decisions with poor outcomes. To the extent that a new management team tried to rein in the generation of bad ideas, it would risk reining in the generation of the next GTA-like idea."

Pachter also evaluated the chances of the company being acquired, broken up and sold in pieces, or being taken over by activist investors. While he described all three scenarios as "unlikely," he did suggest that the publisher's currently unprofitable 2K Sports operation might be an acquisition target for its fiercest rival, Electronic Arts. According to Pachter, EA is the most likely buyer for 2K Sports because few others would be willing to go head-to-head with the Madden NFL publisher in the sports genre.

"It is clear to us that Take-Two’s sports business would have tremendous value to EA, as it would give EA a monopoly on football, basketball, baseball, and hockey," Pachter said. "It is arguable that EA would benefit by as much as $1 billion if it were to obtain an exclusive; this does not mean that it is willing to pay $1 billion."

Given the few potential suitors who would be interested in going toe-to-toe with EA in the sports genre, Pachter said EA could pick up the division for roughly $200 million. An EA representative declined to comment on the speculation, while a Take-Two spokesperson had not returned GameSpot's request for comment as of press time.

87 Comments

  • ppau08223

    Posted Aug 10, 2007 5:30 pm GMT

    i just hope the ea doesnt buy them or it will give monopoly and that is the last thing that ea needs now.

    competition is always good for us customers.

  • ManOfDaHour

    Posted Feb 21, 2007 8:39 am GMT

    It will be a sad day for me and the other 2K sports fans of the NBA2K series if EA buys them out. I would hate to only have Live or NBA from Sony to be the only basketball games on the market. Judging by how Live has not been good since the Original Playstation days, I guess NBA 2k7 will be the LAST GREAT baskeball game I'll be playing for a while or EVER. *wiping tears* I hate when companies merge or sell to another company. Competition just being bought out is never good for consumers. Quality and choices go down while prices go up. I would rather see MicroSoft or Sony buy 2K Sports before EA. NBA 2K7 is one of my favorite 360 games right now.

  • fonzieahmed

    Posted Feb 21, 2007 6:42 am GMT

    hey 2k sport games are quite good actually.

  • surferboy2177

    Posted Feb 20, 2007 9:26 pm GMT

    There's no way that EA will buy out 2k sports. The quality of their games are too good and they definitely have some promising titles that are coming out.

  • blaster710

    Posted Feb 20, 2007 1:14 pm GMT

    I disagree, if 2k sports can provide a good games, or even better games than EA, especially at a lower price points, they can make profits. In the past I have bought games from their hockey series that were significantly better than EA and cheaper in price. Madden would be it's toughest competitor to overcome. I think EA needs the competition and there is room for profits, if done correctly. Look at Winning Eleven, it is not owned by EA but continues to make profits against the popular FIFA. This is merely one stock analysts opinion. As a gamer, having all these companies give in to EA is limiting our options and reducing the quality of the games needed to be produced to get a sale.

  • Generic_Dude

    Posted Feb 20, 2007 12:06 pm GMT

    Their sports franchises will sell better if they put more quality into them... that simple. I play their baseball game a few weeks ago and it's a train wreck. Their basketball games play better, but still look bad for 360 games. Still, I'd rather EA has competition... it incites them to make a better game. NHL 07 wouldn't have been half as good a game as it was if they didn't have to compete against NHL 2k7.

    And no, GTA IV will not carry a company... but the key to success isn't to grab movie licenses. You've got to think outside the box and make NEW IPs... Red Dead Revolver and Manhunt, while not perfect games (I hated Manhunt, to be honest, though Red Dead Revolver had a lot of potential and I hope they make another go at it). It also doesn't help when your company is run by crooks that shake the confidence of stockholders and the general public.

  • wavebrid

    Posted Feb 20, 2007 11:44 am GMT

    one rockstar owns gta

    two ea sucks beacuse you know your going to buy there games anyways?

    dcbronco thats the most stupides thing i ever heard

    i rather have a great football and basbeball game

  • wavebrid

    Posted Feb 20, 2007 11:31 am GMT

    rather have ea work on baseball games than 2take

  • RKOLegend1

    Posted Feb 20, 2007 10:25 am GMT

    Please 2k and GTA don't let EA do this!!!!!!!!!!!!!!!!!!!!

    EA are a bunch of frauds!!!

  • GrgSpunk

    Posted Feb 19, 2007 11:02 pm GMT

    Then by his logic, I take it that Final Fantasy 7 is Square Enix's greatest asset and liability?

  • Megavideogamer

    Posted Feb 19, 2007 12:46 pm GMT

    E.A is not my favorite videogame company, Their games are So-So at best, they are the "Mc Donalds of Game makers". Please let Take-two survive and not be overrun by the Mc Donaldslike Electronic Arts.

  • Get_Shorty

    Posted Feb 19, 2007 10:02 am GMT

    EA is still afraid of 2K Sports?? That got everything else. I'm still continuing my boycott of those sports games from those evil bastards.

  • Cainekass29

    Posted Feb 19, 2007 10:01 am GMT

    cjcr_alexandru imagine a game world without EA...outside of Madden, and NCAA football, and Fight Night EA has been living off their reps for a long, long time. They ahven't dared to try to shake up the formula because they found a winning formula. Because anything outside of sports with EA has been severly lacking. Def Jam is about the only thing worthwhile...and thats because they didn't build the fighting engine on that game.

  • cjcr_alexandru

    Posted Feb 19, 2007 9:19 am GMT

    GTA IV will be good (too bad it won't come to PCs...for now) and EA isn't bad (imagine a gaming world without EA...), so stop whining.

  • SeanGee

    Posted Feb 19, 2007 8:15 am GMT

    EA should be banned from making any attempts to buy 2K.
    The only reason they excelled in Madden in the past few years was because they bought the exclusive rights to all NFL based games, this was from fear that 2K would dominate the football games(especially when they were selling games for a lot cheaper than EA). As for those Madden fans out there, don't hate on 2K until you've really played a 2K football game. As one person mentioned don't buy Madden just like all the other sheep out there, Madden hasn't "evolved" much in the past 2yrs what's the newest thing they added to their engine "Highlight stick" and "Run Blocking"? Even with that it still will not surpass what NFL 2K5 brought to the gaming world.

  • sieg6529

    Posted Feb 19, 2007 8:14 am GMT

    GTA is stale? That's old news. It was stale looong ago, but too many people were wrapped up in playing a "naughty" game to know it. I loved GTA3, but it's not an experience I need to relive over and over with little innovation.

  • lafsdave

    Posted Feb 19, 2007 7:40 am GMT

    boycott ea.......... they are mading the worst game of the industry right now

  • AbstractTerror

    Posted Feb 18, 2007 10:16 am GMT

    If EA buys Take-Two.... I don't even want to know what would happen to Grand Theft Auto.

  • Sam_Lowery

    Posted Feb 18, 2007 10:11 am GMT

    Oh god, please don't sell to EA.

    Those scumbags need to be forced out of the gaming industry, not given more content to inject adds into, before pimping it out every year with another number behind it.

    EA is the worst company EVER and I hope I live to see the day when they crash and burn like they deserve.

  • morororo

    Posted Feb 18, 2007 5:50 am GMT

    steelcityD36 F.Y.I. GTA is getting stale so don't hang your hat on that one anymore.

    I agree. I dont want to play San Andreas with lush graphics. I think they need to give the series a hefty kick in the balls. Saint's Row plays far better than the GTA series but is just soulless. Hopefully they can add the GTA charm to something even better than Saints Row and GTA 4 will be kickass.

  • steelcityD36

    Posted Feb 18, 2007 12:23 am GMT

    MVP 08 (with MLB License) FTW!!!!!!!!!!!

    On the down side we would need another developer to challenge NHL.

    GO EA!!!!!

    "If EA even attempts to buy 2k MS Hopefully will charge in with their Wallet"

    LOL!!! I think MS does not have the balls to take 2k away from EA (if they were to buy it), because if they do they will get pwned by Sony when EA goes exclusive with the PS3/PS2. That would be a major blow to MS lol.

    They would go down hill just like 2K and every console that EA did not support!

    F.Y.I. GTA is getting stale so don't hang your hat on that one anymore.

  • theKSMM

    Posted Feb 18, 2007 12:11 am GMT

    Unfortunately critical acclaim doesn't always translate into commercial success, so those 2K Sports franchises may be superior, but they're still getting buried by EA. It's a shame that Bully came along at such a bad time. It could've blossomed into a really nice franchise.

    Still, I hope EA doesn't get control over 2K Sports. That monopoly wouldn't be good for anyone but EA.

  • Wildcatter

    Posted Feb 17, 2007 2:46 pm GMT

    He can't possibly be following Take-Two that closely. In the sports division alone, NBA 2K is the consenus favorite among basket games. Plus, **2K Football will be back THIS year.** I see blue skies in T2's future.

  • mooseman721

    Posted Feb 17, 2007 2:21 pm GMT

    GTA booster packs!!! NOOOOOOOOoooooooooooooooooooooooooooooooooooooo

  • Chief_Kuuni

    Posted Feb 17, 2007 1:14 pm GMT

    they're a good company, they should do well for years to come

  • snarple_basic

    Posted Feb 17, 2007 12:13 pm GMT

    I think Take Two is in a good position to grow. I think there sports brand is good too, all EA has is Madden.... EA's gorrila is probably only half that weight. Im sure they will come up with some other new interesting ideas.

  • hanapepe_dragon

    Posted Feb 17, 2007 10:58 am GMT

    I still kinda enjoy EA Sports games, but if EA buys 2K then the omen has come for sports games.

  • bunnymanjp

    Posted Feb 17, 2007 10:55 am GMT

    imagine sony or ms buys it

  • Toys_R_us_cop

    Posted Feb 17, 2007 7:46 am GMT

    If EA even attempts to buy 2k MS Hopefully will charge in with their Wallet

  • dcbronco

    Posted Feb 17, 2007 7:04 am GMT

    Michael Patcher is an idiot. It's amazing he can say anything at all since he has one lip firmly planted on Sony's ass and the other on EA's. Stop complaining about EA's cheesy games and start buying more of 2K's. I don't even like Baseball or Basketball, but I will buy both if it hurts EA. 2K5 was far better than Madden. There are just to many sheep out there who buy Madden because it's what they had always done or they see other people buy it. I love football, but I will go without it until 2K comes back. We can't let companies make stupid decisions like the NFL did and continue to support them. Buy All-star football. I even plan to give it away as gifts. If 2K stops making football games again, It will be the last football game I buy.

  • YukoAsho

    Posted Feb 17, 2007 6:48 am GMT

    Blah, it's Pachter talking out of his ass again. Take it with a grain of salt.

  • MedevilDragon

    Posted Feb 17, 2007 3:26 am GMT

    Evil EA just don't give a dame about this industry, all they want to do is destroy it and make as much money as they can at the same time. if they buy 2K then we all should just quit videogames.

  • TavLok

    Posted Feb 17, 2007 1:43 am GMT

    Can you imagine what would happen if EA were to acquire the GTA franchise along with 2K Sports?

  • Death2009

    Posted Feb 17, 2007 1:19 am GMT

    EA already has a monopoly on football, we don't need one on all sports. 2K sports had potential, ESPN 2K5 had better graphics, announcing and presentation than Madden, it just needed better gameplay and franchise mode. But sadly EA killed it by getting the sole rights to the NFL. I hope 2K doesn't sell to EA and keeps going at them, we need competition.

  • louie2k

    Posted Feb 17, 2007 1:00 am GMT

    omg nooooooo!!!!! *goes to EALA to throw eggs*

  • rdo

    Posted Feb 17, 2007 12:02 am GMT

    time for bill gates to open the wallet and buy ubisoft and take two. if ea dosn't like it too much buy ea too and fire some people. infact maybe they should just buy ea to start with and turn it into what it was back in the 80's, had competition and made decent games.

  • Toys_R_us_cop

    Posted Feb 16, 2007 10:36 pm GMT

    .....Are you kidding me....EA just Cuz Madden Sux dosent mean you can just buy out the only good Football game these days

  • John_of_Fire

    Posted Feb 16, 2007 9:09 pm GMT

    If EA bought 2k it would be good for Take2 who is losing money on them. As far as EA if they consumed 2k someone else would spring up to compete against the mighty giant. Football games bring in too much money for companies to sit by and let EA take all the $. If 2k falls someone else will replace them. ____________________________________________________________
    It's too bad other sports like snowboarding are 'owned' by EA. SSX is the only game out their now. ESPN (Konami) is dead, Cool Boarders is dead, 2K fired the Amped Team. 1080 comes out once a generation. Boy I miss the days of good snowboarding games and competition in the market place. I still stand by that football gaming won't die like snowboarding has. (And I don't mean owned literally)

  • Jaguilera85

    Posted Feb 16, 2007 9:09 pm GMT

    Please let this be false. It will be a sad day for sports games. I haven't played a good football game since 2K5. Please!!

  • astep

    Posted Feb 16, 2007 7:57 pm GMT

    mrjasler- you don't know what your talking about when it comes to EA and their exclusive with the NFL....EA had went to the NFL numerous times in the past to acquire an exclusive license...but the NFL wasn't interested...The fact is, that NFL2K5 made Madden 05 look so bad that EA was going to offer the NFL whatever it would take to get that license!!!! No one could match what EA had offered...Everybody has their price and the NFL was no different, who could turn down 300-500 million which is what the deal was reported to have been???? To suggest that 2ksports had equal opportunity is stupid...well maybe opportunity....but definetly not the funds!!!! I for one, have vowed, to never ever buy another EA product as long as I live.....I've done this since the NFL exclusive and it hasn't been difficult at all!!!

  • frogman666

    Posted Feb 16, 2007 7:45 pm GMT

    Not again... notice how this comes just weeks after 2k announced a new football game EA they just don't like competition. whats weird is they make sports games which is all based on competition If it was me I would strive to make my product better to make the others fold on their own. Why waste money buying things if you can control how good your product performs. Although I guess in their case they just like putting out the same old crap every year with just enough added stuff to make fools like us the gamers take their newly added tabel scraps thinking we have to have it

  • dnathug

    Posted Feb 16, 2007 7:17 pm GMT

    I don't see why 2K is suffering so badly. I don't see how

  • DeeCrutch

    Posted Feb 16, 2007 6:57 pm GMT

    I am not a 2K guy in the slightest, but GOOD GOD PLEEEAAASSSEEE DON'T LET EA BUY 2K SPORTS!!!! That would be the single worst thing in the world that could happen to any sports gamer like myself. Exclusivity has already hurt products from both companies. An outright purchase or takeover would damn near kill the industry.

    Over the years, I have preferred EA's sports games to 2K's, except for the last couple years in which EA has severely slacked off, especially in the basketball and football arenas. Even so, I would HATE to see EA in possession of 2K. It may well mean the end of quality sports games as I've known them over the years...

  • Mr_Saturn26

    Posted Feb 16, 2007 6:16 pm GMT

    i rather play blitz than madden, which i do

  • thebrazenone

    Posted Feb 16, 2007 6:13 pm GMT

    pachter is a fraud

  • kenesu96

    Posted Feb 16, 2007 6:04 pm GMT

    i wonder if EA actuallys buys 2K , cin they ould be under the umbrella, then we could see 2 NFL games again?

  • Doomsday0812

    Posted Feb 16, 2007 5:22 pm GMT

    if EA buys 2k sports then its not going to be good for sports fans since there will be no improvement to gameplay because EA will have no competition and will pretty much just update the rosters and keep the same inferior gameplay...looks like i wont be buying a football game anytime soon

  • ShadowDeathX

    Posted Feb 16, 2007 5:18 pm GMT

    I don't care, Who would buy a game when u can play the real thing outside? Many Fat People. OK Except Them. I think Sports Games is retarded. Good business but its stupid.

  • Re_ensurer

    Posted Feb 16, 2007 5:02 pm GMT

    Interesting.

  • polsci1503

    Posted Feb 16, 2007 4:12 pm GMT

    if EA buys 2K Sports then they'll just bury it and chalk it up to annihilating the competition... which sux because 2K made a better football game then they did.

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