8.5M GTA IVs rev Take-Two revs

The second quarter of Take-Two Interactive's fiscal year ended on April 30, the day after Grand Theft Auto IV went on sale. However, the 48 hours following the countrywide midnight launch events for the game saw Algonquin Island-sized sales, according to an earnings report released today.

For three-month period, Take-Two revenues increased 162 percent year-over-year, from $205.4 million in 2007 to $539.8 million in 2008. Net income--aka profit--was $98.2 million ($1.29 per share), versus a net loss of $51.2 million or ($0.71 per share) the year prior. The figures were far above most analysts' expectations, with a survey of analysts by Reuters estimating revenues of just $322 million.

The profit also came in spite of a spate of major expenses for Take-Two. These included a $12.4 million for stock-based compensation and a whopping $3.8 million "professional fees and legal expenses, primarily related to Electronic Arts' unsolicited tender offer."

Initiated in February, EA's takeover bid was postponed for a third time yesterday. The rival publisher's offer of $25.74 per share is now well below Take-Two's share price, which was $27.65 at the end of trading today. The stock was down slightly in after-hours trading.

Speaking with analysts following the report's release, Take-Two chairman Strauss Zelnick reiterated his defiance. "At the time of EA's unsolicited tender offer, we emphasized the board's commitment to explore all strategic alternatives including remaining independent," he proclaimed. "We said we were willing to begin formal discussions with interested parties on April 30 following the launch of Grand Theft Auto IV, and we're actively engaged in that process now. In fact, we have had and continue to have formal discussions with a number of interested parties."

EA's offer is bound to look even less attractive by the time of Take-Two's next earnings report, thanks to sales that GTAIV's Brucie could only describe as "Alpha." As of May 31, a staggering 8.5 million copies of the game were sold worldwide, and a total of 11 million units have been shipped to stores. Last month, Take-Two reported GTAIV had sold over 6 million copies during its first week on the market, generating over $500 million.

Besides retail software sales, GTAIV will also generate a second wave of revenue when downloadable episodic content is released for the Xbox 360 version of the game. Speaking with analysts, CFO Ben Feder announced the DLC--which is being touted as the first of several robust updates--will be released during the first quarter of Take-Two's 2009 fiscal year, which runs from November to January. It had been expected in October, when GTA rival Saints Row 2 will now hit the market.

[UPDATE] But while GTAIV is proving a veritable money-minting machine, other Take-Two franchises are not faring as well. Feder said flat out that "we no longer anticipate reaching profitability in our 2K Sports business in fiscal 2008." On the division's roster this year are such titles as NBA 2K9 and NHL 2K9, with College Hoops 2K9 recently canceled and the All-Pro Football franchise skipping this year--if it returns at all.

Looking ahead, Take-Two executives said that the publisher currently has some 33 titles in various stages of development, including BioShock 2. When asked about the upcoming BioShock film--which has "no risk" and an "economic upside" for the publisher--Zelnick warned that the project wouldn't arrive alongside the sequel, due in fall 2009. "It would be more likely that it would be released coincidentally with BioShock 3," he said, revealing Take-Two's intention to make a trilogy out of the award-winning PC, Xbox 360, and soon PlayStation 3 title.

Guidance-wise, Take-Two raised its estimates to $325 to $375 million for the current May-July quarter. It expects to take in $300 to $350 million during the following three months, bringing its full-year revenue to $1.4 billion to $1.5 billion.