Industry watchers weigh in on publisher's plans to trim the fat; say it won't be a solution to problems by itself.
Earlier this year, Take-Two shareholders--upset over years of headaches from Hot Coffee to SEC investigations--joined together to sweep out the company's executive ranks and install their own board of directors. Yesterday the new management released its first post-takeover quarterly earnings report and detailed a plan to return the publisher to profitability, which would involve laying off "a significant percentage" of its workforce. The job cuts were set primarily to come from sales, marketing, and administrative positions.
Today analysts reacted to the move as a good first step on the way to recovery for the company. Wedbush Morgan Securities' Michael Pachter, whose speculation about a Grand Theft Auto IV delay was bluntly denied by Take-Two executives yesterday, applauded the restructuring plan but said it wouldn't be enough on its own. According to Take-Two's estimates, the restructuring will save it about $25 million annually. While significant, that amount would not be enough to offset even the losses from its most recent quarter, which surpassed $51 million.
"At this level, $25 million in cost savings will only make a dent in the company’s losses," Pachter told investors. "Without better decisions about games, we are not optimistic that Take-Two can generate the earnings power necessary to justify its current share price."
While Evan Wilson of Pacific Crest Securities was similarly reserved in his assessment of the move, his primary area of concern was not the company's choosiness in which games to make, but its reliance on a single golden goose.
"Ultimately, investors are still working on faith in new management and counting on the continued success of the Grand Theft Auto franchise," Wilson said, "which is not a foregone conclusion, in our view. However, we believe the road to profitability is incrementally more clear."
Nollenberger Capital Partners analyst Todd Greenwald also issued a note approving of the restructuring plan, but saw different flies in the Take-Two ointment. Greenwald said the firm was maintaining its cautious stance on Take-Two due to ongoing issues with the Securities and Exchange Commission, high cost structure, and emphasis on PlayStation 3 and Xbox 360 development.
"While other publishers seem to have recognized and reacted to the slow ramp of the PS3, and enormous success of the Wii/DS, Take-Two seems much slower to switch gears," Greenwald said, adding, "At this point, we believe Take-Two has the most to lose if the PS3 and Xbox 360 hardware bases do not accelerate significantly."
A day after the restructuring plan was announced, Take-Two's share price ended the trading day at $19.33, up a little more than 2 percent from its closing price yesterday.
"Noventus to brain20035: well when you consider how easy it is to download PC games via bittorrent and how PC games are like 20% cheaper than console games" And of the people that 'chip' consoles and pirate games that way? They are no concern for profits?
to brain20035: well when you consider how easy it is to download PC games via bittorrent and how PC games are like 20% cheaper than console games
Some people hate to say "I told you so"....not me. I told you so. :-) I observed last January that Take Two had badly misjudged the whole PS3 vs. Wii thing and would suffer greatly for it. It's nice when a financial pro tells me I was right :-) Aren't we *still* waiting for their 1st Wii title? David V .
They are not to blame rockstar only needs more time to make a proper game ... well i'm sure that Bioshock & GTA 4 will bring them right on their feet !!!
Yeah, cause all the gamers posting here seem to know everything about business................................give me a freakin break..................stick to playin games boys and girls
Seems they recognized they're short comings and have addressed them. That can only be good in the overall health and profitability of the company.
all i want is a great grand theft auto game and more to come as long as that keeps happening im happy
What these people dont understand is that Take- Two prides itself on producing serious and good console games and the DS and the Wii are not serious hardcore systems to develope for because all that Take Two develpopes is mature rated games and I dont see good mature game for the Wii or DS because they are mostly directed at the youth of america while the PS3 and #60 is directed at mature players A title for those systems would not sell well and provide a decent size dent in their profits. All in all This restructureing plan sounds like a step in the right direction.
its very rare to find a developin team that is willing to put all their time,money and effort into singular awesome games these days, i mean you can see other companys drawin crap games all the time but not Take Two, "his primary area of concern was not the company's choosiness in which games to make, but its reliance on a single golden goose. " thats kinda ironic, since the moral behind the golden goose is about greed that destroys good, and the phrase "To kill a golden goose" resembles the action of taking a short sighted action to gain an immediate rewarrd, but will ultimately prove disastrous..
I really feel bad for take two (and sony too). They've been raped by lawsuits and bad news. Hopefully GTA will push more people to get ps3/xbox 360 and then they will make money.
I personally LOVE the games this company puts out, and hope they do everything they can to stay in business. I will continue to support them and buy their games...as long as they are still good ;) To cjnwo4life: I doubt it would work well with the Wii, but there is always a chance they can come up with an innovative way for the controls to work for it.
I feel bad for take two. The risks that they took caused massive layoffs due to all the contrversy that they generated from Hot Coffee. I hope that the new board of directors still allow the game developers to put in some new and innovative material into the game. If they are strict about content, then I will worry about how GTA 4 will be...
It appears they want Take-Two to develop Wii themed games and possibly put GTA on the Wii? Would that game sell on the Wii?
As I said before, if a delay occures it will not upset me. I want the game to be well done, not full of bugs, or any mods! :P.
With all this I don't see how there won't be a delay. If one does occur, it wouldn't bother me. As long as its quality, I'll wait for it til next year.
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