Analysts sound off on GTA delay

Greenwald calls slip "disastrous" while Pachter says management "stumbled badly," speculates that PS3 version was to blame.


It's not often that news of a game's delay is as big for the publisher as it is for the gamers anxiously awaiting it. But Rockstar's Grand Theft Auto IV is a hugely important title for Take-Two Interactive, and yesterday's announcement of its delay into next year has significant repercussions for the company.

A handful of analysts today responded to the news and what it means for Take-Two, and they expressed some substantially different points of view on the matter.

Nollenberger Capital Partners' Todd Greenwald called the news "disastrous."

"For investors who have endured a seemingly endless string of disappointments ('Hot Coffee' scandal, [Securities and Exchange Commission] investigations, District Attorney subpoenas, class-action lawsuits, earnings warnings, management/board turmoil, Manhunt [2] delay, to name a few), the release of GTA IV this holiday was their one last glimmer of hope," Greenwald told investors.

What's more, Greenwald thinks the worst might not be over for the publisher.

"Given the 20 percent drop in Take-Two's stock price in the past 2 weeks, and further 20 percent decline after-hours, we believe Take-Two's already long list of class-action shareholder lawsuits could lengthen, and may also draw the attention of the SEC, which is already investigating the company," Greenwald said. "Regardless, legal expense should remain a constant portion of the company's operating budget for some time to come."

Wedbush Morgan Securities' Michael Pachter was similarly nonplussed with the company.

"Take-Two management stumbled badly for the first time during their tenure," Pachter said in his own note to investors. "While the delay of GTA IV was clearly not the fault of new management, we believe that it should have been better understood several months ago, and should have been communicated to investors much earlier than today. The game was scheduled for release in 10 weeks, and management reiterated its belief that the game would ship on time only three weeks ago at E3."

Pachter also offered his own speculation as to what the reason for the delay was.

"We think it is likely that the Rockstar team had difficulty in building an exceptionally complicated game for the PS3, and failed to recognize how far away from completion the game truly was until recently," Pachter said. "We think it is also likely that Take-Two had a contractual commitment to Sony that it would not favor competitor Microsoft by launching the Xbox 360 version of GTA IV prior to launching the PS3 version, and believe that any delay of the PS3 version necessitated a delay of the Xbox 360 version."

While Pachter noted the delays of Manhunt 2 and GTA IV as evidence that Take-Two's "process for monitoring projects under development appears to be a failure," not every analyst was as harsh on the publisher.

In a note titled, "Christmas Delayed Until Spring," Janco Partners' Mike Hickey called the precipitous drop in Take-Two's stock price "an overreaction" to the news, adding he supports the decision to push the game back.

"The GTA franchise has consistently produced some of the highest rated and most enjoyed games in the industry," Hickey said. "A below average quality next-gen release from the GTA franchise could critically damage the franchise's future. We believe the additional development time will allow Rockstar to release the next-gen GTA experience gamers have been waiting for."

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