Take-Two adjusts financials south, blames Max Payne's poor showing

While some publishers count their blessings, Take-Two marches to a different tune. How far will the fall of Max Payne reach?

1 Comments

One game was late, one didn’t sell, two got the boot from the production schedule, and now a vendor who owed Take-Two a substantial sum of money has gone and sought protection under U.S. bankruptcy laws.

With this news and more out of New York-based Take-Two Interactive, woes seemed to flock as if drawn to this well-known, much-covered game publisher. But while the news may not be stellar, the company's stock jumped in trading today, spurred on perchance by two well-regarded analysts who maintained Buy (Wedbush Morgan) and Out-perform (Piper Jaffray) ratings in spite of the news.

The bulk of today's news concerned the guidance, or forecasts of future performance, delivered to Wall Street investors. Those forecasts, already reduced once this fiscal year, indicate leaner times ahead, with Take-Two's CEO Jeffrey Lapin summing it up succinctly: "We are disappointed that our fiscal 2004 results will not meet our prior expectations." Today's statement was in stark contrast to last week's financials reported by Electronic Arts and Activision who both reported strong holiday sales and numerous best-selling titles.

Today, Take-Two lopped almost $30 million off expected earnings for the quarter ending January 31, 2004. Invoking a "revised revenue recognition policy," the game publisher and distributor sees its future now panning out as follows:

For the first quarter that ended January 31, 2004, Take-Two's revised guidance is $385 million in net sales compared to prior guidance of $412 million. For the second quarter, which will end April 30, 2004, its revised projection of net sales is $220 million, down from a previously stated $218 million. In a bright spot, the company estimates that for the full fiscal year ending October 31, 2004, net sales will measure $1.22 billion compared to prior estimates of $1.18 billion, or $4 million ahead of previous estimates.

The company reforecasted sales due to "a number of factors." It cited "the shift of Mafia for Xbox and the majority of the European shipments of Mafia for PlayStation 2 from the first fiscal quarter to the second fiscal quarter; unanticipated weakness in the Company's North American publishing business during the holiday season and extending into January," and surprisingly, "continued disappointing sales of Max Payne 2: The Fall of Max Payne."

The statement also made note of having to write off bad debt associated with the recent bankruptcy filing of KB Toys, and the cancellation of two products in development. On a positive note, the statement mentions the strong showing of its distribution arm, Jack of All Games.

The company continues to operate under threat SEC action against it for alleged accounting violations, although there was no mention of any progress in that investigation in the statement today.

Got a news tip or want to contact us directly? Email news@gamespot.com

Join the conversation
There are 1 comments about this story