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Take-Two revenues rebound

[UPDATE] Publisher finishes fiscal year 2007 with better-than-expected fourth-quarter revenues of $292.6 million, lower losses of $7.1 million.


Last week, Pacific Crest Securities analyst Evan Wilson upgraded Take-Two Interactive's stock performance from "Sector Perform" to "Outperform," indicating that the publisher was on course to outpace the gaming industry for the next 12 months. That guidance appears to have been prescient, given that Take-Two announced today that it exceeded expectations for its fourth fiscal quarter, which ended October 31, 2007.

For its final quarter of fiscal year 2007, Take-Two posted net revenue of $292.6 million, up from $266.6 million during the same period of time last year. In addition to better-than-expected sales, the publisher again trimmed net losses, which fell from $14 million ($0.20 per share) during its fourth quarter of fiscal year 2006 to $7.1 million ($0.10 per share). Take-Two's performance comes in light of the publisher's drastic revision of its fourth-quarter projection following the delay of Grand Theft Auto IV to its fiscal second quarter 2008.

The publisher attributed its success for the quarter to 2K Boston's award-winning shooter BioShock, as well as cross-platform basketball sim NBA 2K8 and minigame compilation Carnival Games. Take-Two claims it has shipped more than 2 million units of BioShock, whereas the poorly rated Carnival Games has mustered more than 500,000 units at retail. Take-Two also said that it continues to see strong returns from its Grand Theft Auto back catalog, and that high demand for Wii games and a year-over-year rise in distribution revenue had a positive impact on its bottom line for the quarter.

Although Take-Two's quarterly performance was better than expected, net revenues for fiscal year 2007 were down on the whole, year over year. Take-Two generated $981.8 million in net revenue for the year, down from $1.038 billion in fiscal 2006. On a positive note, the publisher suffered less losses for the year compared to 2006. For fiscal 2007, net losses stood at $138.4 million ($1.93 per share), down from $184.9 million ($2.60 per share) during the same period of time last year.

Commenting on Take-Two's performance, company chairman Strauss Zelnick said, "Fiscal 2007 was a year of progress for Take-Two, capped by better-than-expected bottom-line financial performance in the fourth quarter. The company has benefited from initiatives to streamline operations and improve our cost structure, while continuing to expand our portfolio of powerful video game franchises."

Reporting on its third-quarter financials in September, Take-Two gave a preliminary indication of its fiscal year 2008 performance. Reaffirming that projection, Take-Two anticipates revenues of $1.1 billion to $1.4 billion. The publisher also offered preliminary guidance on the first quarter of its fiscal year 2008, which ends January 31, stating that net revenues are expected to fall between $175 million and $225 million.

[UPDATE] In a post-earnings conference call, Take-Two further dissected its fourth quarter earnings and answered questions from a group of industry watchers. While the publisher reaffirmed that the Xbox 360 and PS3 versions of GTAIV will launch simultaneously between February and April, Take-Two did say that the Xbox 360 version of the game will receive downloadable content into its fiscal year 2009. When asked whether the game will see a Wii release, a Take-Two representative said, "I think there are other titles that are better suited to the Wii than Grand Theft Auto 4."

Despite a "very, very solid performance" by NBA 2K8, the publisher noted that its 2K Sports division did not turn a profit in 2007. Overall, sports titles accounted for 20 percent of the publisher's revenue for the quarter, according to Take-Two CFO Lainie Goldstein. Other sports titles released for the year included All-Pro Football 2K8, The BIGS, and Top Spin 2, among others.

Following the strong performance of Carnival Games on the Wii, the publisher also noted that it would be bringing Cat Daddy Game's minigame compilation to the Nintendo DS this summer.

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