Take-Two stock sinks on lowered earnings estimate

[UPDATE] Grand Theft Auto publisher's grim 2010 outlook sends shares down 30%; MLB annual loss could hit $35 million; mystery AAA game delayed to FY2011.

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For Take Two Interactive, 2012 and the end of its third-party exclusive deal to make Major League Baseball games can't come soon enough. The company today pre-announced disappointing earnings for the fiscal year ended October 31 and gave grim initial guidance for its full fiscal 2010, citing its MLB deal as a major factor in both instances. The publisher's stock price responded immediately, with shares down as much as 21 percent in after-hours trading.

[UPDATE] On Friday, Take-Two's stock continued to be clobbered, falling over 30 percent from its Thursday closing price. At one point, the company's share price was $7.12--down a whopping $4.45 from its weekly high of $11.57.

MLB exclusivity has been a major league goose egg for Take-Two so far.
MLB exclusivity has been a major league goose egg for Take-Two so far.

For the final quarter of its 2009 fiscal year, which ended October 31, Take-Two had forecast adjusted earnings per share of $0.30 to $0.35 on sales of $350 million to $375 million. Today the publisher lowered the earnings per share range by $0.25 and cut $25 million from its sales projections. Final numbers for the quarter are expected to be announced later this month.

Take-Two also gave investors its first outlook for the current fiscal year. For the 12 months ending October 31, 2010, the publisher expects sales of $1 billion to $1.12 billion, with an adjusted net loss per share between $0.40 and $0.60. Between $30 million and $35 million of that net loss (equal to $0.38 to $0.44 per share) will come from the company's Major League Baseball business.

In a post-announcement conference call with analysts, Take-Two CEO Ben Feder attributed underperforming MLB games for the "vast majority" of the recently completed quarter's shortfall. He added that the baseball business was "very difficult" for the publisher, thanks to a lack of growth in the category and the terms of the exclusivity deal, which was negotiated years before the company's current leadership came to power. MLB 2K9 struck out big with critics in March, and Feder said he expected the much-better-reviewed The Bigs 2 to perform better based on sales of its predecessor.

Another factor in the gloomy outlook for the year was the delay of an unannounced "AAA" title beyond the current fiscal year, but Take-Two executives wouldn't specify which one. One of the publisher's announced titles was also delayed, as Max Payne 3 is now expected in the fourth quarter of its current fiscal year (August through October 2010). Previously the game had been expected in the first half of calendar 2010.

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