Take-Two takes $29.1 million Q1 hit

Slow holiday sales, acquisitions bite into the Grand Theft Auto publisher's bottom line; sales slightly better than expected.

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Increasingly, the holiday sales season has become the focus of game publishers' release calendars. With shoppers eager to shower their favorite gamer with the latest releases, it is the prime time for companies to move their products en masse.

However, as is becoming increasingly clear, the 2005 holiday season left a lump of financial coal in many publishers' stockings. Few, though, saw their fortunes fall as rapidly as Take-Two Interactive. Today, the company announced that it lost $29.1 million during the first quarter of its 2006 financial year, which ran from November 2005 until January 2006.

Overall, Take-Two's net sales for the quarter were $265 million, above the company's previous guidance of $230-240 million. However, the figure was way down from $502.5 million it took in during the same period the year before. Of course, then the company was enjoying record-breaking sales of Grand Theft Auto: San Andreas, which was later recalled over the "Hot Coffee" sex-minigame scandal.

Ironically, Take-Two said the rereleased version of San Andreas, now just $19.99 for the PS2, was one of its two top games during the quarter. The other was another GTA game, Grand Theft Auto: Liberty City Stories for the PSP. Since it launched in October 2005, the latter title has remained the best-selling game for Sony's portable.

All Grand Theft Auto games are published under Take-Two's Rockstar Games label. In its earnings release, the company singled out the two top sellers of its other subbrand, 2K Games. They were Civilization IV, the latest addition to the popular PC strategy series, and the Xbox 360 version of NBA 2K6. According to the latest figures from NPD Funworld, the two titles sold nearly 429,000 and 70,000 copies on their respective platforms as of January.

Though it put on a brave face, Take-Two was likely disappointed by the performance of NBA 2K6--and the rest of its Xbox 360 launch lineup. The company bet big on Microsoft's new console, and rushed to release three games--Amped 3, NBA 2K6, and NHL 2K6--in time for its November 22 US debut. However, widespread shortages of the Xbox 360 continue to hamper sales of the platform to this day, no doubt frustrating publishers.

In a statement, CEO Paul Eibeler laid out his plan to turn Take-Two around. "We are working to manage through the console transition," he said. "Most importantly, we will continue to focus our development resources on creating great content and further leveraging our proprietary brands."

What brands would those be? Since the beginning of February, Take-Two has shipped 24: The Game (PS2) and the Xbox 360 version of College Hoops 2K6. During the rest of the quarter, which ends in April, it plans on shipping The Elder Scrolls IV: Oblivion (PC, Xbox 360), the budget-priced Midnight Club 3: DUB Edition REMIX (PS2, Xbox), Top Spin 2 (Xbox 360), the PS2 port of Grand Theft Auto: Liberty City Stories, and Major League Baseball 2K6 for the Xbox, Xbox 360, PSP, GameCube, and PlayStation 2.

During the remainder of its 2006 fiscal year, which ends on October 31, Take-Two plans on shipping Table Tennis (Xbox 360), Bully (PS2, Xbox), The Da Vinci Code (current-gen consoles, PC), Prey (Xbox 360, PC), Family Guy (current-gen consoles), Stronghold Legends (PC), and The Darkness (unnamed next-generation systems). It also plans on releasing two new PSP titles, including a second GTA game for the platform, and a mysterious "sequel of a Rockstar brand for a current-generation console system." For the fiscal year, the company plans on releasing more than 70 SKUs, or individual products.

In his statement, Eibeler also obliquely touched on another Take-Two expense--the cost of studio acquisitions. During its fiscal Q1 2006, the company made two major purchases, scooping up Civilization studio Firaxis and BioShock developer Irrational Games for $26.7 million and $11.8 million, respectively. "We're taking a hard look at every aspect of our business and are balancing the need to manage expenses while investing in creative resources and the infrastructure needed to support our diversification efforts," said Eibeler.

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