Take-Two Results
I seem to be writing this column every three months now.From Marketwatch
(http://www.marketwatch.com/news/story.asp?guid=%7BD0BBD6D2%2D78CD%2D4CD0%2DA6D0%2D547328210F08%7D&siteid=mktw):
LOS ANGELES (MarketWatch) -- Take-Two Interactive Software Inc. late Thursday reported fiscal fourth-quarter sales that fell 30% from last year.
The publisher of the "Grand Theft Auto" franchise also said it needed more time to certify the results.
The New York-based company said the results were preliminary and unaudited because of the need to finalize the numbers in light of its first year of reporting under the Sarbanes-Oxley Act. It added that the earnings figure does not include the impact of expensing employee stock options.
The company also said in its statement that Gary Lewis resigned as chief operating officer "to relocate back to Europe." Lewis was promoted to COO in April 2004.
Take-Two shares tumbled nearly 9% to $16.90 in after-hours trading Thursday.
The company said unaudited fourth-quarter sales fell 30% from the same period last year. Revenue for the period ended Oct. 31 was $308 million compared to $438 million last year.
Unaudited profits came in at 27 cents a share, compared to profits of 91 cents a share, for last year.
Please note that these are "unaudited" results, meaning that the real numbers could be worse (funny how "audited" numbers never seem to wind up better than the "unaudited" ones). And they weren't able to include the impact of expensing employee options? What?
Oh, and the COO resigned.
In other words, Take-Two is in chaos.
Here's more, from Gamasutra
(http://www.gamasutra.com/php-bin/news_index.php):
...In addition, the company has surprisingly decided not to give any specific financial outlook for the entire next fiscal year, citing a "transitional period for the industry" which makes prediction too difficult.
...It was notably unexpected that Take-Two did not promptly release full results for the year, but, though the company partially blamed the Sarbanes-Oxley Act for increasing difficulty of filing results, it seems that the lack of timely filing was largely due to an inventory management system change related to Take-Two's Jack Of All Games distribution arm that "didn't go as well as planned".
Let me get this straight. This is a high profile, publicly held company that can't make forward estimates on its earnings? If they can't do that, how can they manage their business? And I've been in companies that said something "didn't go as well as planned." That's business code for "it blew up in our face."
Here's the best part, though. Remember when I said that Hot Coffee was going to give Take-Two the chance to take a huge reserve and bury every body they had lying around? Look at this:
Other comments made during the conference call included news that the company had reduced its $33 million reserve set up for returning Grand Theft Auto: San Andreas in the wake of the 'Hot Coffee' re-rating controversy, following lower than expected costs. This meant the firm was able to take $8 million of that amount back, and left-over reserves were still at an additional $8 million.
There you go. They took a ridiculously high reserve, which allowed them to drain a few unrelated swamps, then they took some of the "stash" back to improve their bottom line. That's not uncommon, but accounting controversy has dogged these guys for years, so you'd think they wouldn't be so transparent.
Their new Q1 fiscal outlook calls for revenue over 30% lower than analysts were expecting. Ouch. Plus Top Spin 2 and College Hoops 2K6 (360 version) were both pushed into February.
If you think I'm celebrating any of this, you're incorrect. In spite of how annoying and childish Take-Two and Rockstar can be, they are important players in the gaming industry, and Take-Two owns Visual Concepts, which for my money is the premier sports developer in the world right now (in aggregate, even if they don't have the best single sports game, which is the Winning Eleven series by Konami). I don't want these guys going down and blowing up a bunch of games that I want to play this year.
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