Take-Two loss less than expected

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Video game publisher Take-Two Interactive Software Inc. on Monday posted a smaller-than-expected quarterly loss, helped by sales of games such as "The Darkness" and one based on the latest "Fantastic Four" movie.

Take-Two shares rose 5% after the quarterly report and its forecast that 2008 earnings would exceed Wall Street estimates, thanks largely to cost cutting, a profitable sports business and the release of its most anticipated game, "Grand Theft Auto IV."

Pacific Crest Securities analyst Evan Wilson said the company's profit outlook was above what many had expected due to expectations of lower costs.

"The Street in general will be forced to take a more positive look at the company's margin structure," said Wilson, who has a "sector perform" rating on Take-Two.

Take-Two's net loss for its fiscal third quarter was $58.5 million, or 81 cents per share, compared with a loss of $91.4 million, or $1.29 per share, a year earlier. It was the company's seventh consecutive quarterly net loss.

Take-Two, the maker of the popular "Grand Theft Auto" video game franchise, has been struggling to right itself after being mired in regulatory and legal wrangles stemming from investigations into its stock options practices and sexual content in its last "Grand Theft Auto" game.

In March, the company's management was replaced by dissident investors. Its new leadership has been working to put it back on course.

Excluding $12.4 million in costs for items including corporate restructuring and legal fees, Take-Two lost 64 cents per share. On that basis, analysts, on average, had expected a loss of 67 cents a share, according to Reuters Estimates.

Third-quarter revenue was $206.4 million, down 14% from a year earlier but higher than the average forecast of $200.8 million. The company said sales were helped by demand for games including "The Darkness," "Fantastic Four: Rise of the Silver Surfer," "The BIGs," and "All-Pro Football 2K8."

"BIOSHOCK"

Also during the quarter, Take-Two released "BioShock," in which players fight off enemies while trying to figure out what happened to a crumbling underwater city.

Speaking on a conference call, Take-Two executives said "BioShock" was one of the fastest-selling games in video game history. The company has shipped about 1.5 million copies of the game since its August 21 release, it said.

The success of "BioShock" has been a welcome sign for investors in Take-Two, which last month delayed its most important upcoming game, "Grand Theft Auto IV," and warned that it would post a full-year loss before one-time items.

"Grand Theft Auto IV," which had been scheduled for release in October, is now planned for release in the second quarter of Take-Two's fiscal 2008.

For fiscal 2008, Take-Two forecast net earnings of 80 cents to $1.00 per share. Excluding costs for stock-based compensation and restructuring measures, the company expects to earn between $1.30 and $1.50 per share.

The company expects revenue in fiscal 2008 of between $1.1 billion and $1.4 billion. Wall Street analysts are expecting revenue of $1.44 billion, according to Reuters Estimates.

Another analyst was hesitant about the outlook.

"I'm pretty skeptical of them being able to do the earnings number they put out there given the revenue number. They would have to just completely right the ship ... and I just don't think they're there yet," said Todd Greenwald, an analyst with Nollenberger Capital Partners.

Take-Two said it still expects to post a fourth-quarter net loss of 20 cents to 25 cents per share, and a full-year net loss of $2.05 to $2.10 per share.

Also on Monday, New York-based Take-Two said it formed a new publishing label devoted to casual games called 2K Play.

As part of the new label, the company said it struck a licensing agreement with Nickelodeon that includes properties such as Dora the Explorer and Go, Diego, Go! The company will release games featuring those properties this fall.

Take-Two shares rose 4.9% to $16.52 in after-hours trade after closing at $15.75 on Nasdaq.
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