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Take-Two Tops Forecasts, but Delays 2 Titles

Reuters, 5.26.09

Gabriel Madway

SAN FRANCISCO (Reuters) - Video game publisher Take-Two Interactive Inc (TTWO.O) reported stronger-than-expected quarterly results but cut its fiscal year revenue forecast as it delays the release of two titles.

The company said it will delay "Red Dead Redemption" and "Mafia II" from the fourth quarter into the first half of fiscal 2010, and will continue to look a various ways to cut costs.

Shares of Take-Two were little changed in extended trading on Tuesday after initially falling nearly two percent.

With a light release schedule for the third quarter, Take-Two said the fiscal year's performance will be strongly weighted to the fourth quarter, which will see the launch of "Grand Theft Auto: Episodes from Liberty City" on the Xbox 360.

Wedbush Morgan analyst Michael Pachter said the company is still aiming to prove that it can serve up new hit games outside of its big-name franchise.

"I think what you really care about is that these guys really are building a portfolio, so that maybe they add more franchises besides "Grand Theft Auto" ... on balance I like what they're doing."

The company said it swung to net loss of $10.1 million, or 13 cents a share, in the fiscal second quarter ended April 30 from a profit of $98.2 million, or $1.29 a share, in the year-ago period.

Excluding items, Take-Two lost 4 cents a share, better than analysts' average estimate for a loss of 14 cents a share, according to Reuters Estimates.

Revenue tumbled 57 percent to $229.7 million, versus the Wall Street forecast of $216.6 million. The year-ago quarter saw the release of the company's blockbuster "Grand Theft Auto IV" game.

Take-Two Chairman Strauss Zelnick told Reuters in an interview he was pleased with the company's quarter, and said "I think our view is that the economy may be starting to stabilize."

"I don't think we're getting any great benefits from an economic rebound, that would be utterly premature but ... I'm feeling a bit more optimistic. Conditions are not getting worse."

The company reaffirmed its forecast for the fiscal year ending October 31 for a profit, excluding items, of nil to 20 cents a share, but lowered its revenue forecast to a range of $1.05 billion to $1.15 billion. It had previously pegged revenue at between $1.1 billion and $1.25 billion.

For the current third quarter, the company forecast a loss, excluding items, of 55 cents to 65 cents a share on revenue of $145 million to $165 million.

The video game sector has held up relatively well in the economic downturn, although it has shown signs of weakness lately, with sales diving 17 percent in both March and April. However, analysts said those declines were somewhat misleading because of a difficult comparison from a year ago.

Take-Two's stock is up around 15 percent this year. Shares of New York-based Take-Two fell to $8.80 in extended trading on Tuesday from their close of $8.83 on Nasdaq.

(Reporting by Gabriel Madway; Editing by Richard Chang and Tim Dobbyn)