It is time for the board of Take-Two (NASDAQ:TTWO) to see if it can renegotiate its contract with Zelnick Media, which runs the video game company. The current arrangement calls for Zelnick to get $2.5 million a year and bonuses up to another $2.5 million. The agreement also gives Zelnick favorable stock grants.

Take-Two shares dropped 20% after the close as the company missed all of Wall St.’s forecasts for the fiscal year ending October 31 and it gave a disappointing set of projections for the next year.

For the quarter that just ended, Take-Two said it would have revenue of $325 million to $35o million. The company uses non-GAAP numbers in most of its comparisons. On that basis, EPS for the quarter that just ended was $.05 to $.10. But, “Take-Two anticipates that its results for the fourth quarter and fiscal year 2009 will be below its prior guidance due to several factors, the largest being the performance of its Major League Baseball® titles in the fourth quarter, which reduced earnings by approximately $0.09 per share, along with an impairment of capitalized software based on sales estimates for its MLB titles in fiscal 2010, representing about $0.05 per share. The Company also incurred inventory write downs in its distribution business primarily related to prior generation software, representing about $0.07 per share, and realized lower than expected initial performance of several of its key holiday releases.”

“Additionally, on a GAAP basis, Take-Two expects to record non-cash impairment charges of up to about $15 million on its distribution segment (equal to $0.19 per share in the fourth quarter and $0.20 per share for the full fiscal year 2009), in connection with the Company’s annual assessment of goodwill. These amounts are excluded from the estimated fourth quarter and fiscal year non-GAAP EPS provided in the chart below.”

Going forward, “Take-Two is also providing an initial outlook into its fiscal first quarter ending January 31, 2010 and fiscal year ending October 31, 2010. The Company expects to report a non-GAAP net loss per share for fiscal 2010 in the range of $0.40 to $0.60 on $1.0 billion to $1.2 billion in revenue. Take-Two’s preliminary forecast for the fiscal first quarter is for a non-GAAP net loss per share in the range of $0.40 to $0.50 on $210 million to $260 million in revenue.”

Shares were trading at $8.71 at 5.45 PM.

Douglas A. McIntyre

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