Take-Two's Double-Take: Shares Reacting to Earnings (TTWO)

Take-Two Interactive Software Inc. (TTWO-NASDAQ) reported earnings: Net loss for the recent quarter was $51.2 million or $0.71 per share and Non-GAAP net loss was $29.7 million or $0.41 per share in the second quarter of 2007; net revenue for the second quarter was $205.4 million.  Estimates on non-GAAP were -$0.58 EPS and revenue expectations were $204.4 million.  These numbers are down from last year and a bit ahead of expectations.

Take-Two also announced a restructuring plan to improve financial and operating performance AND named Lainie Goldstein Named CFO.It is restructuring international operations, realigning label and sudio administrative functions, consolidating the 2K and 2K Sports unit management and marketing, and consolidating third party PC distribution into North America.  The company will reduce 425 million in costs and $15 million.  These restructurings will also entail an undisclosed number of layoffs.

ANNUAL GUIDANCE: Take-Two is reiterating its guidance for fiscal 2007 of revenue in the range of $1.2 billion to $1.25 billion and break even results on a GAAP basis, including stock-based compensation expense of $0.22 per share, but excluding any charges related to the Company’s reorganization expenses and restructuring initiatives. Included in the Company’s reorganization expenses is additional stock-based compensation expense of $0.03 per share. NEXT QUARTER GUIDANCE Q3: Take-Two is providing initial guidance of net revenue in the range of $195 million to $215 million, with a GAAP net loss per share in the range of $0.60 to $0.65, including stock-based compensation expense of $0.06 per share, but excluding any charges related to the reorganization expenses and restructuring initiatives.  TWO QUARTERS Q4: For the fourth quarter ending October 31, 2007, Take-Two is providing initial guidance of net revenue in the range of $520 million to $550 million, with diluted net earnings per share in the range of $1.35 to $1.40, including stock-based compensation expense of $0.06 per share, but excluding any charges related to the Company’s reorganization expenses and restructuring initiatives. Included in the reorganization expenses is additional stock-based compensation expense of $0.03 per share.

Shares dipped initially after closing up $1.5% at $18.94, but shares appear to be up about 1% at $19.20 after the realization of a turnaround plan is just starting in a first quarter.  Over the last year shares are well above the lows of $9.06 and well below the highs of $24.80.  It’s hard to know what the street will key in on in any restructuring of the only large US video game company that was a corporate mess, but so far it appears the glass is half full.

Jon C. Ogg
June 11, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.