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Take Two Interactive Meets Revised Profit Estimates

Take Two Interactive Software on Thursday reported fourth-quarter earnings that were in line with the updated guidance it issued earlier this month.

The company lost 28 cents per share, compared to a 20 cent per share loss in 2008. Net revenue, at $343.4 million, was slightly higher than the 2008 figures.

For its just-completed fiscal year, Take Two reported a net loss per share of $1.80, compared with a gain of $1.28 last year, when the company was reaping the benefits of the recently launched “Grand Theft Auto IV”.

While the results were far below analysts' initial estimates, the company did have one bright spot in the quarter. “Borderlands,” a new license for Take Two, has sold over 2 million copies worldwide, making the franchise a key part of its future plans.

The company reiterated is guidance for Fiscal 2010, predicting a 40 cent to 60 cent loss per share.

Take Two CEO Ben Feder blames, in part, a tough retail environment for the current and projected losses.

“We continue to see retail being cautious in inventory purchases,” he says. “We think our guidance for 2010 reflects that … However, when it comes to AAA titles, we believe retailers will get aggressive in a positive way.”

Take Two plans to release at least four titles for core gamers in 2010—“BioShock 2,” “Mafia II,” “Max Payne 3” and “Red Dead Redemption”.

Take Two Interactive
Take Two Interactive

Retailers, such as Wal-Mart and Amazon have been aggressively discounting titles this holiday season. This has led some analysts to theorize that publishers may be forced to lower prices on mid-tier titles moving into next year.

Feder says the price wars haven’t had much of an impact on the company—and even if mid-tier game prices do come down, it shouldn’t impact Take Two’s bottom line.

“Take Two is focused primarily on AAA titles,” he says. “We haven’t seen much of a price war in that category. It’s probably the safest place to be. … The core gamer seems to be intact and seems to be strong. The rest of the industry remains challenging.”

Analysts, while not speaking directly to Take Two’s position in the industry, agree that the core gamer does seem to be the video game industry’s savior these days.

“Core gamer software (which we define as Xbox 360 + PS3, but excluding the Music genre) has actually grown 17 percent year over year over the past six months in the U.S.,” says Ben Schachter, an analyst with Broadpoint AmTech. “[That is] a sign of health for underlying industry fundamentals.”

The Major League Baseball license continues to be an albatross for the company, however. Recent titles have drastically underperformed, which were a significant part of this quarter’s loss. In 2010, the company expect the agreement with the league to result contribute between 38 cents and 44 cents to the company’s overall Fiscal 2010 expected loss.

Feder declined to call the license a mistake, but noted it has been frustrating for the company.

“That deal was signed before I arrived at Take Two,” he says. “It certainly has provided value to the company, but it has been expensive.”