Grand Theft Auto Falls Short for Take-Two

Grand Theft Auto: Liberty City Stories was supposed to be the knockout title for the PSP, the one that everyone was supposed to go crazy for. It has been without doubt the most successful PSP game to date, but has it been successful enough for Take-Two Interactive, who published Rockstar’s acclaimed series for the PSP? According to industry analyst Michael Pachter in a report by GameSpot, it hasn’t and it may be tough to bounce back from.

The news can hardly be called surprising. In late October, officials reduced their estimates of full-year earnings for fiscal year 2005, from $1.22?$1.27 billion to $1.18?$1.185 billion.

At the same time, the company adjusted its Q1 ’06 earnings forecast as well, lopping $50 million off its estimates. Before the October 31 warning, the company was anticipating revenues of $350-$400 million for the quarter ending January 31, 2006. Based on a number of factors, including continued losses associated with pulling Grand Theft Auto: San Andreas from shelves, it adjusted earnings down to the $300-$350 million range.

Pachter also sees some sluggishness lasting into the current fiscal year (November 1, 2005, through October 31, 2006). “As industry sales continue to be challenging, we expect Take-Two to lower fiscal year ’06 and Q1 ’06 guidance,” he said today.

Pachter offered some consolation to Take-Two, adding that whatever downturn the company is experiencing, it is being similarly felt by other publishers. “Given weak November NPD sales and Electronic Arts’ and Activision’s recent earnings warnings, we believe that Take-Two [also] experienced weak sales during the holiday period.” Contributing to the weak sales are consumers who, according to Pachter, “continue to shun current generation games while waiting for next generation consoles.”

Pachter maintains a cautious Hold rating on the stock (with a $20 target price), suggesting investors “stay on the sidelines” for at least the next few months–“until Take-Two can demonstrate that it can deliver on its guidance.”

[Read] Grand Theft Auto: Liberty City Stories was supposed to be the knockout title for the PSP, the one that everyone was supposed to go crazy for. It has been without doubt the most successful PSP game to date, but has it been successful enough for Take-Two Interactive, who published Rockstar’s acclaimed series for the PSP? According to industry analyst Michael Pachter in a report by GameSpot, it hasn’t and it may be tough to bounce back from.

The news can hardly be called surprising. In late October, officials reduced their estimates of full-year earnings for fiscal year 2005, from $1.22?$1.27 billion to $1.18?$1.185 billion.

At the same time, the company adjusted its Q1 ’06 earnings forecast as well, lopping $50 million off its estimates. Before the October 31 warning, the company was anticipating revenues of $350-$400 million for the quarter ending January 31, 2006. Based on a number of factors, including continued losses associated with pulling Grand Theft Auto: San Andreas from shelves, it adjusted earnings down to the $300-$350 million range.

Pachter also sees some sluggishness lasting into the current fiscal year (November 1, 2005, through October 31, 2006). “As industry sales continue to be challenging, we expect Take-Two to lower fiscal year ’06 and Q1 ’06 guidance,” he said today.

Pachter offered some consolation to Take-Two, adding that whatever downturn the company is experiencing, it is being similarly felt by other publishers. “Given weak November NPD sales and Electronic Arts’ and Activision’s recent earnings warnings, we believe that Take-Two [also] experienced weak sales during the holiday period.” Contributing to the weak sales are consumers who, according to Pachter, “continue to shun current generation games while waiting for next generation consoles.”

Pachter maintains a cautious Hold rating on the stock (with a $20 target price), suggesting investors “stay on the sidelines” for at least the next few months–“until Take-Two can demonstrate that it can deliver on its guidance.”

[Read]

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