What investors think of Take-two

[Nostromo]

Taken from Joystiq:

http://www.joystiq.com/2006/03/07/what-investors-think-of-take-two-today/

A picture is worth a thousand words. A graph, about 555 words, because there aren't as many pretty colors. This graph (modified after being taken from the latest issue of the Video Game Journal research report published by Susquehanna Financial Group analysts Jason Kraft and Chris Kwak) shows Take-Two's stock (Nasdaq: TTWO) performance since May of last year, when the company's shares were flying high on the release and success of Grand Theft Auto: San Andreas.

The Hot Coffee scandal isn't the only thing that wiped out nearly a billion dollars in Take-Two share value. The launch of the Xbox 360 has reduced demand for the company's titles on older-generation consoles, resulting in a string of disappointing sales figures. Then there's the whole public spat with a member of the Take-Two board, lawsuits in California, and a Banc of America Securities report suggesting that the company was running low on cash.

It looks like Take-two shares are going to the dumps. When was CIV released again? But if you compare it EA bellow... EA shares took a huge drop between Mar 05 and Apr 05.

[Nostromo]

Here's what they think about EA

As promised, here's a marked-up graph of Electronic Arts (Nasdaq: ERTS) stock performance since March of last year, courtesy Jason Kraft and Chris Kwak of Susquehanna Financial Group.

From a high of nearly $70 to today's share price of $50, Electronic Arts hasn't been knocked about quite as hard as competitor Take-Two, but the company's investors have certainly been taken on a roller-coaster like ride through the year. The bad news is that the bad news may not be over yet.

Financial performance is a lagging indicator of customer preference for a company's products. If EA's hurting, it's because gamers (that's all of us!) are simply not buying their products to the extent that we once were. Every time we write about EA a reader always writes in to criticize the company's products for being derivative and unimaginative. It's therefore tempting to suggest that gamer fatigue is finally hitting EA in the pocketbook. There's so much else going on here, though, that such a conclusion would be premature.

http://www.joystiq.com/2006/03/07/what-investors-think-of-ea-today/

[Solver]

Looking at the income levels and stock values, the quality of games really matters little. EA is making a lot of money and will continue to do so. They release a new incarnation of several sports titles each year - FIFA, NHL, NBA... each year, there's one new feature that the marketing is centered around, slightly better graphics every second year and some other gimmicks. People buy that, EA get money. They release Battlefield 2, online shooter, so it gets bought a lot. It has some horrible technical issues but no matter. Some 5 months later (!) the expansion pack is released which is really just some maps and new weapons, nothing new to gameplay. But that gets bought a lot, too.

You can release the perfect strategy game, it won't earn you as much money. Civ4 is great, I will happily name it the best in the genre after a few months, but even if it were a perfect TBS game (not that such a thing could probably exist), it wouldn't outsell a regular online shooter, and wouldn't come close to any sales-wise "big hits" like GTA or Half-Life2.

[Sava]

wtf

there is no MLB game on PC this year?

[Imran Siddiqui]

Damn... since MLB signed an exclusive deal with Take Two (retaliation by Take 2 for EA signing an exclusive deal with the NFL), and Take Two isn't doing a PC MLB game, nope, Sava. NO MLB PC game this year .

[Sava]

****ing *******s

EA has MVP NCAA Baseball 2006

exclusive license deals

[JohnT]

TTWO released their latest 10Q a couple of days ago. Here's something interesting:

In November 2005, the Company acquired all of the outstanding capital stock of Firaxis Games, Inc. (“Firaxis”), a developer of PC and strategy titles, including the Civilization franchise. The purchase price of approximately $15,442 consisted of $12,500 of unregistered common stock and $4,085 of development advances previously paid to Firaxis reduced by net cash acquired of $1,143. In connection with the acquisition, the Company recorded $5,284 of identifiable intangible assets, comprised of $1,130 of non-competition agreements and $4,154 of intellectual property, $11,445 of goodwill, which is not deductible for tax purposes, $333 of net assets and $1,620 of deferred tax liabilities, on a preliminary basis. The Company also agreed to make additional payments of $11,250 based on future product sales, of which approximately $10,000 will be recorded as additional purchase price when the conditions requiring their payment are met and $1,250 will be recorded as employee compensation expense.

Firaxis sold for $15,442,000. Sid and friends were paid in shares of common stock ($12.5 million) and had about $4 million in advances (debt Firaxis owed to TTWO) wiped off the books. Firaxis apparently had $1.1 million in the bank, which reduced the cost to TTWO.

They'll also get another $11.25 million if certain targets are met.

I wonder what date they used to determine how many shares of TTWO stock made up $12.5 million. Since the Firaxis sell happened in November, after the stock plunged below $18/share, Sid didn't get hit too badly.

I'm also amused as to what the article calls "disappointing sales figures". TTWO revenues declined by half in one year (from $502 million in Q1 05 to $264 million in Q1 06)- that's not disappointing, that's panic-time!

http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001125282-06-001610&Type=HTML