Take-Two To Achieve Profitability Despite 2010 Remaining ‘Challenging’—Zelnick

Take-Two Interactive continues to believe this year “may remain challenging,” Chairman Strauss Zelnick said in an earnings call. But it still expects to achieve profitability this year without the release of a new Grand Theft Auto game, he said. “This will mark the first time in nearly a decade that the company has been able to accomplish that goal,” he said.

Revenue for Q3 ending July 31 soared to $354.1 million from $94.9 million in Q3 last year (CED Sept 3 p12). The “significantly better-than-expected results” were driven by strong demand for Red Dead Redemption, which Zelnick said the company shipped more than 6.9 million units of globally since it was released in May. Continued strong demand for the catalog games Grand Theft Auto: Episodes from Liberty City, Grand Theft Auto IV, NBA 2K10 and Borderlands also contributed to the results, Take-Two said. Digital sales, meanwhile, “continued to be a meaningful component” of sales, it said. Profit from continuing operations was $12.4 million, or 14 cents per share, reversing the loss of $58.3 million, 76 cents, it posted in Q3 last year.

"Initial indications are very strong” for the Oct. 7 release of Red Dead Redemption in Japan, CEO Ben Feder said. “We're enthusiastic about the reception that the title has received from” the first-party hardware companies and “retailers leading up to” its release, he said. U.S.-developed games don’t usually generate strong demand in Japan.

Take-Two will launch Grand Theft Auto: Chinatown Wars HD for the iPad “in early September,” Feder said. Chinatown Wars was originally released for the Nintendo DS in March 2009, and since then it’s been released on platforms including the PSP, iPod Touch and iPhone, shipping a total of 2.2 million units globally, he said. The iPad version of the game will take “full advantage” of the device’s large screen size and “high-resolution graphics,” he said.

The company delayed the release of the game L.A. Noire yet again, this time from this month until the first half of 2011. NBA 2K11, meanwhile, will be its first console game supporting Sony’s PlayStation Move motion-sensing controllers and stereoscopic 3D graphics for the PS3 when it ships next month, Feder said. Preorders “have been very strong,” he said. Preorders for the multi-platform game are up from those of last year’s entry in the basketball game series, Chief Financial Officer Lainie Goldstein said. Mafia II, meanwhile, is “off to a great start” in Q4, she said.

Take-Two “implemented a targeted staff reduction” at its Rockstar San Diego, Firaxis and Visual Concepts studios “to properly align their resources with their current and future goals,” Feder said. Take-Two said it had 1,600 people on its development staff at quarter’s end.

Facebook has been mainly a social gaming platform for “light” and “addictive” games as opposed to the complex AAA titles that Take-Two is focused on, Zelnick said, but “We're beginning to experiment.” The company will study how its initial Facebook offering, Sid Meier’s Civilization, performs, he said. Social games just represent “a small profit contributor” now, but he said, “in the future” it will become “perhaps a larger one."

Take-Two boosted its results forecast for Q4 and the fiscal year ending Oct. 31. It now expects to report revenue of $270-320 million and earnings per share of 20-30 cents for Q4, up from the June forecast of $200-250 million in revenue and 10-20 cents in EPS (CED June 10 p2). For the year, it now expects to report revenue of $1.05-1.1 billion and EPS of 60-70 cents, up from the $880-980 million in revenue and 10-30 cents in EPS forecast in June.