Take-Two delays "Grand Theft Auto IV"
LOS ANGELES (Reuters) - Take-Two Interactive Software Inc (TTWO.O) on Thursday delayed its most important upcoming video game, "Grand Theft Auto IV," and warned it would post a full-year loss, before one-time items, sending shares down 17 percent.
"We are very disappointed to reduce guidance after having previously reaffirmed it," Ben Feder, the chief executive who is part of a new management team at the troubled company, said in a statement, referring to the company's previous assessment, in June.
The game, which had been scheduled for release in October, is now planned for release in the second quarter of Take-Two's fiscal 2008. That means it will not be on store shelves in time for the holidays, dealing a blow to Microsoft Corp (MSFT.O) and Sony Corp (6758.T), who had been banking on the must-have title to help lift sales of their respective gaming consoles, the Xbox 360 and the PlayStation 3.
"It's a disappointment that the game won't come out in the holiday period. It's one of the biggest games of all time," said Janco Partners analyst Mike Hickey, who has a "buy" rating on Take-Two shares. "This is probably going to hurt the sell- through of the PS3 and 360."
In the "Grand Theft Auto" franchise, players assume the role of a thug who, by committing various crimes, works his way up to the top of a criminal organization. The game is notorious, however, for its extreme violence, including letting players run over innocent pedestrians or gun down police officers willy-nilly.
The last version of the game, "Grand Theft Auto: San Andreas" came under fire in 2005 after hidden sex scenes were discovered that allowed players to engage in virtual sex acts.
Take-Two Chairman Strauss Zelnick, who helped lead a shareholder coup that ousted the former management earlier this year, said "certain elements of development proved to be more time-intensive than expected, especially given the commitment for a simultaneous release on two very different platforms."
On a conference call with analysts to discuss the delay, executives said the reason for the move was almost strictly due to technological challenges in completing the game.
The latest version of the game was reviewed on Wednesday, they added, and a decision to delay its release was made on Thursday.
Feder said the company had already warned retailers about the delay and that they had been understanding.
"Putting 'Grand Theft Auto IV' out in the Easter season or so isn't necessarily the worst thing in the world for them," he said.
Take-Two said that, for the fiscal year ending October 31, it expects revenue of $950 million to $1 billion. It also forecast a loss of $1.25 per share to $1.35 per share, excluding one- time items.
Including costs for stock-based compensation, restructuring, and legal matters, Take-Two forecast a 2007 loss of $2.10 per share to $2.20 per share.
In June, Take-Two said it expected revenue of $1.2 billion to $1.25 billion for the year, with break-even results before one-time items.
"It's a disaster. It's nothing but bad news," said Todd Greenwald, an analyst at Nollenberger Capital Partners.
Asked if a turnaround for Take-Two was in sight, he said: "Someday, but not necessarily in sight. There will be several quarters of what I expect to be disappointing results."
Thursday's announcement marks the second high-profile game mishap under Take-Two's new management team. In June, the company suspended plans to sell "Manhunt 2" after the title was slapped with restrictive ratings for its extreme violence.
Take-Two shares dropped 17.2 percent to $14 after hours from a close of $16.91 on Nasdaq.
(Additional reporting by Scott Hillis in San Francisco)
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