Novice Investing - Who Can Take That Anymore?

Date: Monday 01st 2008f December 2008 03:27:56 PM

Who Can Take That Anymore? - 06/27/2006

By: Novice Investing Staff

Take Two Interactive (TTWO) get another heavy blow today when it announced that the New York District Attorney had issued a pair of subpoenas towards the Grand Theft Auto matter. Grand Theft Auto was Take Two's biggest game franchise. Last year, the company was forced to revise its rating from Mature to Adult Only. As a result, most retailers (including Walmart) was forced to return the merchandise to the company, costing it millions. Share price, meanwhile, plunges 19% in early trading.

The blow seems to come endlessly for Take Two. Grand Theft Auto was the biggest revenue generator and profit driver in recent years. The company has $ 100 M of cash on its balance sheet, which is neither good nor bad for the company of its size. Before the announcement, the company is expected to lose $ 0.37 per share or $ 27 Million for the current fiscal year. While you may consider that the company has ample cash cushion, we believe that there will be more hurdle before the company turns a profit anytime soon. Anytime your biggest revenue driver is wiped out, you will run into troubles. Take Two is no exception. It has tried diversifying by buying the franchise of Civilization, which is a pretty popular game. This investment needs several years before it can be paid off.

Without the Grand Theft fiasco, Take Two might have some difficulties operating in current tough gaming environment. Competitors such as Electronic Arts (ERTS), THQ Interactive (THQI) had both racheted down their earning expectation recently. Has conventional gaming reached its peak? This is another subject but to answer briefly, yes, we believe that the gaming world is moving towards MMORPG (Masive Multiplayer Online Role Playing Game) now. For that matter, content provider such as Take Two needs to partner up with MMORPG players such as Shanda Interactive in China. Blizzard Entertainment knew the power of MMORPG with the success of World of Warcraft online. It has given the company north of $ 1 Billion and counting, not a small number.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Take Two Interactive (TTWO) or any other securities.

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