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Pachter: Take-Two To Reject Higher EA Bid
Pachter: Take-Two To Reject Higher EA Bid
June 6, 2008 | By Brandon Boyer

June 6, 2008 | By Brandon Boyer
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Following the release of Take-Two's second quarter results, Wedbush Morgan analyst Michael Pachter has remained skeptical of the company's long term prospects despite the success of GTA, and says the company will likely reject a higher bid from EA, before settling on a friendly bargain once other suitors materialize.

While GTA managed to double Take-Two's revenue and profits for the quarter with 8.5 million copies sold, Pachter says that pace is highly unlikely to continue, noting that by the publisher's own calculations, 2.5 million units were being held in retailer inventory as of a week ago.

"By our estimates, the 8.5 million GTA units represent an attach rate of around 32% of the 26 million combined Xbox 360 and PS3 consoles that have been sold so far in Take-Two's addressable market," said Pachter.

"By our reckoning," he continued, "Microsoft and Sony will likely sell another 7 - 7.5 million combined consoles [by the end of 2008]. Should GTA continue to attach at a 32% rate, the company can expect to sell another 2.5 million units during the remainder of the fiscal year, or about the amount remaining in retail inventory at the end of May."

"The performance of GTA IV is not a surprise, and the performance of the remainder of Take-Two's business is equally unsurprising," he concluded, saying that once Take-Two sells through its estimated 12 million copies this year, that performance will be "difficult to exceed next year." Instead, Pachter says that at the same attach rate, the company should only sell through an estimated 6 million units of the game in 2009.

Finally, looking at the continuing story of EA's bid for Take-Two, Pachter says he believes EA will get FTC approval in the next two months, will try to complete a deal by September, and, even if EA ups its bid "by a modest amount (likely $2 or so), and attempt to complete a friendly deal," Take-Two management will reject the deal.

"Ultimately, we think EA will make a deal happen," he continues. "We believe that once EA walks away and no other bidders materialize, it will be able to allow all parties to cool their heels, and will be able to come back and complete the deal at a reasonable price" -- concluding that "Take-Two shareholders should expect a $27.54 offer."


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Comments


Anonymous
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i agree with patcher's prediction.. I can just see that happening.. September though.. geez that is a long time. Why can't we just get it over with, driving me nuts!

Anonymous
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"Ultimately, we think EA will make a deal happen,"

"We believe that once EA walks away and no other bidders materialize, it will be able to allow all parties to cool their heels, and will be able to come back and complete the deal at a reasonable price"



Your opinion means nothing because you contradict yourself. Just a few head lines ago and even on camera on a bonus round done by gametrailers.com you stated that EA would have a closed deal by May 16, 2008. Do you actually believe some of your own opinions.



So i again disagree with you man, and i bet you are in that group that has a problem unlocking achivements in the game as well. Good thing there are walkthroughs... huh whew Pachter saved again. BARF



And now you are pushing your own speculations out til September making sure you have enough time to appear "correct" this go round.



Do you even read what is in gaming news i dont think you do... this was just stated a few days ago... read below



"During the call, Zelnick also addressed the ongoing EA acquisition - specifically referencing that Take-Two was looking at all strategic avenues for increasing shareholder value, including staying independent and forming business combinations with third parties.



Zelnick explained that the company was "actively engaged in that process now," and have had "formal discussions with a number of interested parties," but offered no further details on just who those partners might be. "



That right there kills most of your opinion. Please Pachter stay out of games, by you using ur "title" and boasting up these opinions of yours you are filling people heads with crap.



Go into Real Estate or something and stop trying to fish out winners in the game industry!



You are wasting article space on Gamasutra!

Anonymous
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in some ways you are right that a guy like Patcher always has to offer his opinion... But i think he is entitled to an opinion and to speculate.. nothing wrong with that. He is one of those educated financial guys that at least knows a little bit about gaming with an unbiased view. This is important because I think most gamers today are biased against EA and have their own preferences to who they like and don't. The fact is that Zelnick and his management are the bad guys and they are being made to look like it with their actions. They will profit 80 million from the sale to EA, so you just wait and see.. patcher might be right this time and the only fools are those that bought into what Zelnick has been saying all this time.

Anonymous
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Im getting sick of this Patcher. Why does he have a hard-on for this deal.....Piss off Patcher

Anonymous
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who cares if he does? his not alone.. there are other people that want the deal to go through too. Just because you don't like EA and you don't want the deal to happen doesn't mean that everyone including patcher should be the same.

John Smith
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Well, it's Pachter's job to speculate as to what will happen in financial matters. Whether he's right or not is a whole 'nother story.



I wouldn't be surprised if EA does secure a deal, but I am hopeful as Take 2 is showing much tenacity in resisting this acquisition.



Mark my words, though... If EA acquires Take 2, you can expect there to be SOME change that will not benefit the gamer in Rockstar games. They are a stereotypical corporation that basically cannot manage the companies they acquire well.



They are hit and miss as far as I am concerned, and the companies they acquire bleed on contact.

Anonymous
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Who is paying him to speculate, how do you get money to speculate....I need that job

Anonymous
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Pacher's reasoning is sound enough, and to all those who denounce it outright, I invite you to make your own "predictions" so long as you too have reasoning to back them up.

Anonymous
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^^^ response



ok ok I predict Take Two doesnt sell to EA because Zelnick secretly wants to rule the world of interactive software and become the new king of the hill and then in return....buy out EA



reasoning you ask???



Back in college Zelnick's school faced Riccitiello's school's debate team and was beaten. During the debate Riccitiello made several comments aimed at Zelnick and his lack of knowledge in the matter they were debating.....Hurt and ridiculed, Zelnick swore revenge on his tormentor. Over his remaining years in college Zelnick spent months carefully calculating a vengeful plot equaled to the Count of Monte Cristo. And now some 30 years later we are seeing his plan unfold..................................BEWARE THE ZELNICK



uh yeah i can sometimes be creative with my speculations....unlike Pachter

Anonymous
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the issue with EA and large corporations is that they dip into employing mediocre people. As soon as one A person hires a B person, its all over. B people hire C, C hire D. There's a reason why EALA hasn't produced anything outstanding for years, lots of mediocre people (some on drugs).



The only way to move ahead for EA is to acquire truly creative and innovative studios like Take Two, unfortunately, the fear is real. B to D people at EA will begin to impose their will on Take Two's A people. I know first hand that at EA there are alot of people, say 90% of the people really don't care about the fine art of making a game, its just a job for them. I would be surprised if they even play games outside of work.



Well at least some people at EA know that about their studio. The best advice for EA is to change its culture with people who live and breathe games and get rid of the people for whom this is only a hobby.

John Smith
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"Back in college Zelnick's school faced Riccitiello's school's debate team and was beaten. During the debate Riccitiello made several comments aimed at Zelnick and his lack of knowledge in the matter they were debating.....Hurt and ridiculed, Zelnick swore revenge on his tormentor. Over his remaining years in college Zelnick spent months carefully calculating a vengeful plot equaled to the Count of Monte Cristo. And now some 30 years later we are seeing his plan unfold..................................BEWARE THE ZELNICK"



Dear God man, your RIGHT!!!



And to the previous poster, it's worse than that. You're right, but the fact is NO ONE has any vision. No one. And that's just reflective in the whole a person hiring a b person. I don't really know anything about business in these places, but I am very familiar with the products that come out of these shitholes.



The gaming industry is dying. It will never actually die though. It will just be a creative cesspool of unoriginal, non progressive, cookie-cutter crap.



Listen. Why is that whenever a cool new feature comes out in games in a lesser department, no one picks up on it? Flames were perfected in Return to Castle Wolfenstein... and now we're back to that very shitty attempt at flames that sucked in comparison. Animated blood decals in Far Cry... and no one picked up on it, and Crytek abandoned ANY innovation in gore department (not to mention any actual satisfying violence to speak of at all).



In Mortal Kombat, Scorpion's spear was very satisfying. In more recent games, there is nothing but two little bits of blood that squirt out and not even an impact sound effect. They delivered on a new "get over here", but failed abysmally overall. The first one had an extreme impact/gory sound, with blood spray, and a very nice amount of blood chunks all flying out. It really gave you a sense of impact: you could "feel" it. You can feel NOTHING in these new crap games (deadly alliance was a true attempt to reinvigorate the series though).



Anyways, here's hoping that Take 2 doesn't get acquired and suffer a guaranteed similar fate.

Anonymous
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the response about A people hiring B people that hire C people etc.. well this happens everywhere, in all industries in fact. So many people get hired these days on a friend basis over an actual talent basis. EA does have a system in place to hire people with experience and talent but some weak ones always creep in. And about the drugs.. maybe you don't know the industry that well, but there is a lot of people at every game company that take drugs socially, this is not uncommon at any company. I know some well known ones that actually promoted it from the senior level.



to be honest about EA's problems... it gets down to the senior management decisions. Unlike other smaller game studios and probably taketwo EA suffers from employing too many producers which ends up creating a too man chefs but not enough cooks situation. The problem with producers is they don't fully know or understand the impact of their decisions on the development team. It is these last minute changes and rushed philosophy for getting the game out the door that create a culture where people just see working at EA as a job. Take your job too seriously or to heart and you will end up heartbroken at EA. Fixing this situation is difficult.



I'm not sure how they can fix their internal teams, that is why buying teams like taketwo's rockstar can be an easier solution. My bet is they would try their best to leave it as it is and only when it gets really bad would they intervene. If EA internally can be more organised on the development of a project by giving it more time with less producers making wholesale changes then I can see the possibility of change and improvement. my 2 cents.. a once EA employee

John Smith
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Seriously, there are a ton of very hard working, responsible people out there that use drugs. These people aren't necessarily idiots or slackers, and can be very ambitious and successful.


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