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Take-Two Holiday 2010 Revenues Beat Expectations, Profits Up 7 Percent

Take-Two Holiday 2010 Revenues Beat Expectations, Profits Up 7 Percent

February 8, 2011 | By Kyle Orland

February 8, 2011 | By Kyle Orland
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Shares in Red Dead Redemption publisher Take-Two Interactive are up just over 3% after hours, as the Rockstar parent announced better-than-expected revenue numbers for the 2010 holiday quarter.

Net revenue for the quarter ending December 31 were down just over 7 percent compared to 2009, to $334.3 million, though the company had publicly expected revenues of $290 to $315 million for the period. Net profits were up just over 7 percent to $40.8 million for the period.

The company is also well ahead for the 2011 fiscal year thus far, with net revenue for the last nine months of 2010 up 80 percent over the same time period a year before, to over $954 million.

According to the firm, the strongest contributors to net revenue and profitability in the third quarter this year included NBA 2K11, as well as the 8 million unit-shipping Red Dead Redemption, Red Dead Redemption: Undead Nightmare (standalone disc), Grand Theft Auto IV: Complete, Borderlands Game of the Year and Sid Meierís Civilization V.

Catalog titles that contributed to the strength in the recent period were led by the Grand Theft Auto franchise, and "strong sales" of digital offerings for Red Dead Redemption, Borderlands and Sid Meierís Civilization V also helped.

"Strong holiday sales enabled Take-Two to continue to deliver better-than-expected revenue and earnings in the third quarter," Take-Two Chairman and CEO Strauss Zelnick said.

"Our results year-to-date clearly demonstrate the Company's ability to translate its world-class creative resources and diverse portfolio of triple-A franchises into meaningful profits."

Shipments for NBA2K11 are now up to 4 million units, after 3 million units shipped during the game's October release month. The casual-focused Carnival Games franchise, meanwhile, has now shipped over 7 million units, ahead of the Kinect-based Carnival Games: Monkey See Monkey Do, which is due in April.

Looking forward, the company increased its revenue guidance for the current fiscal fourth quarter and the 2011 fiscal year as a whole, on high expectations for March sports releases Major League Baseball 2K11 and Top Spin 4.

The PlayStation 3 represented an increased proportion of Take-Two's business in the fiscal 2010 third quarter, representing 27 percent of revenue compared to 18 percent in the 2009 holiday quarter. The growth came primarily at the expense of Take-Two's Xbox 360 and Wii business, which both fell as a proportion of total revenues.

On the company's call to investors, analysts wanted to know whether the publisher was considering titles for Sony's Next Generation Portable or Nintendo's 3DS, and the attach rate for Red Dead Redemption's DLC.

They also asked whether Rockstar's traditionally-long development cycles would pick up to enable the studios to release more titles each fiscal year, and how the company was finding its experience being one of the early content providers on the OnLive cloud-based streaming platform.

The company preferred not to be specific on any of these topics, noting it has "not announced any support" for the new portable hardware despite finding the technology of both to be "very compelling".

Chairman Strauss Zelnick said that while asking if the relationship with Rockstar on a production level would change was like "asking what's the relationship with your family". He notes that Rockstar is a close part of Take-Two and not an entity that it commands. Thus, the company would continue to observe the philosophy of allowing adequate development time for all projects and making no announcements until release windows were decisive.

Zelnick also didn't specify attach rates for DLC. But he said that supporting AAA content with steady follow-ups was the best possible business model for the publisher, and provided no specifics on OnLive either, aside from saying the company was "excited" about the platform.


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