Video game publisher Take-Two Interactive Software Inc
The company brushed off worries a National Basketball Association lockout would lower sales of its upcoming title, NBA 2K12, which will be released in October. The company said a missed season would have no impact on its sales or earnings.
Given how lifelike our games are, we think it's possible we can fill a need in the case of the lockout and offer consumers an opportunity to participate in basketball, said Chief Executive Strauss Zelnick in an interview.
Take-Two's stance on a major lockout seems out of step with its rivals. Electronic Arts Inc
Janco Partners analyst Mike Hickey called Take-Two's NBA strategy misguided and said he was puzzled the company did not use the lockout as a free pass to lower its fiscal targets.
If there's no NBA season next year, there is no way they are going to do the same numbers, Hickey said.
As U.S. stocks plunged on Monday, analysts pressed Zelnick on the company's strategy to cope with consumers tightening their wallets and scaling back on $60 video games. The interactive entertainment sector suffered in 2008 during the global financial crisis.
Despite the economic pressures, Zelnick said the company's strategy of investing in must-have games that appeal to a wide audience such as Grand Theft Auto will pay off.
We think our strategy makes sense in good times and bad, he said.
Take-Two's big bet on its game Duke Nukem Forever hurt its bottom line. Take-Two, like its publisher rivals, now invest more money and resources into fewer games per year, which makes the need to produce hits more critical than ever before.
In the 1990s, a top console game could be made for a couple of million dollars, but in 2011 a marquee game might cost between $20 million and $40 million to produce.
Duke Nukem, an action first-person shooter game, had been in production for more than a decade when it was finally released in June 2011 to poor reviews.
Duke Nukem was nothing to write home about, said Sterne Agee analyst Arvind Bhatia.
He added that the game's performance not only hurt first-quarter sales, but is the reason behind the company's weaker-than-expected forecast for the second quarter.
For the second-quarter, Take-Two expects revenue to be between $70 million and $85 million, and an adjusted loss between 55 cents and 65 cents per share. This is far below the $195 million in revenue Wall Street was expecting for the quarter.
The company's fiscal first quarter net loss was $8.7 million, or 11 cents per share. Excluding items such as stock-based compensation, the company posted earnings per share of 2 cents, which missed analysts' estimates of 9 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 11 percent to $334.4 million, which was below Wall Street's estimates.
For the full year, it expects revenue between $1 billion and $1.1 billion, which is in line with Wall Street estimates.
Its shares were flat after closing 8.8 percent lower at $11.07 on the Nasdaq.
(Reporting by Liana B. Baker; editing by Bernard Orr)