Take-Two sells distribution unit, cuts outlook

 @ibtimes on December 21 2009 5:59 PM

* Sells Jack of All Games for $43.3 mln

* Analyst says priced too low, cites M&A speculation

* Sees Q1 rev $90 mln-$140 mln, adj EPS loss 45-55 cents

* Shares off nearly 6 percent (Adds analyst's comment, details on recent move, share price)

SAN FRANCISCO, Dec 21  - Take-Two Interactive Software Inc (TTWO.O) will sell its Jack of All Games distribution business to Synnex Corp (SNX.N) for $43.3 million, and slashed its forecasts for fiscal 2010 as a result.

Shares of the Grand Theft Auto and Bioshock publisher fell almost 6 percent after analysts questioned the low price tag.

Investors focused on Take-Two last week when activist investor Carl Icahn disclosed an 11.3 percent stake, spurring speculation he might press for a sale of a company that has long been a subject of takeover talk. [ID:nN18240551]

Take Two, which has struggled with game delays and cost overruns, said the sale of Jack of All Games was consistent with its strategy to focus on its core business.

ThinkEquity analyst Atul Bagga said the distribution business was not a good fit for Take-Two.

The price they got was surprising. It seemed a little low, but it's definitely not a core business...the issue with this company right now is their cost structure is out of proportion, he said.

Bagga said Take-Two may be tidying up its financial and cost structure in preparation for a potential sale.

If you're going to put a company on the block you want to make sure it's clean, he said.

A spokesman for the company declined comment.

Take-Two has some of the world's most recognizable gaming brands, but has failed to convert its portfolio into steady earnings. It now expects first-quarter revenue of $90 million to $140 million and a non-GAAP loss of 45 to 55 cents a share. It had previously forecast revenue of $210 million to $260 million and a loss of 40 to 50 cents.

For fiscal 2010, Take-Two now expects revenue of $710 million to $910 million and a non-GAAP loss of 48 cents to 68 cents a share, versus an earlier forecast for sales of $1 billion to $1.2 billion and a loss of 40 cents to 60 cents a share.

Take-Two expects the sale of Jack of All Games to Synnex to be worth $43.3 million, including $36.5 million in cash and up to an additional $6.75 million based on the achievement of certain items. It expects the deal to close in the first calendar quarter of 2010.

Synnex is a technology distributor based in Fremont, California.

Shares in Take-Two slid 5.8 percent in extended trade to $8.88 from a regular-session close of $9.43. Stock in rival Electronic Arts (ERTS.O) also slid 2.1 percent initially, but bounced back to stand roughly flat. (Reporting by Gabriel Madway. Editing by Robert MacMillan)

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