Tax Reform in This Election Year: It's Not Likely
Walmart's New Health Food Push: Is It Too Hard to Swallow?So, Take-Two Interactive (NASDAQ: TTWO) has had enough of arbitrage. According to reports, management decided that it will remain an independent entity after all. You'll recall that the software publisher was being courted by Electronic Arts (NASDAQ: ERTS). That relationship never panned out. Take-Two said "give us more money, EA." And EA apparently said "no way." It was interesting while it lasted. And if you had sold out of Take-Two when the offer was made oh-so-long ago, you made money. Hopefully you aren't still holding the shares.
I don't know why Take-Two didn't decide to cash out, especially when it was becoming apparent that the economy was headed for a severe downturn. I mean, you would think that executives in a company such as this would have more information than I do and would have known where things may have been headed, or at least have a strong indication. Let's face it: Take-Two is an investment/trading idea based on the notion, in part at least, that it's going to be taken out at some point. Otherwise, you've got one big intellectual property, Grand Theft Auto, to get excited about. Now, truth be told, I know and you know that the company has a little more than just that. There's BioShock, for one thing. But this is the perception on Wall Street, and it's a hard one to fight. And since I already own Activision Blizzard (NASDAQ: ATVI), I don't think, at this juncture at least, I'd want to invest in a second game-software publisher. I'd be going for a shorter-term trade. That line of thinking kind of makes me wonder why management didn't decide to trade out of Take-Two months ago. Oh, I forgot. Greed. Hey, greed might be good, but it isn't always smart.
I don't think Take-Two will remain independent forever. It'll be bought out sometime in the future. Someone will want Grand Theft Auto. Will EA come back to the table? That's a strong possibility. Maybe Microsoft Corporation (NASDAQ: MSFT) or Sony Corporation (NYSE: SNE) will make a bid. Doesn't matter who it is, it'll happen. Just not now, maybe. However, I personally wouldn't consider entering Take-Two's shares until they drop much further from current levels. Below $9 a share would be a cool price.
Disclosure: I own Activision Blizzard; positions can change at any time.
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Reader Comments (Page 1 of 1)
10-03-2008 @ 9:15PM
YpoCaramel said...
Yea I know all about management's responsibility to shareholders in business school, but I think EA and Take Two's cultures don't mesh well. EA's too methodically corporate and Take Two can be indie enough at times. But then again, who'd ever hear an ibanker talk about negative synergies?
10-04-2008 @ 4:42PM
Nate said...
Just GTA? Doesn't Take Two also own Firaxis, maker of Civilization? Civilization is one of the most successful franchises in gaming history. The future of the company isn't even so much in brand names like GTA or Civ, it's in the people who made them.
An EA takeover could well have destroyed TakeTwo. The departure of top talent like Sid Meier or designers at Rockstar would shred the future of their design teams, and such departures are frequent after takeovers by corporate machines like EA. Of course I don't know the inside details - e.g. if anyone threatened to leave - but you can be sure the TakeTwo execs do.
10-05-2008 @ 2:04AM
Brad O'Neill said...
Wow that may have been the most ignorant article I ever read. Take Two is sitting on 4 dollars per share in cash right now. They have GTA4 to rely on through Christmas and they have GTA china town coming out for ds (the most widely held gaming system) Midnight club los angeles will be a hit and bioshock for the ps3 should sell a copy or two. The PE is the Lowest in the industry. The company has a great management team in place that showed tremendous skill in letting GTA54 cook a little longer even though they were under tremendous pressure to get it out. Carnival games is probably worth more than 9 bucks a share. The company does no more than you. They know traditionally escapism sells well in recessions even in depressions. They know that after 4 years of hard work they finally figured out how to program effectively for the PS3 and the XBOX 360 they also know this knowledge will translate into quicker turnaround times for future games. ATVI is a great company but for growth TTWO is going to smoke them.
As for future takeover possabilities. Zelnick was brought in with the express purpose of getting them ready to be taken over. He has a goal of consistent earnings and blockbuster IPs so far he has established the blockbuster and he is working very hard on getting the pipeline set up to provide those earnings.
The creative talent at Take Two is incredible. Sid Meyer, the houser brothers, Rock Star, 2k all of these produce excellent games and with the financial backing and supportive management they will rocket into being the premier video game company on the planet. They already had the greatest money maker in the history of entertainment not bad for a little over a year on the job for Zelnick. Another ceo would of forced it out unfinnished for the christmas rush and it would of been ok but probably would not have had the sales it recorded.
When Borderlands comes out you will see the loyalty generated by quality titles. This is a brand new IP but the gaming community has confidence in the guys that brought us Bioshock and GTA4.
I own TTWO and I am buying more through each down day. The analysts are completely wrong to think a bad christmas for the economy is going to sink this company.
SOrry I know that was too long and you probably haven't taken the time to look deeply into this company so its wrong of me to go off like that. But I feel it is wrong of you to put out terrible advice. The only way this stock hits 9 is if the entire market collapses which may happen but if the market begins to rebound next week you will never see 9 on this puppy and you will have missed out on an easy double.