Take-Two Interactive disappoints investors

Less than a year after it fought off a big takeover offer from Electronic Arts (NASDAQ: ERTS), shares of Take-Two Interactive (NASDAQ: TTWO) are down about 45%.

But the beatings continue: The stock plunged another 21% in after-hours trading yesterday after the company reported its fourth quarter results and warned investors that the first quarter of 2009 is likely to be a mess. The company predicted a first-quarter loss of 70-85 cents per share on revenue of $175 million to $225 million. Analysts had on average been expecting earnings of 22 cents per share on revenue of $317.6 million. For the first quarter of 2008, Take-Two had sales of $240 million.

The more dire predictions for Take-Two appear to be materializing. As a small shop with relatively few titles compared to titans like Electronic Arts, Take-Two is vulnerable to a rapid slowdown in sales. If the company can't cut costs rapidly when that happens, the black ink can turn crimson in heartbeat.

Of course Electronic Arts has its own problems too: The company's stock closed on Wednesday at $17.22, down from a 52-week high of $60.35. But the company's offer for Take-Two was all cash, so that's irrelevant from the point of view of disgruntled Take-Two shareholders.