Take-Two Interactive (TTWO) is the kind of stock I want to take a chance on but just can't bring myself to do so. The situation can be risky unless a fresh bit of Grand Theft Auto content is about to come out into the marketplace. Then again, those who bought ahead of the Q1 earnings report, released yesterday after the bell, are pretty overjoyed this afternoon, seeing that the stock is, at the time of this writing anyway, up well over 9%.

Net sales increased 9%. The adjusted loss from continuing operations was 31 cents per share. Last year at this time, shareholders were looking at a loss of 56 cents per share on the same basis. Reuters says the analyst call was for the red ink to equal 51 cents per share. Good job, management.

Fair or not, Take-Two Interactive (NASDAQ: TTWO) has a reputation for a shallow pipeline of shareholder-enhancing software. It is known simply as the Grand Theft Auto publisher. There's more to Take-Two, of course. There are sports titles, for example. There's BioShock. How about the big hit for the Nintendo (OTC: NTDOY) Wii, Carnival Games? What about Borderlands?

That's all well and good, but if you look at the company's latest earnings report, you'll have no choice but to conclude that the one-game reputation is firmly intact.

Take-Two's top line plummeted 68% during the fiscal third quarter. Net loss on an adjusted basis came to 66 cents per share. There was a huge profit of 93 cents per share in the year-ago period, driven by the fourth edition of Grand Theft Auto. Not a great comparison. At least the performance was a little better than expectations. According to Earnings.com, Wall Street was calling for a loss of around 68 cents per share.

This post is part of our feature on Money Losers of 2008. See all 20.

Take-Two Interactive's (NASDAQ: TTWO) Grand Theft Auto IV has made a lot of money. It's been the recent driving force for the software publisher's fortunes. And the Grand Theft Auto franchise is the reason why Electronic Arts (NASDAQ: ERTS) made a bid for the company earlier in the year (that transaction was never ultimately consummated).

But there's something of a sad story behind the glitz and glamor of the game. According to The New York Times, an actor named Michael Hollick, who played a character named Niko Bellic in the fourth Grand Theft Auto, received a small pittance in compensation when compared to the hundreds of millions of dollars in revenue that Take-Two took home for itself. Did Hollick earn only $2 million? $1 million? Did he only make $500,000?

Try $100,000. That's all Hollick grossed for himself and his major role in the incredibly successful game title! The Times article says that Hollick supplied his voice and motion-capture assets to the software, and he worked for about 15 months on the project. Can you believe that? No residuals, royalties, or anything else that begins with an r. Take-Two simply paid him a set fee and did not allow him to participate in any of the gross dollars captured by the mature-rated juggernaut.

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.

I was a little surprised when I heard that the deal between Electronic Arts (NASDAQ: ERTS) and Take-Two Interactive (NASDAQ: TTWO) was called off. Yes, I had my doubts, but I thought that in the end, EA might raise its offer so that it could get its corporate paws on the Grand Theft Auto franchise. EA has been looking for ways to grow in a world where Activision Blizzard (NASDAQ: ATVI) is making waves with Guitar Hero and World of Warcraft. That company's stock has done well over the past year, while EA's has suffered.

EA may be walking away for now, but I'm not sure this is the last that we'll be hearing of Take-Two being in arbitrage play. Management clearly wants to sell the publisher. Thing is, it should have simply taken the offer it received earlier in the year. Now, shareholders will have to wait for another bid. Who knows when that will be, considering that it's been reported that software sales may be heading for a slowdown (I'm sure EA must have taken this into consideration when leaving the table).

But what does this mean for video-game investors? I believe investors should put Take-Two on a watch list and pray for the publisher's shares to drift down toward the 52-week low. I would not take a chance on the stock at these levels. Ideally, I would love to see Take-Two trading below $10 per share before buying. Right now the 52-week low is $13.53. Getting to single digits might be wishful thinking, but you never know the way this market is behaving. And considering that management passed up what was most likely a decent offer in the first place, one has to wonder if Wall Street might be in a punishing mood.

No matter what, Take-Two will be bought out. And if one could get in at a very low price, then the speculative risk/reward scenario might be attractive. EA might come back at some point, too. In fact, I expect the company to, although that is purely my own educated guess. I continue to own ATVI as my video-game play, but will be keeping my eye on Take-Two and its price action.

Disclosure: I own Activision Blizzard; positions can change at any time.

Can you believe the drama going on between Electronic Arts (NASDAQ: ERTS) and Take-Two Interactive (NASDAQ: TTWO) has dragged on for this long? I can't. According to this article, EA has let its current bid expire and intends on checking out additional stats behind the company in an effort to think more about what Take-Two has to offer and what its true value might be. The company behind the Grand Theft Auto series of mature-rated games is offering to give EA a presentation that includes non-public data.

EA really wants this deal. So does Take-Two. EA believes that it needs a super-franchise that goes beyond its sports dominance, and it feels that Grand Theft Auto would be one heck of an asset to own. It's true. EA would probably benefit from the title, and it might get the company's stock out of its current doldrums. And in a world where Activision Blizzard (NASDAQ: ATVI) is benefiting greatly from an acquisition and a merger -- Guitar Hero and Vivendi Games, respectively -- one cannot blame EA, I suppose, for keeping the dream alive.

EA is in something of a bad spot because, at this point, it probably will have to raise the bid on Take-Two. I think the market will ultimately be disappointed if EA doesn't get Grand Theft Auto (and BioShock, for that matter). It will be perceived as a failure on management's part, and shareholders will wonder where the growth will be coming from, and what catalysts can be counted on to drive the stock price higher in this tough economic environment.

Take-Two Interactive (NASDAQ: TTWO) has launched its important new "Grand Theft Auto IV" franchise and it has done remarkably well. It did not cause a big bump in the firm's stock, which has only moved from $26.62 three weeks ago to $27.10.

The company's one suitor, Electronic Arts (NASDAQ: ERTS), had already taken the shares up from from under $18 with its buyout offer. Most analysts believe that the offer will be extended because Take-Two has resisted a buyout.

According to The Wall Street Journal, there is a "belief among Take-Two management and some of the company's shareholders that the company deserves a higher offer from EA. "

No matter what Take-Two believes, EA's best move now is probably not to extend the offer but, instead, to walk away. The Take-Two share price would be very likely to move back below $20, which would pressure the company's board to do something to move the share price back up again.

EA's shareholders are ill-served if the company extends its offer. Without a buyer, Take-Two might have to come to the negotiating table and Electronic Arts could get a better deal.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

In a column in Barron's (subscription required), analyst Todd Greenwald provides a bullish outlook for the video game industry, macroeconomic trends be damned:

We believe that this industry is virtually recession-proof and will be driven almost entirely by the release of new games, and continued hardware sales, rather than any macro-level consumer spending trends.

Last year's momentum has continued into the first half of 2008; year-to-date software sales are up 41% in the U.S., following 34% growth last year. Furthermore, this will likely accelerate in the coming months, driven by the releases of Grand Theft Auto IV, Nintendo's Mario Kart Wii and Wii Fit, and Konami's Metal Gear Solid 4.

I tend to agree with the notion that video games should be pretty recession-resistant -- they just aren't that expensive for the amount of time that so many young, male hardcore gamers spend with them. There's an argument to be made that a $50 video game actually provides a positive return on investment to the consumer because a night at home playing PlayStation in your underwear is cheaper than a night out on the town.

But one word of caution: Much of the growth, especially in more casual games like the Nintendo Wii, is being driven by a growing number of non-hardcore gamers. People who don't consider video games their main hobby may be more likely to give them up if things get tight.

Another problem to keep in mind: the Associated Press recently reported that teens are having a tough time procuring summer work in light of the struggling economy. That means less spending money for video games. But teen-oriented fashion retailers are more likely to be the victims of that.

The most recent quarter was good for Boston Beer Co. Inc. (NYSE: SAM), which reported that its fourth-quarter profit more than doubled, and not too bad for Take-Two Interactive Software Inc. (NASDAQ: TTWO), which posted a narrower-than-expected loss for the first quarter.

For the quarter that ended December 29, Boston Beer's net income jumped to $6.8 million, or 46 cents per share, from $2.5 million, or 17 cents per share, in the prior year quarter. Revenue rose 26% to $92.2 million from the same period of 2006. Analysts polled by Thomson Financial had expected earnings of 35 cents per share on revenue of $88.9 million.

The company credited its performance to drinkers trading up to craft beers, as well as increasing retailer and wholesale support for the craft category and for Samuel Adams. The company noted that its Twisted Tea brand also performed well in the quarter.

For the full year, profit grew 24% from a year ago, to $22.5 million, or $1.53 per share, while revenue grew 20% to $341.6 million.

Boston Beer shares rose $2.02, or 6%, to close at $35.81, and continued to rise in after-hours trading.

I decided to sell my position in Take-Two Interactive (NASDAQ: TTWO) today. I obviously wanted to take advantage of the nice jump in the share price following the buzz over the all-cash offer from Electronic Arts (NASDAQ: ERTS). As I write this, Take-Two's stock is up 52% from its previous closing value, and up somewhere around 29% from the price I paid near the end of 2007 for the stubs that I just dumped.

My reasoning is simple. I purchased Take-Two ahead of the expected stock appreciation that would occur in the months preceding the Grand Theft Auto IV release in April. Also, I felt that the company was improving and moving beyond the problems it experienced with corporate governance issues in the recent past. Well, with the significant move in the value of my shares in a relatively short period of time, and with the uncertainty regarding this deal, I decided to take the money and see if the funds might be better invested elsewhere. I don't necessarily want to be in the middle of a takeover battle; I'm sure shareholders of Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) aren't the most content investors on earth right now.

Do I think Take-Two might be able to negotiate a better offer? Yes, I do. But I own Activision (NASDAQ: ATVI), and I am satisfied with playing the videogame sector via its shares for now. And I can always look at Take-Two after things settle. I believe selling Take-Two was the right decision for my portfolio.

Disclosure: I sold my entire position of Take-Two shortly before writing this, and I own shares in Activision.

Shares in Take Two (NASDAQ:TTWO) fell almost 3% after hours and could do worse at the open. The company offered such weak guidance that investors are trying to find out what killed the firm's big turnaround.

Net revenue for the fourth quarter was $292.6 million, compared to $266.6 million for the same period of fiscal 2006, which was in line with expectations. Net loss for the fourth quarter was $7.1 million or $0.10 per share, compared to a net loss of $14.0 million or $0.20 per share in the fourth quarter of fiscal 2006. Revenue in the quarter was driven by by BioShock, NBA 2K8 and Carnival Games, all of which were new titles released last quarter, as well as Grand Theft Auto catalog titles.

But, the company's next quarter will be much worse than expected. Barron's reports that "for the fiscal first quarter ending January 31, the company sees revenue of $175 million to $225 million, with a non-GAAP loss of 50-60 cents a share. The Street has been looking for $278 million and a loss of 16 cents."

After years of accounting problems and management turnover new investors brought in a top management team to fix the company. It seemed to be working, at least until today. The shares traded just above $12 in August, but signs that things were improving moved the stock to over $19 in early October. After hours today, the price dropped to $17.55.

Take Two is not likely to move up for at least a quarter, and if guidance is light then shareholders may lose what patience they have left.

Douglas A. McIntyre is an editor at 247wallst.com.

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) did not lose as much money for its latest quarter, according to results the company release yesterday evening. Take-Two, the game publisher known for being a staunch defender of graphically violent and disturbing games in the "Grand Theft Auto" series, said that game titles such as "The Darkness" and one based on the newer "Fantastic Four" movie help drive results to a not-as-large-as-expected loss.

The software publisher's net loss for the third-quarter period was $58.5 million ($0.81 per share), which paled in comparison to the year-ago loss of $91.4 million ($1.29 per share). But, with its recently completed Q3 period being the seventh straight with a loss, what are TTWO investors to do? Continue waiting for some kind of turnaround?

In standard, idiotic Wall Street fashion, the company's shares made a gain of 5% after the Q3 results were announced, probably since the loss was less than expected. I'm not sure seven straight quarterly losses would make me bid up the stock -- you? Take-Two did say 2008 earnings would exceed Wall Street estimates, so perhaps that was priced into the uptick.

The release of "Grand Theft Auto IV" in Q4 may give the company the profit boost is desperately needs. Although the publisher has a new management team after years of legal wrangles based on corporate misdeeds and consumer lawsuits, it still has not righted itself -- maybe time is all the company needs. But, how much is too much?

Hot Topic Inc (NASDAQ: HOTT), the trendy retailer with a downward trending stock price, announced last night that it is buying back $40 million of stock, roughly 11% of the company's value.

As we blogged in early July, the retailer is way off from its $30 high and is now selling for $8.15. The sagging stock price has attracted SAC Capital, which accumulated 5.1% of Hot Topic stock, or 2.3 million shares.

We blogged about the merits of bottom fishing in this retailer, but proved a bit early as investors dumped retail stocks on weak economic data and concerns about the subprime market hit the headlines. Hot Topic also got hit due to Take-Two Interactive Software Inc (NASDAQ: TTWO) delaying the launch of Grand Theft Auto 4, as the introduction of new game consoles is thought to have boosted Hot Topic's results in the past.

Hot Topic has a clean balance sheet and a second concept, Torrid, which provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29, that is doing alright.

Last night's announcement can be credited to SAC Capital. SAC likes the management of overcapitalized balance sheet to put any excess money to work quickly. The combination of a large share repurchase in addition to a potential turn around of the Hot Topic concept could drive this stock considerably higher in 2008.

Historically, the Electronic Entertainment Expo, or E3, had been a model of industry excess. But after last year's extravaganza it was announced that the expo would be restructured due to the high costs it imposed on the computer and video game companies involved in the technological bacchanalian. The large trade show that boasted a draw of 60,000 attendees has since been eliminated and replaced with a invitation-only business summit format. Now the new Electronic Entertainment Expo, being held in Santa Monica from July 11 through July 13, will have less fanfare. But will it still hold the same prominent position in the industry? That remains to be seen.

The players are all still here -- Microsoft Corporation (NASDAQ: MSFT), Sony Corporation (NYSE: SNE), Nintendo Ltd (OTC: NTDOY), as well as the top-notch game makers. But their announcements are unlikely to top those of recent years past, due to the point at which we are in the product cycle -- not due to the change in the event's format. There will be no new groundbreaking console announcements this year, but there will still be plenty items of note, and E3 will still be the platform of choice to announce them. The most important news to listen for: What will the industry players be selling this holiday season? Will they announce must-own games, or better yet, games that will push consumers to buy new consoles?

Some rumors for the various consoles include Mario Kart and Super Mario Galaxy being shown for the Wii; Grand Theft Auto IV and Metal Gear Solid 4 shown for the PlayStation 3; Halo Wars, Fable 2 and Grand Theft Auto IV being shown for the Xbox 360, with Gears of War 2 and 3 and Dead Rising 2 being announced. How many of these will come true? Who knows, but it will be an interesting week.

Check back again for an E3 recap after the dust settles.

MAJOR PAPERS:

• The Wall Street Journal reported that Toyota Motor Corporation (NYSE: TM), which launched a factory-building blitz five years ago, is now being urged by senior members of the founding family to stop building factories in the United States on fears it will hurt the company's efficiency.
• Kirk Kerkorian, who controls MGM Mirage (NYSE: MGM), had planned to buy the Bellagio Hotel and Casino and the $7.4B Project City Center from MGM. But that deal now appears to be off, according to the Wall Street Journal.

OTHER PAPERS:

• The U.K. Times reported that News Corporation (NYSE: NWS) has had preliminary talks with Yahoo Inc (NASDAQ: YHOO) about giving its social networking site MySpace to the online search company, in exchange for a 25% stake in Yahoo!.
• The New York Times reported that NYC Mayor Michael Bloomberg will leave the Republican Party and register as an Independent.
• The New York Times also reported that Microsoft Corporation (NASDAQ: MSFT) will pay Take-Two Interactive Software (NASDAQ: TTWO) $50M for two exclusive downloadable episodes of Grand Theft Auto for the Xbox 360.