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Take-Two Takes Financial Hit

Posted by Zonk on from the money-lost-to-bullies dept.

Gamespot reports that Take-Two Entertainment, publishers of titles like Civ IV, has reported much lower earnings than in the previous year in the same period. From the article: "There were several reasons behind the shortfall. Though Take-Two had three Xbox 360 launch titles--Amped 3, NBA 2K6, and NHL 2K6--and a solid PC hit in the form of Civilization IV, the company admits it had a lackluster Christmas in 2005. 'Clearly, the holiday season did not live up to anyone's expectations,' said Paul Eibeler, Take-Two's president and CEO, in a statement."

1 of 24 comments (clear)

  1. they're playing accounting games, too... by Malor · · Score: 5, Informative

    Bill Harris over at Dubious Quality has been talking some about Take 2. He pointed out, a few days ago, that they're using an old trick.... reserves.

    When something bad happens, you 'set aside' an obscenely large amount of money to 'deal with the problem'. You announce, loudly, that you WOULD have made money ('beat the Street') if only the terrible thing hadn't happened. Investors sigh, and your stock gets hit, but usually not that badly. Then, later on, you take some of the money out of the Rainy Day Fund to make a quarter that's not doing so well.

    That's exactly what they did here. They set aside THIRTY MILLION DOLLARS to take care of the 'Hot Coffee' problem. This quarter, they announced that the problem wasn't as bad as they thought, so they 'unreserved' eight million dollars...enough to mitigate the damage, so they don't look quite so much like a sucking chest wound.

    This is totally an accounting game. By now, they know how much damage Hot Coffee did. They could unreserve all but a million or so... that should be more than enough to handle any additional returns and/or pay for any lawsuits. They didn't do that, because they want to be able to 'beat the Street' in some later quarter, and artificially drive up the stock price.

    Investing is EXTREMELY risky if you don't know accounting. Accounting is the language of business, and companies are very good at whitewashing a rotten infrastructure.... only if you 'speak' accounting (or pay someone who does), can you be sure they're on the level.

    There are very, very few trustworthy, accurate analysts. When was the last time you saw a 'sell' on ANYTHING?