How much for video gaming's bad boy? - Top Stocks
 
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How much for video gaming's bad boy?

Posted Mar 04 2008, 06:56 AM by Kim Peterson

"Grand Theft Auto IV" comes out April 29, and I can't wait. It's the next installment in the controversial, violent, mayhem-filled series, and it will become the year's top-selling video game. Those who haven't played GTA are often mortified by the carjacking, cop-killing and other nefarious shenanigans it offers. But these games sell because above all else, they're unbelievably fun. (The new title will surely be rated "mature," so don't let the little ones get their hands on it.)

The upcoming game is a huge reason why Electronic Arts is making a major, and slightly hostile, play for GTA publisher Take-Two Interactive. EA offered $2 billion for Take-Two last month -- $26 a share, up from an earlier offer of $25 a share -- and was flatly rejected. Take-Two called the offer "the wrong price at the wrong time." Its shares, in the $16 range before EA's offer was made public, closed at $26.20 Monday.

Take-Two is smart to reject such a low offer. But how much is the company worth? A Wedbush Morgan analyst thinks EA should walk away if Take Two continues to thumb its nose. But Cowan's Doug Creutz thinks EA is justified in going as high as $32 a share. A Take-Two investor wants $33 a share.

Take-Two is being coy now, saying that EA isn't its only suitor. In an SEC filing, the company says it has received "informal indications of interest" from others, but no serious offers.

With no GTA to offer players, 2007 was a down year for the company. Revenue was $982 million but net loss was $138 million as production ramped up. Levered free cash flow was $101.6 million, and forward P/E is 17.70.

The numbers will all change when the new "GTA" debuts, and EA is trying to get in before that happens. The game, for the Xbox 360 and the PlayStation 3, is estimated to sell at least 10 million copies. To put that in perspective: the biggest-selling game in 2007 (the Xbox-only "Halo 3") had sales of 4.82 million.

Yet for all the allure of a blockbuster game series, buying Take-Two would mean taking on baggage. This is not the best run company. Take that board meeting last March where five out of six directors, including the CEO, were ousted. A month earlier, a previous CEO pled guilty to falsifying records. And the share price dropped about 20% in the past year before EA's intentions became public.

Take-Two has a nice bargaining position this month as the world awaits its latest blockbuster. But the company shouldn't be too arrogant and lose EA altogether. 

Comments

 

THis game is fun? Have you seen all the killings of people recently, yeah I bet those masacres seemed fun to those guys who decided to take innocent lives. Games like this are disgusting! Halo is a game to save Earth, not kill cops, random people, etc. So im not saying shooting games are fun, but when you make killing random people fun, dont be surprised when you hear about random killings in real life. They get it from some where! Totally against games like this.

if you calculate the intrinsic value of take-two interactive, you can see that the offer from EA was much too low.  they should raise their offer to $29.50/share.

It's politically correct people like Chief Johnson as to why there are really so many things wrongs with America.  I have played everyone of the GTA games ... but yet strangely enough I don't go around shooting people or committing unlawful acts.  In fact I will be graduating next year with a  degree in Molecularbiosciences and Biotechnology.  Video games are exactly what they are titled GAMES.  Have you looked at some of the movies out there ... or ever heard of something called the internet.  There are some truly disturbing scenes and images you can see in movies and on the internet, and guess what these acts are being carried out by REAL people.  Not VIRTUAL characters in a world that doesn't even exist.  People that think video games are bad are simply ignoring the much larger problem at hand.  You should really be angry at what is on TV, movies and the internet.  Oh and here is an even better solution ... if all this virtual violence offends you so much then don't play the games.  

God I hate people who complain that video games kill people. You can take away all the violent games in the world, and people will still get shot. Can you say the same thing about guns?

Long live GTA, the greatest game EVAH!!!!!

Yea this game is fun, dim-wit....all the killings in the world are not becuase of GTA......although it would make it nice for the blame game. Try corrupt politicians, government drug rings and the like if you want to start pointing fingers for the worlds ills......

Give me a break.  You probably think porn causes rape and child molestation too huh?  People are messed up, the games don't make them messed up.  Give it a rest.

Sure, because random killings were invented by video game players!

Give me a break.

People who kill will be inspired to kill by the violence in their lives, not the violence in a video game, movie, or music lyrics.

it's a GAME,just like the 3 stooges were A COMEDY ACT!!! if   kid's can't tell the difference between a game and real life then the  parents need to be SLAPPED!!

I agree with Chief Johnson.  I believe these games should be banned and censored.  I also believe that sugar and fat foods should be banned to protect the obese.  I'm all for book burning too that is profane.  All guns too should be banned and only our government should be armed.  Violent games create crime it sure isn't poor parenting it has to be violent games.  We all know that rape, murder, theft, and other violent crimes didn't exist until violent video games were invented.

people do not kill other people from games you need a fall back yes halo3 is fun and makes you want to keep playing but jacking cars is also fun you can do what ever you want in the game thats what makes the game fun.

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