Looking at one of the first paragraphs of their release:
"Take-Two anticipates that its results for the fourth quarter and fiscal year 2009 will be below its prior guidance due to several factors, the largest being the performance of its Major League Baseball® titles in the fourth quarter, which reduced earnings by approximately $0.09 per share,"
Wat? They should have been expecting pretty close to zero MLB sales in Q4.
"along with an impairment of capitalized software based on sales estimates for its MLB titles in fiscal 2010, representing approximately $0.05 per share."
Can some accountant translate that for me? Does that mean 'We think MLB 2K10 will sell like crap too so we are already writing off some of the development cost.'?
"The Company also incurred inventory write downs in its distribution business primarily related to prior generation software, representing approximately $0.07 per share,"
Wat? The xbox 360 has been out for 4 years! How much previous gen software do you still have lying around?
"and realized lower than expected initial performance of several of its key holiday releases."
Wat? You bragged how great NBA 2K10 sales were. You've bragged about how great Borderlands has sold. OK, GTA was a little weak but you said this 'GTA IV and the subsequent line extensions were profitable,"' here:
So exactly what f'ing 'key holiday releases' sold 'lower than expected'???
"Additionally, on a GAAP basis, Take-Two expects to record non-cash impairment charges of up to approximately $15 million on its distribution segment (equivalent to $0.19 per share in the fourth quarter and $0.20 per share for the full fiscal year 2009), in connection with the Company’s annual assessment of goodwill."
Again, can some accountant translate that? WTF is a 'non-cash impairment charge . . . on goodwill'? Does that mean 'We want to sell the distribution division so we are devaluing it to make selling it easier'?
What a day for Xbox to be posting on Facebook about picking the cover for MLB2K10. I pick the one with Zelnick with the bat crammed up his...oh never mind.
Xbox Help 2K Sports pick the cover for Major League Baseball 2K10. Which one will you be voting for?
2K Sports - MLB 2K10 - Cover Contest
Voting will be open for only two weeks – from Tuesday, 11/24 at 12 noon EST through Tuesday, 12/8 at 12 noon EST. The final box cover for Major League Baseball 2K10 will be revealed before Friday, 12/11. ESRB Rating: Rating Pending
"What a day for Xbox to be posting on Facebook about picking the cover for MLB2K10. I pick the one with Zelnick with the bat crammed up his...oh never mind."
Like the comment. Actually gave me a reason to smile despite what happened here today. Besides feeling like I just got kicked in the stomach, I feel really angry. I wonder if there is something else up here. And how do we believe anything else Zelnick has to say. Walstreet hates uncertainty.
Buy out aside(I sure don't expect one now, but would be great), I think we need time to evaluate what was Zelnick said and put things into perspective. Bioshock, RDR, Mafia are to be released this year. Borderlands is strong and we should see a sequel. All is not lost. I'm not sure where this stock price should be. I guess somewhere between $0 and $26 ???? I just know I'm not going to sell in a panic.
Hope to continue to hear from the regulars here.
With all the crap that was thrown in (inventory, goodwill, etc.), maybe another company was doing due diligence on TTWO and actually had a team of accountants and lawyers that knew what they were doing. They probably said "you need to make these adjustments" as they walked out the door...never to be heard from again.
Funny, that's exactly what I was thinking. TTWO holding their breath, hoping to make the deal, and then due diligence reveals a HUGE mess, AGAIN, and the buyer says no way, but now the dirty laundry needs to be washed.
If any credit is to be given to present mgmt, all the complaints about a lack of transparency seem to have been spot on. Seems like no one at all saw this coming. If only it were the other way with HUGE upsides, current and future. We might be at 14-15 this AM instead of trying to hold 7.
CPA here and I can tell you that you are spot on about the MLB2K10 write down on capitalized costs. The auditors must have made them write it down based on crappy sales this past year and no reason to believe in better performance going fwd.
Basically same with the goodwill on any category. Auditors require an annual review of all intangible assets and if you cannot support future revs and/or earnings from these assets, they must be written down. If you can support them, they don't even need to be amortized in many cases.
I would wager these assets have been on the balance sheet for a long time and the auditors finally forced a move. This is not the kind of thing that comes out of left field, in my experience.
"Wat? The xbox 360 has been out for 4 years! How much previous gen software do you still have lying around?"
I was joking about the Commodore 64, but I did hear Intellivision didn't hold up as strongly as TTWO expected.