The chief executive of Take-Two Interactive Software Inc. resigned on Wednesday as the video game publisher warned of a massive sales shortfall and a quarterly loss on disappointing sales and a delay in the release of a new game.
The New York-based company, whose shares tumbled more than 12 percent on the news, gave no reason for the departure of CEO Jeff Lapin. His contract was amended late last year to allow him to leave at any time after March 30 and continue to receive salary, bonus and benefits for 18 months.
Take-Two's loss forecast comes as rival video game publishers are forecasting higher and higher profits.
The company, whose accounting practices have been under investigation by the U.S. Securities and Exchange Commission for more than two years, said it expects a loss of 15 cents a share in the current quarter, instead of the profit of 34 cents it forecasted just last month. It said revenue would be well below Wall Street estimates.
But financial analysts remained bullish on the company, primarily because of the impending release of "Grand Theft Auto: San Andreas," expected to contend for best-selling game of the year and possibly be one of the top sellers ever.
Richard Roedel, who became chairman on March 16, was named CEO on an interim basis, succeeding Lapin. Roedel's ascension to chairman was widely seen as putting greater control in the hands of Lapin, a long-time industry executive.
Lapin had consistently declined to discuss the reasons for the amendment to his contract, other than to say he had no plans to leave. Take-Two said it would have severance charges for his departure.
Delayed games
The company said the release of the game "Red Dead Revolver," due in the fiscal second quarter ending April 30, would be delayed until the third quarter. It also postponed "The Warriors" from the third quarter to the first quarter of fiscal 2005.
It said its loss forecast stemmed from the "Red Dead Revolver" delay, lower-than-expected sales of older titles, and the Lapin severance charges. It forecast second-quarter revenue of $170 million, more than 20 percent below the average estimate among analysts polled by Reuters Research, a unit of Reuters Group Plc.
For the full fiscal year 2004, it said it expects net sales of $1.17 billion and earnings per share of $2, down from a prior forecast of $1.22 billion and $2.45 per share.
But some analysts remained upbeat on the company.
"We expect shares of Take-Two will be weak in the near-term based on the (poor forecast) and management changes," Banc of America Securities analyst Gary Cooper said in a note. "However, we believe that most investors hold Take-Two for one reason: 'GTA: San Andreas.'"
The Grand Theft Auto series has been an international blockbuster, turning Take-Two from a small publishing house into one of the largest companies in the industry.
As chairman, Roedel succeeded company founder Ryan Brant, who resigned as chairman but remained with the company as a publishing executive.
Brant and three other current or former Take-Two employees received "Wells notices" from the SEC late last year indicating they might face civil charges over the company's accounting practices.
Take-Two on Wednesday also announced the appointment of Paul Eibeler as president and Gary Lewis as global chief operating officer.
Eibeler was Take-Two president from December 2000 to June 2003, including the period covered in the SEC probe. He joined rival video game publisher Acclaim Entertainment Inc. as North American president and COO in July 2003. Lewis had been Take-Two's international managing director.
