In declining game business, Take-Two sees upside

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Sales of video game discs may have slipped 6% in 2010, but New York game publisher Take-Two Interactive Software sees nothing but sunshine in the year ahead.

‘Even though sales are falling for the industry, in the areas we target, it’s growing 20%,’ said Take-Two Chief Operating Officer Karl Slatoff during a conference call Tuesday announcing the company’s December quarter results.

Slatoff’s comments highlight a tale of have’s and have not’s in the hit-driven world of video games where certain genres run hot one year, but cold the next.

For Take-Two, which placed its bets on hard-core action and sports titles, business has been relatively good. Although revenue for the third quarter ended Dec. 31 was off 7% to $334.3 million from a year ago, it was higher than Wall Street had expected, partly because the company had only one major game release in the quarter, its basketball game, NBA2K11.

Net income rose 3.6% to $40.8 million, or 45 cents a share, from $39.4 million, or 44 cents a share, a year earlier.

The company’s shares, which gained 19 cents to $14.54 Tuesday, rose an additional 41 cents in after-hours trading following Take-Two’s earnings announcement.

Unlike many companies that staked their businesses on music games and titles for Nintendo’s Wii console that appeal to a casual audience, Take-Two doubled down on games for serious players.

The play seems to have paid off. While music games and sales of the Wii console have plummeted, games targeted at hard-core players have sold especially well. Take-Two’s Red Dead Redemption, launched last year, has already sold more than 8 million copies worldwide, according to company Chief Executive Strauss Zelnick. Its upcoming game L.A. Noire, due out in May, is among the most anticipated titles of the year among die-hard fans of the shooting and adventure genre.

The company expects to extend its winning streak into this year, raising its profit projection for the fiscal year ending March. Take-Two forecast net earnings per share between 80 cents and 85 cents for the year, up from its projections in December of 50 cents to 65 cents. Revenue is expected to remain the same at around $1.1 billion.

-- Alex Pham