"We believe the transaction is set to create a formidable new digital media powerhouse and the most valuable interactive entertainment company worldwide, unlocking the value of industry juggernaut World of Warcraft, and possibly also setting a new benchmark for profit margins among publicly traded video game pure-plays"

Along with the rosy outlook, Sebastian is raising the company's target price (the price at which buyers will purchase the stock) from $33 to $40.

Activision Blizzard formation set for July 8 [GamesIndustry.biz]

"Following our business review over the last six weeks, we are initiating a clear action plan based on three fundamental strands of activity: a radical change in our structure to a studio-led business, a top to bottom programme of product improvement and efficiency and a considerable cost reduction plan," Phil Rogers, Chief Executive of SCi Entertainment Group said, in a prepared statement. "To get SCi on track we have to act rapidly and effect change quickly. We must allow the world-class people that we have within the Group to focus on strong, profitable titles which will create the value our shareholders deserve."

A chief part of that plan is a fundamental change to the way the company does business with SCi shifting from the current centrally-controlled development and publishing model to a studio-led one, similar to the labels model that EA moved to last year.

Under the new structure, SCI would have studios based around "cornerstone products" like Tomb Raider, Hitman, Championship Manager and Deus Ex. The company is also creating an Eidos PLAY studio which will "fuse together casual and new media resources." Finally, production services will form part of the studio group and be relocated to Montreal from London.

I blame the Wii... well that and a company that has essentially been living off of three franchises for nearly two decades.

SCi Corporate

Business review and half-yearly financial report for the six months ended 31
December 2007

COMPANY TO BE RE-STRUCTURED

SCi Entertainment Group plc ('SCi' 'the Company' or the 'Group'), today announces a group re-structuring plan following its business review and its interim results for the six months to 31 December 2007.

The business review led by new Chief Executive, Phil Rogers, has decided on the following actions:

Fundamental change in business structure:

* SCi's business structure will be significantly changed from a centrally controlled development and publishing model to a studio-led business focused around cornerstone products, such as Tomb Raider, Hitman, Championship Manager and Deus Ex.
* Creation of Eidos PLAY to fuse together casual and new media resources to attack growing markets.
* Flexible and efficient approach to distribution.

Product improvement initiatives started:

* Cancellation of 14 projects which the Board considers are unlikely to generate an acceptable return on investment or are not of appropriate quality.
* Studios focusing on product innovation and delivery of high quality games.
* Production services to form part of the studio group, relocating to Montreal from London.

Cost reduction plan:

* New business structure targeted to operate with a maximum of 800 people, a reduction of 25% from current headcount.
* Annual operating costs to be cut by £14 million by the end of June 2008 at a one-off cost of £7 million

Phil Rogers, Chief Executive of SCi Entertainment Group said, 'SCi is in need of immediate change.

'Following our business review over the last six weeks, we are initiating a clear action plan based on three fundamental strands of activity: a radical change in our structure to a studio-led business, a top to bottom programme of product improvement and efficiency and a considerable cost reduction plan.

'To get SCi on track we have to act rapidly and effect change quickly. We must allow the world-class people that we have within the Group to focus on strong, profitable titles which will create the value our shareholders deserve.

'I am confident our staff share this vision and excitement for the future, and determination to build a working environment where our innovation and creativity can be commercially realised.'

I also, coincidentally, received Take-Two's comments on the whole, now-public, affair while on the phone with Riccitello. While the two seem to match up on the basic facts, their final analysis don't.

"Basically, (Take-Two) said to us that they thought the offer was inadequate and the price wasn't right," Riccitiello said. "Pretty much the standard response you get from just about anyone in a case like this."

Take-Two's official line pretty much says the same thing, though with a bit more detail on why the $2 billion offer doesn't work for them.

"Electronic Arts' proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives underway at the Company," said Strauss Zelnick, Executive Chairman of the Board of Take-Two. "Thanks to the extraordinary efforts of our creative and business teams, Take-Two has made enormous strides in the past 10 months toward our common goal of being the most creative, innovative and efficient company in our industry. We're extremely proud of our unique portfolio of game franchises, exceptional creative talent and loyal consumer following. Our Board believes that we will build greater value for our stakeholders by remaining relentlessly focused on our strategy and delivering on our mission of making the highest quality interactive entertainment.

"In addition to undervaluing key elements of our business, EA's proposal fails to recognize the value we are building through our ongoing turnaround efforts, which will further revitalize Take-Two. While we have made substantial progress already, the turnaround of our business which we initiated in June is not yet complete, and we believe its benefits have not been recognized in either our current stock price or in the value of EA's proposal.

"While the Board believes that entering into discussions with EA at this time is not in the best interests of shareholders, we had offered to enter into a good-faith dialogue with EA to determine if our companies can reach common ground on the appropriate value of Take-Two as a first step to realizing a mutually beneficially transaction. However, given the great importance of the Grand Theft Auto IV launch to the value of Take-Two, the Board has determined that the only prudent and responsible course for our Company and its stockholders is to defer these discussions until immediately after Grand Theft Auto IV is released. Therefore, we offered to initiate discussions with EA on April 30th, 2008 (the day after Grand Theft Auto IV is scheduled to release). We believe this offer demonstrated our commitment to pursuing all avenues to maximize stockholder value, while we believe that EA's refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount, whereas we believe this value rightly belongs to our stockholders."

When I told Riccitiello about Take-Two's desire to forestall talks until after the GTA launch, perhaps because they want to see how one of their top titles will do before selling, he said that they did their best to hold off on their offer. In fact EA first approached the board in December, but decided to wait on starting serious talks to make sure the rumblings wouldn't create problems for the Rockstar team working to get the game wrapped up. But now, Riccitiello believes, the company is pretty much done and the time to talk is almost past.

"I initially brought the offer in December, but we waited until GTA development was complete," he said, pointing out that most analysts have already built forecasts for GTA sales into the company's stock value. "That's already baked into their estimates. The truth is the longer they wait the less valuable the (GTA) asset becomes we have less time to influence the holiday sales.

"We felt we got the timing right."

I asked Riccitiello about the perception some have, right or wrong, that Electronic Arts is a company that buys up successful franchises and then runs them into the ground but pumping out endless iterations of the same game. He was quick to point out the reorganization the company went through last year to try and place a greater emphasis on developers over the larger EA brand. The move, from what I heard from people at Bioware, Maxis and Pandemic, was definitely in the right direction.

Riccitiello, in fact, points to their new label model, one inspired by conversations he had with Rockstar's as proof that Take-Two and it's developers would find a happy home at EA.

"As a company, Take-Two is a company that has been faced with operations, financial and legal challenges," he said.

"We think that (the recent reorganization at EA) creates a super environment for the studio labels... We can give them access to the world's best distribution model."

News of this offer brings to mind, for me, rumors I heard earlier this week that a large company (I heard Microsoft, but it could just as easily be EA) was in fact courting some of Take-Two's largest shareholders in an effort to line-up a hostile take-over if an equitable purchase couldn't be arranged, a question that riled the folks at EA.

"We haven't taken anything off the table in terms of options," Riccitello said. "But we see ourselves, in many ways, as a White Knight. There is nothing friendlier than a 60 percent increase in their stock."

"Frankly you can write anything, but look at what we've done (with the labels model). People are flocking to that. I think we can be a good home for these developers."

Riccitello, incidentally, said he was in New York, where Take-Two is based, rather than EA's headquarters in Los Angles, this weekend. I asked if it was because he expected to be sitting down with Take-Two in the coming days and he declined to say. But did say it was a good place to handle the press attention in the coming week.

EA Makes Offer to Buy Take-Two [Kotaku]

The jump in Nintendo stock was part of a Japanese stock rebound spurred by the cut which came after the worst two-day drop in that stock in 17 years. Ironically the cut actually hurt Sony, which saw a 2.7 percent drop, spurring at least one investment group to change its rating on Sony from neutral to buy.

It's pretty amazing to me to think that the Japanese economy, right now, seems to be running on a game engine and that it's not even a next-gen one.

Japan's Stocks Rebound After U.S. Federal Reserve Cuts Rate [Bloomberg]

Hickey said the GameStop's holiday period typically represents 75 percent of Q4 reported sales, which means that "the street is looking for $2.027 billion in holiday sales, or +17 percent year-on-year."

Analysts: Buy GameStop Shares Now [Next Gen]

Nintendo's fiscal year may not end until March, but with the year the company's been having chances are pretty good that the company could be announcing that they expect to do better than predicted in January. That's what happened at the beginning of this year and if doesn't happen again at the beginning of next year there's a chance that investors could be a little ticked, according to an anonymous Nintendo Stock Blogger. It's ironic that the companies success could lead investors to expect constant jumps in earnings.

Of course with record Wii sales, sell-outs around the country and rumors that the Wii may be about to take the top console spot you'd think an upward modification has to be in the cards. My money is on big financial news in the coming weeks.

Nintendo Stockowners Anxiously Await Announcement [Nintendo Stock]

http://nintendostock.blogspot.com/

Nintendo of America president Reggie Fils-Aime confirmed today what we first broke earlier this week, Best Buy and six other national retailers will be stocking Wii this weekend. And by stocking I mean they will be advertising the console in their weekly circulars (except Wal-Mart) and then throwing the consoles up on the shelves come the weekend and then running away.

Best Buy, Target, Wal-Mart, Sears, Kmart, Toys R Us and Circuit City are all stocking the Wii this weekend for those still on the hunt. We had several tips after our rumor story ran about the stock issue.

According to Best Buy tipsters it sounds like all stores will have at least 21 of the consoles with some carrying as many as 100. I've also heard that Best Buy is expecting a second shipment next week which is supposed to go straight to shelves. Most stores will get them sometimes before noon. The bad news is that rumor has it that that will be the last pre-Christmas shipment for Best Buy, though they expect more in early January.

Target, another tipster tells me, has a big stockpile as well, some stores have more than 100. So this weekend sounds like your best chance to pick up a Wii, unless you don't mind buying a raincheck.

Nintendo stock spiked at 64,800 yen on Wednesday, an all-time high, on speculation that the company might be bumping up its earning forecast again. The stock dipped back down to 64,300 by closing, a 2.7 percent increase over the day, Reuters reports.

"We believe Nintendo's talent in creating new markets, evident from the launch of the DS and Wii, could bring it close to the level of Apple, whose high valuations are due in large part to its innovative business model," Goldman said in a report.

All of this a day after Nintendo dropped $17 million on free (get out of a lawsuit) Remote Jackets. Nintendo's certainly riding high going into the holidays.

Nintendo shares hit record high on GS "buy" rating [Reuters]

Nintendo today just bumped up their consolidated financial projections for net sales by 66 billion. That's with a really big B. Now Nintendo expects to make 966 billion in net sales.

The company is pinning the 7 1/2 percent jump on DS, not Wii, software and hardware sales. I can't even imagine what their financial projections are going to look like next quarter. Or as Kim would say: BUY! Brian Crecente

Consolidated net sales are now expected to reach 966 billion yen as a result of the 66 billion yen increase from the financial forecast for the fiscal year ended March 31, 2007 set forth in the "Notice of Financial Forecast Modifications" dated January 10, 2007, primarily due to robust trends in sales of "Nintendo DS" software and hardware.

Consequently, consolidated operating income, consolidated income before income taxes and extraordinary items, and consolidated net income for the fiscal year ended March 31, 2007 are expected to exceed the previous forecasts as well. In addition, foreign exchange gain is expected to be approximately 20 billion yen (10 billion yen of foreign exchange loss in the previous forecast), mainly due to year-end exchange rate revaluation (the exchange rates: previous forecast: 1 dollar = 115 yen, 1 euro = 143 yen, and actual exchange rates: 1 dollar = 118.05, 1 euro = 157.33 yen) of assets and liabilities in foreign currencies without exchange contracts as of March 31, 2007.

Non-consolidated results are similarly affected.
Nintendo Co., Ltd. (the "Company") intends to accelerate its financial closing process to announce its March 2007 fiscal year results on April 26, 2007 at which time further information will be provided.
Regarding the year-end dividend to shareholders, the pre-established dividend payout policy (the 50% consolidated net income standard) is likely to be adopted due to foreign exchange gain in fiscal year ended March 31, 2007. The dividend amount will be announced as part of the March 2007 financial results announcement and will be proposed at the Annual General Meeting of Shareholders.

Microsoft yesterday lowered their sales outlook for its entertainment and device division for the second half of its fiscal year, saying they had a "reasonable" amount of Xbox 360s in stores, Reuters is reporting.

So by reasonable do they mean glut? One can't help but wonder if this abundance of consoles gathering dust on shelves could have something to do with Microsoft's ability to pull off a year-end hail mary and hit their 10 million shipped number.

"We are just being cautious about the second half. It was always going to be a slow half. We've done very well in the first half. There is a reasonable amount of inventory in the channel," Microsoft Chief Financial Officer Chris Liddell said in an interview.

You know, this just highlights the fact that stock numbers can be a real double-edged sword. If you have too many in stores it means no one likes your console. If you don't have enough, if means you're screwing up production. Brian Crecente

Microsoft CFO says taking cautious outlook on Xbox

Reuters News — January 25, 2007

SEATTLE, Jan 25 (Reuters) - Microsoft Corp. on
Thursday lowered the sales outlook for its entertainment and
device division for the second half of its fiscal year, citing
a "reasonable" amount of Xbox 360 video game console inventory
in stores.
"We are just being cautious about the second half. It was
always going to be a slow half. We've done very well in the
first half. There is a reasonable amount of inventory in the
channel," Microsoft Chief Financial Officer Chris Liddell said
in an interview.
The company had shipped 10.4 million Xbox 360 video game
consoles by the end of 2006, beating its target of 10 million,
but it faces strong competition from Sony Corp.<6758.T> and
Nintendo Co. Ltd.<7974.OS>, which launched consoles late last
year.
Liddell added Microsoft expects to offset those lowered
Xbox sales expectations with better sales of premium versions
of its Windows operating system.
The company raised its sales outlook on Thursday for the
client software division, which includes its Windows operating
system, to a range of 11 percent to 12 percent for the fiscal
year from a growth target of 9 percent to 10 percent.
That offset an expected slower rise in sales from the
entertainment division. Microsoft now sees sales for that
division rising 26 percent to 31 percent for the fiscal year
instead of the previously forecast 33 percent to 46 percent
rise.
Since Windows is a higher margin product than the Xbox 360
game consoles, Microsoft was able to raise its profit outlook
for its fiscal year ending June 30, even though its revenue
forecast remained largely unchanged.
For the fiscal year Microsoft narrowed its target revenue
range to a range of $50.2 billion to $50.7 billion from the
previous target of $50.0 billion to $50.9 billion, while its
net earnings per share target rose to $1.45 to $1.47 from $1.43
to $1.46.
(Additional reporting by Peter Henderson in Los Angeles)

Subject Codes: N2/BUS, N2/IND, N2/MAC, N2/ENT, N2/SFWR, N2/US, N2/RESF,
N2/RES, N2/GSFT, N2/JP, N2/ASIA, SU/OEC

Company Codes: MSFT.O

Reports have been steadily trickling in since yesterday of stockpiles of Playstation 3s found sitting around in Best Buys untouched, or hardly touched.

Best Buy announced they would be selling a bunch of the consoles starting Sunday and according to several emailers, very few people took them up on their offer. Of course this is all anecdotally, so I'm not sure how widespread it is.

What I can tell you is that the Best Buy near my house had 31 Playstation 3s sitting in a lovely wall o' consoles this morning when I swung by the store. Many, if not all of them, were the 60GB model.

While taking pictures of the stack load of PS3s (and the nearby wall of Xbox 360s, twice the size) someone came buy and plucked one up. He happened to be right next to me when I was paying for my stuff and I heard him saying that the main reason he decided to get it was because it offered up games at 1080p and he wanted to see what it looked like on his plasma. It appeared he was also buying a Blu-ray movie and a copy of Madden for the system.

I can't help but wonder if this seeming lack of interest in the PS3 at Best Buys is because of a general post-holiday buying drought or something more about the system itself. It certainly doesn't look good, especially when coupled with the details were reported on last week about the PS3's grey market. Brian Crecente

All stores will receive PlayStation 3 (60 GB, $599) for the Dec. 31 ad (ad minimum 25). Product will be labeled with orange stickers that say "Hold for ad." If your store received 70 or more units, hold 40 units for the ad and release the rest. Some stores have sold many units and may be at risk of not having the minimums. If your store received less than 70 units, hold 32 units for the ad and release the rest. Additional PS3 software and accessories will arrive throughout the week to support the ad.

The insider goes on to say that stores will also be receiving shipments of Wii this week and that blues are to get them to the floor and sell them ASAP.

Employee purchases of either console, by the way, remain a no no at the chain. Brian Crecente

The past ten years worth of Take-Two financial reports may not be reliable and the company incorrectly granted and documented stock options, a special investigatory committee found.

While the Special Committee, which was established by Take-Two's Board of Directors to investigate post stock option grants and the accounting surrounding them, have yet to determine how much money is involved, they did say that all financial statements, earnings releases and "similar communications" issued from 1997 through April 30, 2006 should not be relied on.

The committee added that they did not find misconduct by the Company's current Executive Officers.

Take-Two also announced that they have met with the NASDAQ Listing Qualifications Panel about the letter they received saying that the company could be delisted for not filing their most recent fiscal statement on time. The company requested an extension of time, but have not heard a response yet.

While it remains to be seen just how much significant the readjustment is going to be for the company, I'd wager a guess that news that a decade's worth of financial reports are now worth about as much as Take-Two's stock is going to do some major damage to the company. Brian Crecente

New York, NY - December 11, 2006 - Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced that a Special Committee of its Board of Directors has reported its preliminary findings on the Company's stock option granting practices and procedures to the Board of Directors.

As previously announced, the Special Committee was established by Take-Two's Board of Directors to conduct an independent investigation relating to past stock option grants, the timing of such grants and related accounting matters. The Special Committee consists of three independent members of Take-Two's Board of Directors, and is being assisted in the investigation by outside legal counsel Kasowitz, Benson, Torres & Friedman LLP and independent accountants BDO Seidman, LLP.

The Special Committee conducted a thorough investigation, including a review and analysis of documents and emails, and interviews of current and former officers, directors, employees and advisors to Take-Two. The Special Committee found that there were improprieties in the process of granting and documenting stock options and that incorrect measurement dates for certain stock option grants were used for financial accounting purposes. The Special Committee expects to prepare a final report detailing both its findings and recommendations for remedial actions.

While Take-Two and its independent auditors are currently reviewing the findings of the Special Committee, the Board of Directors and management have concluded that the Company will need to restate historical financial statements to record non-cash charges for compensation expense relating to past stock option grants. Although the amount of such charges and the resulting tax and accounting impact has not yet been determined, all consolidated financial statements, earnings releases and similar communications issued by the Company containing financial information for periods beginning 1997 through April 30, 2006 should no longer be relied upon. Any non-cash stock-based compensation expense recorded will not affect the Company's previously reported cash positions or revenues.

The investigation did not find misconduct by the Company's current Executive Officers, including Paul Eibeler, Take-Two's Chief Executive Officer and President, and Karl Winters, Take-Two's Chief Financial Officer.

Additionally, Take-Two has met with the NASDAQ Listing Qualifications Panel regarding the previously announced NASDAQ Staff Determination letters indicating that the Company is not in compliance with NASDAQ filing requirements because, due to the Special Committee's ongoing stock options investigation, the Company has delayed the filing of its Form 10-Q for the fiscal third quarter ended July 31, 2006, and has delayed the solicitation of proxies and its annual shareholders' meeting for the fiscal year ended October 31, 2005. At the meeting with the NASDAQ Listing Qualifications Panel, Take-Two requested an extension of time to file its Form 10-Q, solicit proxies and hold an annual meeting. The Company's shares will remain listed under the ticker symbol TTWO on The NASDAQ Global Select Market pending a decision by the Panel on the Company's request.

In the midst of a increasingly hot sales in the U.S., Japan and Australia, Nintendo is gearing up for their launch of their Wii in Europe.

But if you live there and haven't pre-ordered yet the chances of getting the console are close to nill, according to UK retailers.

"We're expecting to fulfil all pre-orders on the day," said Hamish Thompson of DSG. "We're continuing to take pre-orders but informing consumers that they probably won't be able to be fulfilled until after Christmas."

"We're expecting four deliveries between now and Christmas and we expect them all to go to pre-orders. If customers haven't already pre-ordered then they've probably missed the boat."

Welcome to the club Yurp, welcome to the club. Brian Crecente

Console 'as rare as hen's teeth,' predicts leading High Street group [Games Industry]

Prior to today, 3,533 PS3s have sold on eBay for an average price of $1,788.88. There are currently about 1,580 listings on the site. The average price for the PS3 for the past week was $1,959.73. While yesterday, 334 of the consoles sold for $2,185.85.

What does that all mean? It means that the price seems have started drifting up a bit since the console has become available in stores. The real measure of what's going to happen to the console's price is what happens with stock come Monday. Brian Crecente

It's unclear how they got their hands on, what I believe to be an internal inventory report, but they say that the remote stores will have as few as 24 of Nintendo's consoles per a story while the larger, busier locations will get as many as 120 each. That seems to match up well with what our own Mole is saying.

The report goes on to say that each Best Buy will have about 60 copies of Red Steel and 30 copies of Trauma Center: Second Opinion.

The site also reports that Best Buys will start receiving their shipments on Oct. 28 or 29. What the... Where the heck is my review unit then? Actually, I've heard that reviewable PS3s and Wiis could be hitting your favorite magazines and sites as early as this week. Finger's crossed, breath held.

I can't wait to see the first picture of a hundred Wii's sitting on a palette in some crud-filled back room. Brian Crecente

Best Buy Wii Inventory Uncovered

Gamasutra points to an interesting article from The Street about Electronic Arts struggle to deal with dropping stock prices and employee retention. The Street reports that the behemoth developer is allowing certain EA employees to trade out their old, now undervalued stock, for shiny new current-market valued stock.

The plan still needs approval from shareholders at their annual meeting on July 27, so this is very up in the air.

While the stock trade is interesting, what's even more intriguing is the wider issue of how developers will deal with the recent drop in stock value. As Gamasutra points out, many major game companies pay their employees, in part, by stock. With companies like Take-Two losing more than half its value, should developers reevaluate this practice? Brian Crecente

EA Offers Extra Stock to Retain Employees [Gamasutra]

We broke the news yesterday of the Manhattan District Attorney's Office issuing a subpoenea to Take-Two as part of a grand jury investigation into Hot Coffee Gate. Today, investors showed their unhappiness, with the company's stock plummeting nearly 20 percent since yesterday's close.

According to this chart, while the stock opened at a dismal 9.85 a share, it has already rebounded to a still dismal 10.36. There's also a HUGE spike in volume. The three month average is 1.7 million or so, and today's volume has already hit 8.2 million.

Say it with me. Buy, Sell, Buy, Sell! Brian Crecente

Take-Two [Yahoo Finance]