Take-Two Slips After Missing Out on Deal to Electronic Arts

(Bloomberg) -- Take-Two Interactive Software Inc. slipped in late trading after rival Electronic Arts Inc. announced it was acquiring Glu Mobile Inc., snatching away another potential acquisition target.

Though Take-Two posted strong quarterly earnings and an upbeat forecast on Monday, the stock fell as much as 3.6% after the close. Its results coincided with the announcement by EA that it was buying Glu Mobile in a $2.4 billion deal.

Take-Two previously backed out of a bidding war for racing-games maker Codemasters, which was snapped up by Electronic Arts in December. Take-Two continues to look around for potential transactions, Chief Executive Officer Strauss Zelnick said in a phone interview Monday. With $2.7 billion in cash, “we are in a position to pursue any number of deals,” he said.

Take-Two’s shares had climbed 70% in 2020, bolstered by an industrywide boom in video games.

Adjusted revenue will be $602 million to $652 million this quarter, Take-Two said in a statement, compared with an average Wall Street estimate of $585.1 million. Take-Two forecast at least 52 cents a share in earnings, excluding some items, well ahead of estimates.

While many competitors have said they’ve stopped seeing an impact from the Covid-19 lockdowns, Take-Two is still benefiting from the pandemic. “We are continuing to see elevated engagement and sales from people sheltering in place,” the company said. Recurrent consumer spending -- a measure of how engaged customers are -- grew 30% in the quarter, twice what the company expected.

The company is growing quickly in China. NBA 2K Online in China increased 49% in the third quarter and is the No. 1 PC online sports game in the country -- with 51 million registered users. On Feb. 2, Private Division launched space simulation Kerbal Space Program on Tencent’s WeGame.

In the latest quarter, 56% of the company’s console games were delivered digitally, up from 44% a year ago -- potentially bad news for brick-and-mortar retailers like GameStop Corp. This quarter, 73% of console game sales will be delivered digitally, Take-Two predicts, up from 63% last year.

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