MORE BAD NEWS COMES FOR TAKE-TWO INTERACTIVE
Ubi Soft Entertainment claimed victory Fri. in first part of its legal dispute with competitor Take-Two Interactive. Paris- based Ubi Soft said that “in a critical legal development” in case involving its Red Storm division and Take-Two Interactive Software Europe, only 2 weeks before preliminary issues were to be taken up by High Court, Take-Two conceded certain “crucial issues.” Dispute involves distribution rights Take-Two received from Red Storm for games in Europe and other markets outside U.S. before Ubi Soft’s purchase of Red Storm.
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At recent hearing, Take-Two was ordered to pay Red Storm additional ?1.1 million, including interim contribution toward Red Storm’s legal costs to date, Ubi Soft said. It said court also agreed to Red Storm’s request, opposed by Take-Two, to fast- track rest of case. Ubi Soft said payment brought total Take-Two has been ordered to pay Red Storm to ?3.1 million since beginning of litigation.
Alain Corre, Ubi Soft Europe, Asia Pacific, S. America Managing Dir., said: “The trial of preliminary issues was the key step in this litigation against Take-Two. The way is now open to move rapidly to the full trial, currently scheduled for mid-July.” Ubi Soft Head of Legal Affairs Cecile Russeil added: “This acceleration of the trial date demonstrated the court’s dissatisfaction with Take-Two’s conduct in this litigation so far. The full trial will determine the whole amount due by Take- Two to Red Storm.” Take-Two comment was unavailable at our Fri. deadline.
As Take-Two battled Ubi Soft in Europe, it also continued to battle class action lawsuits by disgruntled investors in U.S. that started as result of N.Y. game maker’s troubles over controversial accounting practices (CED Jan 18 p5). Those practices had led to company’s becoming subject of SEC probe. It recently restated its results for all of its fiscal 2000 and first 3 quarters of fiscal 2001 (CED Feb 14 p4). But Take-Two said in SEC filing late last week that it had to revise those fiscal 2001 results yet again: “The results of operations for the 3rd quarter of fiscal 2001, as restated, has been revised to correct mathematical miscalculation made in the course of preparing the restatement. The revisions do not involve the applications of any accounting principle or have any impact on the results of operations for fiscal 2001.” When Take-Two first announced restated results last month, it said it lost $8.6 million (-25?) in 2001 compared with restated $6.4 million profit (23?) in 2000 as sales expanded to $451.1 million from $364 million. In conference call with analysts last month, Take-Two Finance Vp Cindi Buckwalter said finalization of restated results “took much longer than expected,” but lengthy process “was absolutely essential to ensure the accuracy and integrity” of restated results (CED Feb 19 p7). Commenting on latest restatement of results by company, Wedbush Morgan Securities analyst Michael Pachter told Reuters: “There really are only 2 excuses: They had bad intent or they were careless. This is consistent with the careless theory.”
Because of math mistakes, Take-Two said in last week’s filing, it had to reduce its 2nd quarter 2001 loss by $169,000 to $11.5 million for -35? per share loss instead of -36? loss per share posted last month. For 3rd quarter 2001, company dropped profit by $794,000, leaving it with $665,000 loss (-2?). Also impacted was 4th quarter 2001, which game maker reported last month for first time. Take-Two lowered loss $625,000 to $4.7 million (-13?) from -$5.3 million (-15?).