Take-Two Selling ‘Jack of All Games’ Distribution Unit, Lowers Guidance (Yet Again)

Take-Two interactive; Grand Theft Auto

That was quick. Less than a week after Carl Icahn upped his stake in Take-Two Interactive (NSDQ: TTWO), comes news that the company is selling off its physical games distribution business, Jack of All Games. Serendipitous timing? Perhaps. But it will only add fuel to the chatter about whether Icahn intends to help whip Take-Two into financial shape by any means necessary.

The game publisher is selling Jack of All Games to IT and tech distributor SYNNEX Corporation, in a deal potentially worth $43.25 million. SYNNEX will pay $36.5 million cash up front, and up to an additional $6.75 million depending on factors like the value of the inventory Jack of All Games is holding the day the deal actually closes, per the 8-K. The companies expect it to close in Q1 2010.

Take-Two acquired Jack of All Games in 1998, thinking that it made sense to control both the publishing and distribution of its games. Jack of All Games became the exclusive distributor of games from its studios like Rockstar and 2K Games to more than 20,000 game stores, including big box retailers.

But running the distribution business has clearly been impacting the company’s ability to focus on creating great games; Take-Two cited inventory write-downs as part of the reason it blew its fiscal Q4 (and full-year 2009) earnings report. In a statement, CEO Ben Feder said the sale will let Take-Two “focus” on its core business strategy.

Still, the news sent Take-Two’s shares down by about 5 percent in after-hours trading, as the company lowered guidance yet again — this time, taking in to account the loss of revenue it will face from selling off Jack of All Games. In addition to a “small after-tax loss,” the company dropped its fiscal Q1 and full-year 2010 forecasts: It expects to earn $90 million to $140 million in revenue in Q1, down from the $210 million to $260 million it said just two weeks ago. For the full year, it won’t even crack the billion mark — expecting revenue of $710 million to $910 million — down from $1 billion to $1.2 billion. Release.

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