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Take-Two Soars on Profit, Outlook From ‘Red Dead’

Sept. 3 (Bloomberg) -- Take-Two Interactive Software Inc., publisher of “Grand Theft Auto” video games, rose 7.3 percent after reporting an unexpected profit and boosting its outlook on sales of the new release “Red Dead Redemption.”

Take-Two, based in New York, gained 65 cents to $9.50 at 4 p.m. New York time in Nasdaq Stock Market trading after reaching $10.25 for the greatest intraday gain since Dec. 18. The shares have fallen 5.5 percent this year.

Take-Two late yesterday predicted a fiscal 2011 profit of 60 cents to 70 cents a share, its first in a year without a new “Grand Theft” game. Analysts had estimated a loss of 20 cents. Janco Partners raised its rating on the stock to “buy” from “accumulate,” citing potential earnings gains and the possibility the company may be bought.

“We expect the company could be acquired, if share price levels remain low into the release of ‘Grand Theft Auto V,’” Mike Hickey, an analyst with Janco Partners in Greenwood Village, Colorado, said today in a note.

Third-quarter profit excluding some costs was 28 cents a share, the company said in a statement. That compares with the average 8-cent loss estimated by 13 analysts in a Bloomberg survey.

“Red Dead Redemption,” more than four years in development, was created by Take-Two’s Rockstar studio, which also makes “Grand Theft Auto.” The game, with an average score of 95 out of 100 in reviews compiled by Metacritic.com, is set in the western U.S. during the early 20th century and lets players travel in a cowboy-movie landscape and hunt outlaws.

Hardware Sales

“Red Dead,” one of a handful of major console titles released this summer, benefited from strong sales of Microsoft Corp.’s newly redesigned Xbox game console and lower prices for Sony Corp.’s PlayStation 3, Hickey said.

“The game’s exceptional quality and strong PS3/Xbox 360 hardware sales trends for the period contributed additional strength,” Hickey said in an earlier note to investors.

The company said third-quarter net income was $5.92 million, or 7 cents a share, compared with a loss of $56.5 million, or 73 cents, a year earlier. Revenue more than tripled to $354.1 million from $94.9 million.

Chairman Strauss Zelnick, who took control of the company in 2007, has focused on reducing the number of titles produced and increasing their quality. After delays in development, Take-Two released “Mafia II” on Aug. 24 to strong initial sales, according to product-tracking firms in the U.S. and U.K.

Other new titles scheduled for release this year include “NBA 2K11” and the latest iteration of the “Civilization” PC game.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.

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