http://www.gamesindustry.biz/content_page.php?aid=33595

Thinks competitors are reacting to Activision-Vivendi merger

Speaking at the Goldman Sachs Technology Investment Symposium 2008 Conference, Activision chairman and CEO Bobby Kotick said that Take-Two did not meet the company's criteria.

"I think we've had - as we’ve said for a very long time, now - well-stated criteria for what we're interested in in an acquisition," he said.

"We've said that we need a history of profitability, good management, the proprietary technology for a franchise, history of multimillion unit sellers. They would have to be non-dilutive and operating margin accretive.

"And, for us, Take-Two didn’t fulfill those requirements. Maybe it does over the long-term for EA, but it doesn't for us."

Kotick told a Mark Wienkes, a media analyst from Goldman Sachs, that some of Activision's competitors are reacting to what they've done - creating a company that is going to be the market leader, with the highest operating margins and with a successful track record of realising franchises in every geography in the world.

"You're going to start thinking about what you need to do to maintain your lead," Kotick noted.

"But again, our focus is on our lead as profitable participants in the space - and not share-for-share space. Without getting into too many of the details of Take-Two, we really like businesses where if we take the risk, we get the reward.

"Where you see businesses where you're taking all of the financial risk in the product-development investment or in the franchise fees, and then the reward is going to the developer or the licensor. That doesn't really make for a great margin expansion strategy, in our view."

Even so, Kotick admitted that EA has some unique insight into that business and has been looking at it for a long time.

"I'm sure they have a good sense of what its prospects are for the future."

Thats where they failed I think.

I'm not expert on business mergers, but on the surface, Activisions reasoning seems fine too me. Buy out Take Two and your buying a company with a huge debt, unproven management and questionable profitability (and yes GTAIV will sell but Take Two is more than just one game).

@Tk: So you had to quote the whole wall and answer it with something like 3 words?

But yes, management and profitability. Basically GTA has been keeping Take Two alive for years. And now Carnival Games, which isn't nothing compared to GTA, but they seem to have wasted a lot of money to non-profitable projects.

@Gamerace: The debt itself isn't really a problem, but the doubt about can Take Two pay it back...

Yep. The only thing worth aquiring from take 2 is GTA IV for most companies. It's not worth all the garbage to get it.

Though for EA, they also get to shut down 2K sports if they get it... which are about their only serious competitors in sports games non soccer related.

They've barely kept afloat just because they have a bad buisness model.  It's probably why they had to give 360 such a likely sweet heart deal on downloadble content.  Just to stay afloat.

Simple solution for Take Two to survive; port the GTAs to Wii, and say it is a test. Then all the only GC owners will buy it, and the hardcore will buy it in a desperate attempt to get GTA 4/5 to Wii.

They could do gta4 on Wii similar to the way they did table Tennis since it is the same engine. Obviously it would need to be scaled down some but I think they can do something with it.