Although it may appear that the company's guidance was better than expected, we believe that the FY:08 consensus estimate was artificially low, and reflected widespread skepticism about the company's ability to deliver solid profits next year.

Take-Two delivered July quarter results that were largely in line and provided an FY08 outlook that was disappointing on the top line but better than expected on the bottom line, suggesting big expectations for cost reductions and margin expansion... While the company's earnings outlook for 2008 is impressive, we note that it looks overly optimistic to us; we prefer to wait and see more progress before assuming Take-Two can return to peak gross margin levels in FY08.