Carl Icahn Puts the Squeeze on Take-Two

Carl Icahn Puts the Squeeze on Take-Two

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Billionaire investor and corporate raider Carl Icahn has used his clout at Take-Two to force a change in the company's board of directors, replacing three members, including CEO Ben Feder, with his own people.

Icahn, one of the richest men in the world, is a self-described "shareholder activist" notorious for his aggressive approach toward companies he holds an interest in, such as when he launched an action against the Yahoo board of directors in 2008 after it was unable to seal the deal in an attempted buyout by Microsoft. Icahn eventually forced changes that included the expansion of the Yahoo board to make room for the addition of three new members of his choosing, including Icahn himself.

And now, as the saying goes, it's like deja-vu all over again, except this time Icahn is throwing his muscle around at Take-Two. Icahn increased his stake in the company in December 2009 to become its second-largest shareholder and now he's using that position to do a little housecleaning: In exchange for voting for the company's full slate of board nominees at the 2010 stockholder meeting, three current members of the board have agreed not to stand for re-election in order to make room for candidates of Icahn's choosing, including his son Brett.

The board members who agreed to step aside are taking one for the team, said Chairman Strauss Zelnick, who pointed out that Icahn was not seeking the removal of any specific people. Among them is Take-Two CEO Ben Feder, although he will continue to hold the position of chief executive at the company. "It's important to note that Mr. Icahn did not request that these directors in particular step down," Zelnick said. "They were willing to continue in their role but agreed not to stand for re-election in keeping with their commitment to the company and desire to put the best interests of stockholders first, as they have done throughout their tenure on the board."

"Advancing our stockholders' interests is the board's guiding principle, and it's in that spirit that we've undertaken a change in board representation," he continued. "We have much to accomplish at Take-Two in the year ahead, and we welcome the new directors who each have experience in the entertainment industry and will help us achieve our objectives."

So why do we care if some super-rich guy flexes his corporate muscle and forces a few anonymous executive types to swap seats? Because, as industry analyst Michael Pachter pointed out, Take-Two makes fantastic games but its commitment to "high expectations and high quality standards" leads to delays and other problems that hamper its shipping schedules and, inevitably, its value. "If Take-Two can deliver its franchises on a more compressed schedule, its earnings power would essentially double, and the stock would command a much higher price," Pachter said.

Icahn's not the kind of guy who will sit by quietly when he sees an opportunity to maximize profits and shareholder value, and if he happens to agree with Pachter's assessment we could be seeing some whips cracking and hammers falling at Take-Two in very short order. That might put Take-Two on a tighter and more reliable shipping schedule, but looking at it pessimistically, it could also mean the slow erosion of the company's approach to quality game creation. We've seen it before and we could be seeing it again: Maximizing shareholder value and making great games don't necessarily go hand-in-hand.

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There's not a link for comments at the bottom of the article.

But yeah, I think there's gonna be changes there. I've already noticed that Take 2's usual community relations have been SADLY lacking over the past year or so. Perhaps this may actually be a good move? I always assassinate failures in Evil Genius and it works for me...

That is a stunningly appropriate picture.

I hate people like him, so so so much. People to whom money is more important than everything else, more important than quality, more important than people, anything. A shareholders 'activist', yes because rich bastards who don't do squat for the actual customers and treat well-respected companies as their play thing deserve massive amounts of money. Not.

It's a damned shame, in heart it's a fantastic economic system, but it's the rotten mentality of many people that completely corrupts it. Just look at EA, or at least the old EA, or the poster boy of this horribleness, Bobby Kotick.

/rant over

PS:
I think someone pressed the post button a little too often, seeing as there are 14 copies of this news article in the News sub-forum.

Thank fuck Bioshock 2 is already made. Though I don't know if I'll buy it because someone over at Take-Two hates Australia so much the price on steam is almost double then the U.S.

Yeah I don't like Bobby Kotick "Mini-me" or the original Mr Evil for that matter.

NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

god dam corporate fat cats go back to the puss filed crevasse you come from. Leave our games alone

Less delays? Uh oh. Aside from when games vapourise like Duke Nukem Forever delays tend to be very good for games often making the difference between an okay game and a brilliant game (Arkham Asylum and Team Fortress 2 come to mind first to me).

Edit: Bloody hell there are alot of copies of this in the forum currently O_o

as others have mentioned, this does not bode well for Take Two. He'll now, almost certainly, start demanding a "compressed schedule" for everything, meaning games will be rushed out the door so he can "maximize his share value".

In return, people will stop buying the crap Take Two is releasing, tanking the stock, and resulting in the closing of studios and layoffs for the people that actually did the work.

I predict a Bioshock 3 for 2011, with an RTS and action-rpg in the same world by 2012 at the latest. (Gotta maximize that revenue stream, you know! :-S)

So games from this company will be rushed and released half-finished from now on? Meh. Thank you, Mr Icahn.

So... He want's T2 to essentially churn out more games on a faster basis? Oh why, I can't see what will suffer in that plan.

Oh fuck.

No wait; optimism! The world is not a dark and beauty-less place. Not everyone is a terrible idiot. I'll wait and see and hope that this won't herald a decrease in quality. I won't crucify this guy until he's actually proven that he deserves it. For fuck's sake don't prove me wrong, cosmos!

That's all fine and dandy that he wants to increase T2 profits and whatnot but how likely is it that any of that money will go to the actual people developing the game?

NO. NO.NO.NO!!!!!

I can just see it now. Saw 56: The Game Or any other generic movie game.

What worse added his son to the board so T2 will be making his super cool idea what just plain awesome very soon. Lets just hope he learned from other investors mistakes with video game industries...oh who am I kidding will bleed them dry and sell his shares before the collapse like the rest of them *sighs*

Oh damn, and here I was hoping Icahn was squeezing Take-Two for their bone-headed DRM and Games for Windows Live fuckups with Bioshock 2, or as punishment for never having patched Sid Meyer's Railroads into something stable, or for not making a sequel to Railroads, or for not including mass transit in Tropico 3. And the list goes on, Take-Two and 2K have a long, LONG list of things they need a neck-snapping for.

If this is for the good of gamers it is yet to be seen...

We will just have to wait and see if it will actually mean something for us other than an internal shakeup

John Funk:
That is a stunningly appropriate picture.

In that it's a narcissistic hypocrite who only believes in objectivism as long as he's on top and the moment somebody threatens to overtake him he readily converts to fascism to protect his own power?

My daddy put me on the board of directors! Now I am real special and important! Wheeeeee!

Cowabungaa:
I hate people like him, so so so much. ...Just look at EA, or at least the old EA, or the poster boy of this horribleness, Bobby Kotick.

Why?

You just assume that because he is rich, he is evil?

He isn't reported to have said anything malicious like Kotick. Hes just adding 3 people who he feels would do a better job and provide him with greater insight into whats going on with Take-Two.

Thats not unreasonable considering the direction the companies going in.

http://www.google.com/finance?client=ob&q=NASDAQ:TTWO

Look at the past 5 years...the hell do you expect a sane man to do?

The article says he "increased" his holding in late 2009...which means he had shares before.

Question:

So if this guy had a bunch of shares worth $25 back in 2008...then watched them drop to $9 where they have been floundering for a while now...and did nothing...you would be fine with that? You wouldn't call him insane? (Put yourself in his shoes)

Point is, wait for a news article that tells of how his vicegrip is actually messing up the way TakeTwo makes games...then grab the pitchforks...

These aren't the guys doing Mafia 2 are they?

I know there's been a shit load of name changes with these guys and its hard to keep track/

If they fuck up before its released I will actually kill someone...

gee another one of those corporate fucks eh? ... probably stick his kid on the board and the games will be released in complete

games take time to make and should never be rushed , if he really wants to change a game developer ...buy ea games

Wow.. This is not gonna end well...

hansari:
le snip

Please read my total post, I said "People to whom money is more important than everything else, more important than quality, more important than people, anything." Do note that I did not even use the word 'rich'.

He just wants to make a lot of money for the stockholders, he even says that in the actual article. He doesn't care about their actual products, just his wallet. I can't stand that.

Plus, when was such a business model good for a gaming company? When were strict release dates ever good for a creative business? Just look at Age of Conan, yeah sure that released nice and on time, but good heavens did anyone actually like that? When a game is not ready, especially an anticipated game, only a fool will still release it.

The worst and most extreme example was Atari, and that backfired horribly for them.

He isn't reported to have said anything malicious like Kotick. Hes just adding 3 people who he feels would do a better job and provide him with greater insight into whats going on with Take-Two.

A better job than who? He doesn't care who doesn't come back, he just wants seats open. So he can put people he's picked on the board. So he can increase his power to manipulate company policy. For the express reason of making more money.

Now I'm sure that on at least some level he and the people he chooses will understand that a decrease in quality will hurt future income, but I'll be damned if I trust 'a guy with money' and his cronies to value future income over fast money in the short term.

theaceplaya:
That's all fine and dandy that he wants to increase T2 profits and whatnot but how likely is it that any of that money will go to the actual people developing the game?

Note that Icahn wants to "maximize shareholder value" which means making the stocks rise in selling price. That's pretty much what the board of directors does. Unless the developers themselves own stock in the company, it doesn't affect them. Even if they did, they wouldn't make money on the stocks unless they sold them at a profit and/or made dividends from them. Looking at the 2008 annual statement of Activision though, they don't pay dividends, nor do they expect to pay them in the future.

Of course in order to raise stock prices, the company has to make more and spend less in order to increase net income. If the company does make more money, it could trickle down to the developers in the form of increased salaries and/or bonuses. Though, as the article stated, that means condensed schedules and more game releases, and in an industry where creativity is a significant part of the product, less time for quality would mean less sales of a product.

This change could go either way, but I'm not going to hold my breath in the hopes that "increasing shareholder value" is going to allow the developers enough time to put out a polished product.

Cowabungaa:
He just wants to make a lot of money for the stockholders, he even says that in the actual article.

Thats how this business works. There are investors, some who have never picked up a game controller in their life. I think its reasonable to keep investors happy. Particularly now that their $25 shares are worth much less.

In fact, some investors must already be leaving...how else did Icahn acquire these extra shares in such rapid time? (1 year, and he is #2)

Cowabungaa:
He doesn't care about their actual products, just his wallet. I can't stand that.

Thats just an assumption.

The article says this man is aggressive in acquiring companies. It says he likes having a significant say in how things are done in his investments. History has shown these two to be true.

BUT, it doesn't say what sort of plans he has. Pachter was stating an observation about TakeTwo, and Chalk was just guessing at a few possible scenarios.

I think we should wait and see what this guys does so we know if he is the next Ritticello, the next Kotick, or if he doesn't do much of any changes at all. (even that is a possibility...maybe he just craves power...)

brewbeard:
A better job than who? He doesn't care who doesn't come back, he just wants seats open. So he can put people he's picked on the board. So he can increase his power to manipulate company policy. For the express reason of making more money.

Now I'm sure that on at least some level he and the people he chooses will understand that a decrease in quality will hurt future income, but I'll be damned if I trust 'a guy with money' and his cronies to value future income over fast money in the short term.

There is no video game company using that model. And considering typical profit margin in making a video game, I'm sure the newcomers to TakeTwo will be smart enough to know better.

Although I am interested in seeing what change, if any, occurs to Duke Nukems publishing rights...that offers neither "fast money" nor much "future income" :P

 

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