With EA out of the picture, Take-Two has apparently decided to go it alone.

That word comes by way of a press release issued today by the Grand Theft Auto publisher. Citing "detailed discussions with various interested parties over the last five months," T2 has concluded that stockholders will be best served by the company staying its course.

Chairman Strauss Zelnick is quoted in the press release:

Take-Two’s Board of Directors and management have a clear mandate from stockholders to maximize value. We are strongly positioned creatively, financially and competitively to benefit from the opportunities we see in the fastest growing segment of the entertainment industry.

CEO Ben Feder invoked the success of GTA franchise and cited the rest of T2's catalogue:

Take-Two’s recent performance demonstrates our potential to create value for the long term. We have delivered solid financial results and expanded our portfolio of leading titles, which includes the powerful Grand Theft Auto franchise, as well as 15 other wholly owned brands with sales of more than one million units each.

Following the collapse of a proposed merger between Electronic Arts and Take-Two Interactive, GamePolitics wondered aloud yesterday whether Take-Two might be the second coming of Yahoo. That is, a company which should have accepted a reasonable acquisition offer and saw stockholder equity plummet following its rejection.

Analyst Doug Creutz (left) of Cowen and Co. thinks not. Here's what he told GP when asked if T2 was following in Yahoo's ill-considered footsteps:

I’d say no. YHOO [Yahoo] is clearly a company in decline, with an entrenched management. TTWO [Take-Two] is a company with arguably improving business fundamentals and a management team that I believe was willing to deal at the right price. I also think that MSFT [Microsoft] shareholders were not excited by the prospect of a YHOO acquisition whereas most ERTS [Electronic Arts] shareholders wanted the TTWO deal to happen at a reasonable price.

Nor did Creutz believe that T2 Chairman Strauss Zelnick was in jeopardy in the wake of EA's withdrawal from negotiations:

I don’t think so. Any shareholders who wanted to get out of the stock at $26 (EA’s best offer) had ample opportunity. Anyone who was holding out for a higher price feels the same way as Zelnick – no deal at $26. As long as the business turnaround continues then I think Zelnick is safe.

In failing to accept EA's buyout offer, has Take-Two become the new Yahoo?

Is Strauss Zelnick's position as chairman in jeopardy?

Readers may recall that Yahoo spurned a series of acquisition offers by Microsoft over a five month period earlier this year. If that sounds familiar, Take-Two spurned several EA tender offers over roughly the same time frame.

Microsoft's' interest in Yahoo drove the search firm's stock higher, to the 30 range; Yahoo ultimately stunned Wall Street by refusing MS' 33 per share bid. EA's interest in T2 did the same, pushing TTWO at times into the 26+ range. EA's 25.74 offer remained on the table for months, ridiculed by T2 as undervaluing the GTA publisher.

When MS became frustrated and pulled out, Yahoo stock tanked. Today it wil open at 18.27. On Sunday's news that EA was bailing, T2 plunged 5 points yesterday. Admittedly, some of that might have been helped along by the most brutal day on Wall Street since the 9/11 aftermath.

So why would Zelnick's job be on the line?

It probably isn't - yet. But T2 investors who saw the value of  their shares jump nearly ten points on EA's offer have now given all of those paper profits back with EA's withdrawal. The stock is back where it started. Moreover, a sweetheart deal that would have enriched Zelnick and his management team in the event of an acquisition never sat well with EA. It actually caused EA to lower its tender offer by about 1/4 point and caused bad blood between EA and T2 execs from the get-go.

Now that EA is gone, Zelnick faces some challenges. GTA IV profits are slowing. The Houser brothers will become free agents in February. If they walk, T2 becomes less of a company than it is now. If they stay, T2 will have to pay them a bigger slice of the profits.

We asked Wedbush-Morgan analyst Michael Pachter whether Zelnick might be in jeopardy. His thoughts:

Jeopardy is a strong word. I think that shareholders may be upset that he didn't accept the $26 offer when he had it in hand.  He has some time to demonstrate that there are other interested parties; if he can produce them, I don't think he is in trouble at all.  If he can't, I think that the number of unhappy shareholders will increase.

Financial website The Motley Fool does not see T2 as the new Yahoo, however:

This isn't Microhoo revisited. Take-Two's fundamentals have actually improved since EA went public with its unsolicited offer for Take-Two at $25.74 a share. Grand Theft Auto IV broke records. The BioShock franchise has a sequel on the way, as well as Pirates of the Caribbean director Gore Verbinski on board to give the property the Hollywood theatrical treatment.

 

This is why I believe that Take-Two will bounce back from this a lot quicker than Yahoo! did after its prolonged courtship with Microsoft came up empty... Take-Two shareholders can't blame executives, because those investors perpetually turned down EA's tender offers. The company can also point to its improving fundamentals.

gamesindustry.biz reports that the uncertain status of GTA masterminds Sam and Dan Houser (left) may have played a key role in sinking an EA-T2 merger. The brothers' current contract with Take-Two expires in February.

Moreover, as GP has alluded to in the past, chemistry was lacking between EA and T2 execs. Along that line, gamesindustry.biz reports comments by analyst Doug Creutz of Cowen and Co.:

We think EA's decision to walk was motivated by some combination of the following: a desire to appear fiscally responsible after several years of capital misallocation, concern about EA’s ability to retain the development talent at Rockstar, personality conflicts between the management teams of the two companies, and scepticism about Take-Two's multi-year release lineup.

 

The main question mark is the status of Rockstar’s key talent [i.e., Dan and Sam Houser], with their contract due to expire in February 2009.
 

Meanwhile, in a note issued this morning, Wedbush-Morgan analyst Michael Pachter foresees a bidding war for the Housers:

While neither [Houser brother] writes game code, we believe that they are analogous to the director of a Hollywood film, instrumental in determining the final shape of the ultimate games released. We expect a bidding war for the Housers’ services in February 2009, and remain convinced that Take-Two faces two equally unpalatable options: either lose the Housers to another bidder, or pay more to retain them...

 

Should the Housers depart to Activision, Ubisoft, or even to EA, we think that Take-Two will suffer lower future sales of its GTA games. We draw an analogy to EA’s Medal of Honor brand, which saw sales decline by over 40% following the departure of key members of its development teams in 2003. Those teams produced Activision’s Call of Duty franchise, which has consistently outsold Medal of Honor since the departure...

 

On the other hand, should the Housers remain at Take-Two, the price of making future Grand Theft Auto games will go up...

Nor does Pachter anticipate any other publishers stepping up to acquire T2 - again, it's the Houser factor:

We do not think that any offers will come in from third parties. The risk of losing key talent is too great, and the Housers’ contract is up for renewal in February. Should a third party (including EA) be interested in an acquisition, we think that the first step is to secure the services of the Housers. Thus, we do not expect competing offers to materialize until after February 2009, when the status of the Housers’ contract is better understood.

Reaction has been swift to yesterday's report that EA was giving up on its quest to acquire Grand Theft Auto publisher Take-Two Interactive.

As GP predicted yesterday, Reuters is now reporting Take-Two's stock price has plunged. Indeed, from Friday's close just under 22, as I write this the stock [TTWO] has dropped to 16.44. On the other hand, the market as a whole is experiencing a broad sell-off today as shockwaves from the collapse of Lehman Brothers and the purchase of Merrill-Lynch ripple through Wall Street. At the same time, EA [ERTS] stock is also down from Friday's closing price of 44.99.

Reuters quotes UBS analyst Benjamin Schacter on the EA-T2 situation:

While (Electronic Arts) will not reveal details about its exact reasons for walking, the fact that it did not make any offer after further due diligence will certainly raise some eyebrows.

 

In our view, Ubisoft could be a logical buyer, but a deal would not be easy. Traditional media companies as well as Asian video game publishers-operators might also be interested, but we don't believe that these players are likely to even match EA's prior offer given that none would have synergies in the sports genre.

It's official - Grand Theft Auto V will not be released under the Electronic Arts brand.

EA has just issued a press release announcing that it has decided not to continue its lengthy pursuit of Take-Two Interactive.

The two sides have been talking, but those negotiations appear to have broken down. At this point it's unclear what made EA decide to give up its nearly seven-month long bid to acquire T2. From the EA release:

Electronic Arts... today announced that while EA continues to have a high regard for Take-Two's creative teams and products, after careful consideration, including a management presentation and review of other due diligence materials provided by Take-Two... EA has decided not to make a proposal to acquire Take-Two and has terminated discussions with Take-Two.

EA CEO John Riccitiello (right) commented:

EA is tracking toward a record breaking year. We're launching 15 new games including award-winners like SPORE, Dead Space and Mirror's Edge, great new titles from the Sims, new family titles with Hasbro, and the highest quality slate of EA SPORTS titles on this generation of consoles. We're also expanding beyond our core business with a series of direct-to-consumer launches including Warhammer Online.
 

UPDATE: Take-Two has issued a press release of its own, with chairman Strauss Zelnick (left) saying:

We remain focused on creating value for our stockholders and our consumers. This has been our goal since EA launched its conditional and unsolicited bid six months ago, a bid which was repeatedly rejected by our stockholders. As part of that commitment, we remain actively engaged in discussions with other parties in the context of our formal process to consider strategic alternatives. We're especially proud of the success we've enjoyed over the past eighteen months and we remain confident in our ability to generate value for stockholders.

GP: Expect T2 stock to take a big hit when the markets open in the morning. TTWO closed at 21.65 on Friday amid expectations that an EA-T2 deal would get done somewhere north of the 25.74 tender price that EA offered earlier. Prior to EA's expression of interest, T2 had been trading in the 17 range. With EA now out of the picture, T2 shares will likely be heading south.

Business Week reports that Tecmo, uneasy with the prospect of being acquired by much larger Square Enix, has sought refuge in the arms of fellow small publisher Koei:

When Japanese video game developer Square Enix unveiled its "friendly" offer to buy rival Tecmo last week, analysts and investors applauded. The two companies seemed a natural fit: Square Enix's Final Fantasy and Dragon Quest series had a huge following among diehards in Japan, while Tecmo's Ninja Gaiden and Dead or Alive fighting games were popular in the U.S. and Europe. To sweeten the deal, Square Enix President Yoichi Wada pledged to preserve the Tecmo brand. He gave Tecmo's management a week to think it over.

At the deadline, Tecmo told Square Enix "thanks, but no thanks," and said it was exploring a merger with Koei. From the report:

Tecmo didn't give a reason for going with Koei. But size appears to have been one issue: Rather than getting swallowed up, Tecmo may have wanted something closer to a marriage of equals...

 

Industry executives say Japan's midsize game developers are prime takeover targets. Many of them have a strong record at home but limited exposure overseas. A suitor with a worldwide network—particularly in the U.S. and Europe—could take a niche Japanese developer stuck in a stagnant market and create a global mainstream franchise.

This one's not over, at least not yet. Square Enix has asked Tecmo to explain how Koei's deal was better for shareholders than its offer and may continue its pursuit of Tecmo.

Following a volatile Wednesday for Take-Two stock, investment site Seeking Alpha mentions that a rumor floating around Wall Street had EA walking out on its secret merger negotiations with T2:

Yesterday's session featured some strange exchanging of Take-Two Interactive Software Inc. (TTWO) shares, just one day before the company is set to release earnings.

 

There was no news released, though Barron's later said that the price decline was due to rumors about Electronic Arts Inc. (ERTS) walking away from merger talks.  ERTS had an executive speak at a conference right around noon.

T2 opened yesterday at 24.51 but dropped as low as 21.34 on the rumor. (note the big dip in the TTWO share price chart for Wednesday afternoon). 

While Seeking Alpha ultimately discounts the rumor, it's known that EA management is not especially fond of the Strauss Zelnick team at T2. That has a lot to do with the rich deal Zelnick put in place for himself and his crew in the event of an acquisition. Given that atmosphere, hardball tactics (such as a walkout) would seem to be in the realm of possibility.

Don Reisinger, who pens The Digital Home column for Cnet, takes a dim view of video game publisher mergers - especially the proposed deal between Electronic Arts and Take-Two Interactive.

Reisinger believes consolidation results in high profits for pubishers and low-risk, lackluster titles for gamers:

Since the age of consolidation hit the video game industry, it has changed drastically... In fact, consolidation has spawned an industry that's dominated by sequel after sequel and enough first-person shooters and sports games that barely differ from year to year...

 

A quick glance at EA's upcoming lineup of games tells you everything you need to know about consolidation. Aside from Spore, it's dominated by sequels and titles that will do little but provide the same basic experience...

 

And if EA and Take-Two -- two of the biggest culprits of derivative gaming -- combine to form one major developer, this will only get worse.

Now that the Federal Trade Commission has opted not to place any regulatory hurdles in the way of a potential EA-T2 merger, the two publishers will begin meeting behind closed doors.

An filing made by Electronic Arts with the Securities & Exchange Commission late yesterday reads in part:

On August 25, 2008, [EA] and [T2] entered into the confidentiality agreement contemplated by the letter of August 17, 2008 from Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two to John Riccitiello, Chief Executive Officer of EA, and the letter of August 18 from Mr. Riccitiello to Mr. Zelnick.

 

The terms of the confidentiality agreement prohibit each of EA and Take-Two from, among other things, publicly disclosing the status or terms of any discussions or negotiations between EA and Take-Two unless EA or Take-Two notifies the other that it is terminating discussions. As a result, EA does not intend to make any further announcements regarding the status of any discussions or negotiations with Take-Two unless and until discussions between EA and Take-Two have been terminated or such parties have entered into a transaction. As previously disclosed, EA now requires due diligence to support any proposal to acquire Take-Two and there can be no assurance that any proposal, negotiations or transaction will result.

Among other things, EA will be looking at T2's three-year game release schedule. Not a tough one to figure out: GTA V, Bioshock 2. A GTA MMO would be a nice surprise...

The Federal Trade Commission has posted letters on its website which indicate that it will not oppose a proposed merger between Electronic Arts and Take-Two Interactive.

The letters, written in government bureaucrat-speak, are dated August 18th and read as follows:

The Federal Trade Commission’s Bureau of Competition has conducted a non-public investigation to determine whether the acquisition by Electronic Arts Inc. of Take-Two Interactive Software, Inc. may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.

 

Upon further review of this matter, it now appears that no additional action by the Commission is warranted at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take further action as the public interest may require.

With the FTC hurdle apparently out of the way, EA and Take-Two are free to attempt to reach agreement on a takeover.

Via: Reuters

Yesterday we noted a New York Post report on the proposed EA takeover of Take-Two which claimed that the Federal Trade Commission, scheduled to rule on the merger by tomorrow, might require that T2 spin off one or more of its sports franchises so as not to hand EA a stranglehold on the sports segment of the market.

Heidi Moore of the Wall Street Journal digs a little deeper, interviewing Jeff Anderson, CEO of startup online sports gaming service Play Hard Sports (and former Turbine CEO) concerning his view of potential monopoly issues:

It’s in the best interests of consumers to have a choice. I’m always in favor of having more choice in the marketplace. Look at the ESPN football product when it came out. There was no [NFL] exclusivity agreement then. When Take Two changed its price point, people moved toward the Take-Two product and forced EA to reduce its price. You saw how competition can work in the advantage of the consumer.

 

The question we’re looking at, and what the FTC should be looking at, is whether this will reduce competition. If Take-Two’s sports franchise becomes part of EA, will that influence competition for the better or not? And will it influence prices positively or negatively?

 

Generally I’m not a fan of monopolies in the gaming world. We’re interested in providing a new choice to consumers. As a gameplayer, we’d love to see great games produced by these studios. And we’d love to see them compete.

As GamePolitics reported yesterday, EA may have called a cease-fire in its hostile bid to absorb Take-Two Interactive. That development, however, does not mean that the two game publishers are ready to share a hug.

The New York Post reports on snarky (and anonymous) barbs traded between EA and T2:

"To say that EA blinked is a huge understatement," said one source close to the Take-Two camp. "They finally came to their senses and realized this wasn't going to be done their way."

 

A source close to EA countered by suggesting that the company was miffed that it had to make the first overture to Take-Two. The source added that EA officials don't want to negotiate with Take-Two's current management team.

The Post also reports that, while the FTC is expected to bless the proposed merger, it will insist that Take-Two spin off some of its sports franchises, so as not to give EA a complete monopoly on sports games:

Though a deal would combine two of the world's largest video-game publishers, the Federal Trade Commission is expected to give the go-ahead to a potential combination by Thursday on the condition that it divest one or more of its sports gaming franchises, with basketball or hockey being the most likely.

GP: Great mashup (left) of GTA and T2 boss Strauss Zelnick accompanies the NY Post article...

As we mentioned in the previous story, EA released some surprising info today:

• it will not renew its tender offer (expiring at midnight) to buy T2 shares at $25.74
• EA and T2 have been talking, with T2 preparing a secret presentation for EX execs

For expert analysis we turned to Michael Pachter (left) of Wedbush-Morgan who told GP:

It appears that EA is proceeding with a friendly deal.  The two companies exchanged letters over the weekend, with EA saying the offer price would require review (meaning they are inclined to go lower) because the deal cannot be completed before the holidays.  Take-Two's response was an offer of due diligence, including the presentation of non-public information under a non-disclosure agreement, intended to support a higher value.

 

EA accepted the offer of a presentation, and intends to allow its hostile tender offer to expire.  This merely changes the proposal from hostile to friendly, and keeps the pressure on the FTC to rule by Thursday, as previously expected.

 

My guess is that the parties reach an accommodation shortly at a $1 - 2 premium to EA's current $25.74 offer.  We have said this consistently since February 25, and continue to believe a deal gets done this month.  If Take-Two management holds out for a price in the $30s, EA will go hostile again, likely at a price closer to $20.  If Take-Two management negotiates a price below $27.50, I think a deal gets done.

 

The only surprise to me is that EA agreed to go friendly.  I suppose that they figured it was magnanimous to make the attempt, and Take-Two management recognized that this was its last and only opportunity to affect the outcome.  I really expect the parties to reach an agreement close to the $25.74 price (slightly above).

 

I do not expect EA to be impressed with the presentation, which will include a 3-year release schedule and a list of cost control initiatives, but believe that it will allow TTWO management to save face.  EA is unconcerned about cost control, since it will eliminate most operating expense once Take-Two is integrated, and should not be particularly surprised to learn that GTA 5 and BioShock 2 are planned.
 

With its most recent tender offer for Take-Two stock expiring at midnight, EA says that it will not renew the offer. 

It seems, however, that the two companies have been talking. As per a just-issued press release, EA CEO John Riccitiello telephoned T2 chairman Strauss Zelnick on Friday. Zelnick apparently offered to provide EA execs with a secret presentation concerning T2's game schedule for through 2011.

It's unclear what EA's decision not to renew its offer portends. It could be that EA has acquired sufficient T2 stock to seize control. Or, perhaps a new offer with a revised (i.e., lower) price structure is coming. Take-Two stock (TTWO) closed at $24.84 on Friday, nearly a dollar below EA's $25.74 tender offer. As Riccitiello points out, the proposed takeover has dragged past the point where an acquisition of T2 will provide a positive impact for EA's holiday sales, so perhaps the deal is less attractive at this point.

EA also mentioned that the Federal Trade Commission will complete its anti-trust review of the proposed merger by Thursday, August 21st. The press release also included a letter dated today from Riccitiello to Zelnick as well as one Zelnick to Riccitiello dated last Friday:

Here's Riccitiello to Zelnick:

Dear Strauss:

Thank you for taking my call on Friday and for your response letter  on August 17, 2008.

 

As discussed on Friday, given the passage of time, we have to validate the assumptions used in the model to support our offer price of $25.74 per share in cash. In addition, we no longer believe we can integrate Take-Two ahead of the important holiday season. 

 

Accordingly, we require due diligence to support a transaction and are therefore letting the tender offer expire tonight. However, we are pleased to accept your offer to review your management presentation as outlined in your letter.

 

We continue to have great respect for Take-Two's creative teams and products and are hopeful that we can work together to reach a mutually agreed transaction.

And here's Zelnick to Riccitiello, dated yesterday:

Sega of America CEO  Simon Jeffrey (left) has issued a bit of a spanking to his counterparts at Electronic Arts over their handling of the never-ending Take-Two takeover bid.

In a wide-ranging interview with Forbes, Jeffrey said:

It feels like EA kind of needs [Take-Two], but it probably shouldn't have made it so public that it really needed it. I think that it's losing some investor confidence; the stock price is at a three-year low. And it seems like EA has been the petulant child instead of the professional market leader. However it's EA, and it's really good at coming back.

Jeffrey praised Activision in the same interview:

[Activision Chairman] Bobby Kotick is one of the smartest people in the business. The way he's constructed Activision is really admirable... Bobby has grown Activision in stages over a long number of years to get to this point. And it's very calculating and very clever the way he's done that. Activision has also managed to be the first company in this business to market games properly. Anyone who can turn a hardcore brand like "Call of Duty" into a 10 million unit seller … is outstanding.

GP: Alas, no talk of the return of the Dreamcast... (sigh)

Via:Virgin Media

As expected, Electronic Arts has once again extended its deadline for Take-Two Interactive stockholders to tender their shares at $25.74. The new deadline is August 18th.

EA is apparently beginning to make some progress in its bid to acquire T2. The game publisher says that 11,741,339 shares have been tendered under the offer, nearly double the amount turned in when the previous deadline expired in late June. That is almost certainly related to T2's sagging share price of late. The stock has been trading below EA's offer price, making the deal more attractive to shareholders. TTWO closed on Friday at 25.04

This morning's EA press release links the extension to the Federal Trade Commission's review of potential anti-trust implications:

Extending the tender offer allows the FTC review process to continue. The proposed transaction is still subject to certain conditions that include regulatory approval. EA retains the right to terminate the offer if the conditions are not satisfied.

Coming up later today: Take-Two's obligatory press release explaining why, in its view, EA's offer is a bad deal for shareholders.

UPDATE: Wow, that didn't take long. In a press release which followed EA's by less than an hour, Take-Two, as expected, slams EA's offer. T2 chairman Strauss Zelnick alludes to "multiple" suitors, but does not name them (Activision? Ubisoft?):

We are fully engaged in a formal process to evaluate strategic alternatives that have the potential to deliver greater value than EA's inadequate offer. As part of this process, we continue to engage in meaningful discussions with multiple parties, a number of whom have been conducting due diligence.

UPDATE: In a lively interview wiith VentureBeat's Dean Takahashi, EA CEO John Riccitiello touches on the T2 deal:

Having clever verbal sword play about Take-Two doesn’t really matter. I’m not really playing for a headline in the New York Times...

 

I don’t think we’ve played a poker hand. We have expressed our interest. We have made a public bid. We are in the Hart-Scott-Rodino antitrust review. All of the information has been disclosed. We’re playing it to the way we’ve said we would play it. There have basically been three moves and there have 6,000 articles on it. It’s sort of amusing. I feel a little bit like those strobe light things where it looks like a guy is moving a lot. The flash goes off but the body doesn’t move. Every time a flash goes off, somebody writes a story on it. To be honest with you, the last time there was news was a couple of months ago.

A piece in today's New York Post reminds us that EA's most recent renewal of its $25.74 tender offer to acquire Take-Two stock expires today.

The most likely development is a renewed offer by EA.

The New York Times' Deal Book blog speculates today that Activision Blizzard may be eyeing an acquisition of Grand Theft Auto publisher Take-Two Interactive.

Electronic Arts, of course, has been chasing T2 for most of 2008 and has a tender offer outstanding. EA's problem, however, is that T2 shareholders just aren't jumping on board so far.

Analyst Mike Hickey of Janco Partners told the Deal Book:

We absolutely believe Activision will take a look at Take-Two. If a competitor is for sale, you take a look, and if EA is your real rival, why wouldn't you stir the pot a little bit?

However, UBS Securities analyst Ben Schachter pooh-pooh any such deal:

It is highly unlikely that Activision would try to outbid EA. They have enough on their plate at the moment.

The oft-quoted Michael Pachter of Wedbush-Morgan had his own opinion:

There are only three players involved — EA, the FTC and the arbs. Is EA likely to withdraw or lower their offer? No, because they want Take-Two. The odds of the FTC not approving the deal on market concentration is virtually zero. And if the arbs want to sell the stock, they'll sell the stock — they don't care what [T2 chairman] Strauss Zelnick thinks the stock is worth.

Mike Musgrove of the Washington Post reports that the Activision-Vivendi merger is now official, following a vote by 92% of Activision shareholders to approve the deal.

The new company will be known as Activision Blizzard. We hope to see a new logo unveiled, as opposed to mock-ups, like the one at left, which can found around the web.

Referring to EA's now-former status as the biggest kid on the game industry block, Wedbush-Morgan analyst Michael Pachter told Musgrove:

It's good to have a duopoly instead of a monopoly. This just makes the industry that much more interesting.