Take-Two's Zelnick Goes All-Out In Annual Meeting [News] - Tech Weblogs

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On the table? In addition to a reinstatement of the board, that controversial compensation package to executives, through which Strauss Zelnick's ZelnickMedia stood to see their monthly pay go up from $62,500 to $208,333. The compensation package also includes a bumped up annual bonus, from $750,000 to $2,500,000 per year, and 600,000 shares of common stock that the management also gets as part of the same compensation boost. Only investors who bought shares before February 19th were able to submit ballots on these issues.

Even chairman Strauss Zelnick acknowledged, though, that what most of the stockholders really wanted to hear about was EA. And he held little back in a spirited attempt to convince shareholders that, at least for the moment, they were better off not selling.

Take -Two opened with a video presentation that chairman Strauss Zelnick said would demonstrate the breadth and quality of Take Two's products, the depth of its portfolio and the strength of its staff. Given that Take-Two aims to convince its shareholders it can maintain a share price over the $26 they've been offered by EA, it's not surprising that he'd open with a focus on the positives. We couldn't see exactly what the presentation contained, listening in on an audio-only feed — all we could hear was some amped-up guitar music, the kind you'd expect to hear overlaying a montage.

Following the video, CEO Ben Feder continued on the upbeat note. "We've made significant progress over the past year on all fronts," he began, praising the progress of the company's turnaround initiatives announced this time last year. Federer said the reorganization in place, including a $25 million cost reduction initiative, is going well, and reminded attendees that the company's now backed with a credit facility to ensure stability.

"We're very pleased that we've broadened our product lineup across all genres, platforms and demographics," Feder said, and expressed confidence at the company's "robust" lineup for the coming years. On GTA's upcoming launch, Feder confirmed the game is complete and in production. "GTA... is our most profitable and biggest-selling franchise. Retail preorders for GTA IV are ahead of our initial expectations, which suggests that the launch of GTA could be defining for our company and for the entertainment industry."

Federer also promised releases beyond GTA held strong potential. He mentioned the upcoming Midnight Club, which as a franchise has sold 12 million units to date, Sid Meier's Civilizations Revolution, the 8 million-selling franchise's console debut, and the follow-up to BioShock slated to release in 2009.

In addition to praising the performance of Carnival Games, Feder called Take-Two's stable of sports titles one of its highest achievements, and expects, based on all these strengths, for Take-Two to turn a profit this year, rounding out the positive tone by expressing confidence in the Asian expansion initiative announced earlier this week.

Zelnick reclaimed the floor, reiterating what he's been saying all along regarding EA's offer: "The Board and management of Take-Two strongly believe.. that EA's offer is still at the wrong place, and still at the wrong time."

He cited "one of the strongest porfolios of intellectual properties in the business," Take-Two's suite of 17 development houses including Rockstar, 2k, 2k Sports and 2k Play, and a staff of 1400 developers altogether, and said Take-Two has 30 titles with sales of 1 million units or better — and, claimed the highest-rated titles of all third-party publishers including EA.

He called EA's bid "highly opportunistic," stating, "We believe EA's decision to pursue a hostile process instead of a cooperative one is strong evidence they're trying to lock in value at the expense of [stockholders]."

Added Zelnick, "The offer also fails to take note of... positive results we're seeing from turnaround initiatives that are well underway. EA's timing was specifically designed to capture the benefit of those initiatives before they became apparent and reflected in our stock price. We've become a much more efficient company. We believe we're a much better-managed company. We're a rational company; we make rational decisions. We have a lot of hard-working, dedicated, talented people."

Specifically, he focused on 2K Sports, saying that head-to-head, 2k beats EA on every metric for sports titles. "EA's offer doesn't remotely compensate stockholders for the value of the sports business to EA," Zelnick stressed.

Zelnick's voice took on a tone of urgency, and the audio picked up what sounded like him striking the table to punctuate his speech. "Take-Two is worth more than $26 per share — and I'm being moderate because I have lawyers in here. The board believes it's worth more than $26 a share. I urge stockholders not to tender shares at this price."

However, he made it clear the door is open to negotiations in the future: "That said, I want to emphasize — this is crucial. The board of Take-Two, the management of Take-Two is one hundred percent, absolutely committed to doing the right thing by stockholders and to create value at this company. The results... are only going to get better."

He said the board would consider all its options — including remaining independent — but that the company is prepared to begin formal discussions with interested parties on April 30th. He again said that Take-Two has received "numerous indications of interest from third parties," and that they continue to receive inquiries — though when asked, Zelnick would not disclose whether he'd entered into any kind of confidentiality agreement that would protect such discussions.

Finally, Zelnick noted that both Take-Two and EA are cooperating with the FTC on its investigation of possible antitrust violations surrounding the proposed transactions, and he refused to speculate on what areas in specific the FTC might be scrutinizing the most closely.