TakeTwo Interactive:

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Take-Two Interactive Presented by Sat
Joshi,Vice-President, MII March 24, 2004
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About Take-Two
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• Incorporated in 1993
• Member of 1 billion club ( a club with only 2
  members)
• 3 operating divisions
• Development
• Publishing
• Distribution

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About Take-Two
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• Three Principal Brands
• Rockstar
• Flagship brand, high margins
• Gathering
• Historically focused on PC, expanding
• Will focus on mid-priced products and
  non-Rockstar premium products
• Global Star
• PC, console, handheld titles

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Investment Thesis Take-Two Interactive

• Thesis Points
• Well-positioned in a high-growth market that is
  becoming increasingly concentrated
• Game studios have a proven track record
• Unique corporate strategy/structure that embraces
  popular cultural themes and interprets them well
• Company is undervalued in the market

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Thesis 1 Take-Two
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• Video Game Market
• Video games have done well in a sluggish economy
• Video game sales exceeded movie industrys annual
  box office draw by over 1 billion
• Grand Theft Auto Vice City, sold more than 1.4
  million copies at an average 48 apiece in its
  first three days. That 70 million windfall
  easily puts it in the ranks of a blockbuster
  movie.

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Thesis 1 Take-Two
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Video Game Market
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Thesis 1 Take-Two
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• Video Game Market (cont.)
• Designers make around 50,000 out of college
• Hit-makers pull in over 100k
• Sony got nearly 60 of its 2002 profit from sales
  of hardware and software for PS2.
• In its 2002 3rd quarter results, Barnes Noble
  said GameStop, the video game retailer of which
  it owns 60, contributed as much to profit as its
  banner bookstores. Without video games, BN would
  have reported a loss.

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Thesis 1 Take-Two
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• Video Game Market (cont.)
• Average PS1 user 17 years old
• Average PS2 user 22 years old
• Average video gamer is 28 years old
• As gamers age, their disposable income increases,
  making gaming an extraordinarily lucrative
  market.

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Thesis 2 Take-Two
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• Take-Two Has a Proven Track Record
• Grand Theft Auto And GTA Vice City have sold
  over 22 million units
• One of the most successful video games of all
  time
• GTA 30 million units
• Max Payne 4 million units
• Midnight Club 3 million units

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Thesis 2 Take-Two
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• Take-Two Has a Proven Track Record
• GTA double-pack is currently Walmarts
  best-selling game
• GTA 3/GTA Vice City received scores of 9.3 and
  editors choice awards on Gamespot.com
• Max Payne 2/Max Payne received scores of 9.2 and
  9.0 on Gamespot.com

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Thesis 2 Take-Two
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• Take-Two Has a Proven Track Record
• Consistently building its other franchises
• Solid pipeline of games GTA San Andreas, Max
  Payne 3, Red Dead Revolver, and more
• Eyeing next generation of video game consoles so
  that it can be ahead of the video game curve
• Games are on the cutting-edge
• GTA engine pushes limits of PS2

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Thesis 3 Take-Two
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• Unique Corporate Strategy/Structure
• Smaller size has advantages
• Hire only the best designers
• Coherent corporate vision
• Bigger than other players
• Distribution Jack of all Games
• Over 650 internal developers
• 5 Rockstar Studios
• 8 Studios Total
• Globally positioned to access new markets

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Thesis 3 Take-Two
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• Unique Corporate Strategy/Structure
• Novel marketing concepts
• Billboards, bus and bus stations
• Embrace pop-culture themes with originality
• 80s, Miami
• New York City
• Mafia

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Thesis 4 Take-Two
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• Take-Two is Undervalued
• Has greater revenues than any other player except
  for Electronic Arts
• PE Ratios
• Electronic Arts 30
• Activision 32
• Industry Average 25
• Take-Two Interactive 19

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Thesis 4 Take-Two
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Take-Two is Undervalued Price/Sales
Ratio Electronic Arts 5.17 Activision
2.09 Industry Average 2.84 Take-Two Interactive
1.53 Price/Book Ratio Electronic Arts
5.84 Activision 2.37 Industry Average
4.60 Take-Two Interactive 2.64
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Thesis 4 Take-Two
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• Take-Two is Undervalued
• Current Share Price 34.05
• Alternative Valuations
• P/E Ratio 44.68
• Price/Sales Ratio 62.66
• Price/Book Ratio 58.75
• Using Current PE Ratio
• Share price should increase to 46.55 as earnings
  increase in 2004

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Thesis 4 Take-Two
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• Take-Two is Undervalued
• Current reasons for low share price
• Market isnt focusing on distribution
• Market is overreacting to managements past
  errors
• Market doesnt recognize Take-Twos expertise
• Imitation products are not successful
• Market is too focused on short-term
• Next-generation of consoles

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Thesis 4 Take-Two
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• Financial Highlights
• Market Capitalization 1.5 billion
• Revenues 1.03 billion
• P/E Ratio 19
• PEG Ratio 0.79
• Free Cashflow 65.16M

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Thesis 4 Take-Two
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Risks Take-Two
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• Risk 1 Will management keep its act clean?
• Risk 2 Is Take-Two too narrowly focused?
• Game genre
• PS2
• Risk 3 Violence Litigation
• Risk 4 Does distribution pose a conflict of
  interest?

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End Take-Two
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Questions?