Take-Two: How to shoot yourself in the D-pad

It's one thing for a smallish company that makes few good games to tank. It's another for a major company like Take-Two Interactive -- the third biggest game company, behind Electronic Arts and Activision -- to decapitate itself. But that seems to be happening.

This week, someone resigned from Take-Two's board of directors; the company's stock tumbled; and Los Angeles is suing over the Hot Coffee hidden sex minigame in Grand Theft Auto: San Andreas. Take it away, Reuters: Bank of America analyst Gary Cooper "said in a note to clients that the company behind the wildly popular and controversial 'Grand Theft Auto' game series faces a variety of risks, including falling earnings, over-valuation, potential Securities and Exchange Commission investigations and possible accounting restatements. He said the company is burning cash at an 'alarming' rate and that he expects 'more title delays, a possible SEC investigation and key employee departures.' "

Take-Two seems decently diversified: the company includes Rockstar Games, which makes the Grand Theft Auto and Midnight Club series; 2K Games, which publishes the Civilization games and Elder Scrolls; and 2K sports. But if the company is as screwed up as it seems, that would make the margin of error even tighter. And with failures like Manhunt, Red Dead Revolver; the challenge of EA Sports; and Rockstar Games' one-note reputation (GTA, Manhunt, The Warriors, and the upcoming Bully are all essentially the same game), it shrinks even more. And a seemingly solid game company turns out to be as fragile as a hundred others.