The news hit the gaming world like a ton of bricks late yesterday when Take-Two suddenly announced that the much anticipated GTA IV would be pushed back into 2008. While executives in a conference call said the delay was "almost strictly because of technological challenges," Wedbush Morgan Securities analyst Michael Pachter has another theory.

"We can only surmise what happened. We think it is likely that the Rockstar team had difficulty in building an exceptionally complicated game for the PS3, and failed to recognize how far away from completion the game truly was until recently," he said. "We think it is also likely that Take-Two had a contractual commitment to Sony that it would not favor competitor Microsoft by launching the Xbox 360 version of GTA IV prior to launching the PS3 version, and believe that any delay of the PS3 version necessitated a delay of the Xbox 360 version. In our view, this is the only plausible explanation of what happened, but management was reticent to provide any details during the conference call."

Pachter also views the delay as a major misstep for Take-Two's new management. "Take-Two management stumbled badly for the first time during their tenure. While the delay of GTA IV was clearly not the fault of new management, we believe that it should have been better understood several months ago, and should have been communicated to investors much earlier than today. The game was scheduled for release in 10 weeks, and management reiterated its belief that the game would ship on time only three weeks ago at E3," he explained.

His criticism continued: "We think that new management is doing many things right, but believe that some structural obstacles remain. The company has begun an initiative to improve the green light process for new projects, but given the delays of Manhunt and GTA, its process for monitoring projects under development appears to be a failure. Until we see evidence of better controls over work in process and greater diligence in project selection, we are not confident that the company will gain market share in future years. Our current estimate reflects 15% publishing revenue growth in FY:08 over and above the expected contribution from GTA, suggesting that the company will maintain market share. We believe that it can only achieve this level with better game selection decisions and better control over the game development process.

"In our view, it is far from certain that GTA (or any other major franchise) will arrive on schedule, nor is it certain that any other franchise will be regularly repeated. We have not seen an installment of the Max Payne or Red Dead Revolver franchises in four years, and next year's Midnight Club will arrive three years after the prior installment. We think that investors have (until today) given new management way too much credit for being able to manage this business effectively, and think that investors should require management to demonstrate its ability first."

Todd Greenwald of Nollenberger Capital Partners was equally critical: "For investors who have endured a seemingly endless string of disappointments ('Hot Coffee' scandal, SEC investigations, District Attorney subpoenas, class-action lawsuits, earnings warnings, management/board turmoil, Manhunt delay, to name a few), the release of GTA IV this holiday was their one last glimmer of hope... We believe the lack of GTA IV this holiday is a clear positive for TTWO's competitors, namely EA and ATVI. We estimate that roughly $400 to $500 million in consumers wallets will be freed up to spend on other hard-core games, which could boost sales of titles like Call of Duty 4, Medal of Honor, Crysis, Need For Speed (as well as Halo, Assassins' Creed, Haze, Stranglehold, etc). It will also allow retailers more shelf space to heavily promote these titles."

He added, "While we recognize that this [GTA] delay is mainly a timing issue, and don't think the franchise will be weakened, it is yet another disappointment will lead to will 2 to 3 more quarters of weak results, in our opinion."