Game Points: Game Console and Software Stock Update

Key points from Kaufman Bros. analyst Todd Mitchell's recent note to clients (for a full-length version of this report, click here).

• THQ (THQI) licenses the Ultimate Fighting Championship [UFC] brand through 2011. This is a good franchise for THQ, which should play off its WWE success. The UFC is a "mixed martial arts" organization. UFC bills itself as the tournament to find the best fighter regardless of style. Originally billed as no holds barred, the industry has consolidated and cleaned itself up and is making a play to go mainstream.
• Finalized stock option investigation of Take-Two (TTWO) shows significant wrongdoing. The results show Take-Two had inadequate control and compliance procedures for option grants. For continued listing on the NASDAQ, Take-Two must file its 10-Q and any restatements on or before March 19, and an annual stockholder meeting must take place on or before March 27.
• Sony (SNE) reports reaching its goal of 2 million PS3 shipped by mid-January. This was a couple weeks short of its goal of 2 million by year-end, but Sony claims the PS3 reached the 2 million mark faster than the PS or the PS2. Total worldwide PS3 software shipments exceeded 5 million units as of December 31, with Resistance: Fall of Man the top seller. Sony reiterates its March 2007 release date for PS3 in Europe and other PAL countries.
• Microsoft's (MSFT) Gears of War goes triple platinum in 10 weeks. Released last November, the Xbox 360 exclusive game has sold over 3 million copies worldwide in just 10 weeks. Two new multiplayer maps were released on Xbox Live and they have been downloaded over 750,000 times in less than two weeks for a total of over 1.5 million downloads.
• Codemasters announced IPO plans for late 2007 or early 2008. Codemasters recently signed a distribution and sales deal in North America with Warner Bros. The company has 10 new titles across 30 SKUs this spring, highlighted by Heatseeker, Turning Point and Jericho and it is targeting total revenue of $250 million in the next 18 months.
• Canadian Press reports industry sales rose 22% to $933 million. Overall sales were driven by a 43% increase in hardware sales to $349 million. Software sales were up 10% to $481 million. The best selling game was EA's NHL 07 on PS2 followed by New Super Mario Bros. on DS and Gears of War on X360.
• Ubisoft files trademark application for Worlds of Might and Magic. Filed in November, we believe the trademark may be an indication of online gaming services for a MMORPG based on the Might and Magic franchise. Ubisoft is the last listed owner of the trademark, which is still live.
• Australian industry sales rose 7% in 2006 to $723 million. Hardware sales grew 18%, while software sales grew only 1%, with December software sales accounting for 23% of the annual total. Software volumes fell to 12.5 million copies from 12.6 million.
• NPD reports PC sales grew less than 2% in 2006 to $970 million. The top PC game was World of Warcraft. With PC sales, total video game software sales grew 6% in 2006 to $7.4 billion.
• Electronic Arts (ERTS) announces new Sims franchise, The Sims: Stories. The laptop friendly, single player games feature a new chapter based story mode that focuses on the lifetime of particular characters.
• Lost Planet: Extreme Condition (X360) ships 1 million worldwide. The game was shipped in North America and Europe on January 12 and in Japan on December 21. Two XBox demos saw one million downloads before launch.