Cindy Buckwalter - Executive Vice President Strauss Zelnick - Chairman of the Board Benjamin Feder - Chief Executive Officer, Director Lainie Goldstein - Chief Financial Officer Seth Krauss - Chief Legal Counsel

Heath Terry - Credit Suisse Whitney Goldstein - Lehman Brothers Daniel Ernst - Hudson Square Research Mike Hickey - Janco Partners Brent Thill - Citigroup Benjamin Schachter - UBS John Taylor - Arcadia Investment Corporation Doug Creutz - Cowen & Company Anthony Gikas - Piper Jaffray Edward Williams - BMO Capital Markets Edward Urban - Bear Stearns Evan Wilson - Pacific Crest Securities Adam Knowle - Cowen & Company

Greetings, ladies and gentlemen and welcome to the Take-TwoInteractive fourth quarter and year-end 2007 results. (Operator Instructions)It is now my pleasure to introduce your host, Ms. Cindy Buckwalter, ExecutiveVice President for Take-Two Interactive. Thank you, Ms. Buckwalter. You maybegin.

Thank you. Welcome and thank you all for joining us today.Today’s call will be led by Strauss Zelnick, Chairman of Take-Two; Ben Feder,our CEO; and Lainie Goldstein, our CFO. We are also joined by Seth Krauss, ourChief Legal Counsel. The team will be available to answer your questions duringthe Q&A session following our prepared remarks. Before we begin, I would first like to quickly review ourSafe Harbor statement by reminding everyone that the statements made duringthis call that are not historical facts are considered forward-lookingstatements under federal securities laws. These forward-looking statements arebased on the beliefs of our management as well as assumptions made by andinformation currently available to us. Actual operating results may varysignificant from these forward-looking statements based on a variety offactors. These important factors are described in our filings with the SEC,including our 10-K for the fiscal year ended October 31, 2006, and our 10-Q forthe third quarter ended July 31, 2007, which are both available on our websiteor by contacting the SEC. Now let me turn the call over to Strauss.

Thanks, Cindy and good afternoon, everyone. Thanks forjoining us. I believe fiscal 2007 will largely be remembered as a year in whichTake-Two made significant progress on initiatives that will provide a solid foundationfor our future. As a result, we’ve begun fiscal 2008 as a stronger organizationthan we have been in the past, with a sharp focus on being the most creative,the most innovative, and the most efficient company in our industry. Before I turn the call over to Ben and Lainie, I would liketo review some of the reasons why we believe Take-Two is so well-positioned forthis fiscal year and beyond. First, we believe we have the strongest portfolioof owned product franchises in our business and at the same time, we’veexpanded and diversified these franchises to include 15 proprietary brands,such as Grand Theft Auto, Bioshock, Midnight Club, Bully, Red Dead Revolver,Manhunt, Civilization, Carnival Games, and others. We also have a promisingsports business along with our recent entry into casual games, 2K Play. Perhapseven more importantly, we have the most talented creative teams in theindustry. We’re very proud of that. The recent consolidation activity in this business clearlydemonstrates the importance and value of owned intellectual property, the goldstandard of our business. We’ve created a more streamlined and efficientorganization through our restructuring and revitalization efforts. As a result,Take-Two is sharply focused on our core publishing business and better equippedto support the potential of our creative teams. Coupled with that is asubstantially reduced cost structure, the benefits of which will be more fullyrealized this fiscal year. We’ve worked diligently to resolve the distractions ofvarious regulatory and litigation issues. Most recently, we announced aproposed settlement of all consumer class action lawsuits pending in the U.S.relating to the so-called Hot Coffee modification. Along with our progress inthese and other areas, we anticipate significantly stronger operating andfinancial performance in fiscal 2008. As Lainie will discuss in greater detail, we are reiteratingour guidance for full year earnings per share in the range of $1.30 to $1.50 ona non-GAAP basis on $1.1 billion to $1.4 billion in revenue. We are alsoproviding guidance for our first quarter. In summary, we begin fiscal 2008 with great confidence inour competitive position and in our potential for profitable growth. We’vearrived at this point just as the video game industry is poised to reap thebenefits of the cycle that began in 2005. As the installed base of nextgeneration hardware continues to grow and the sales of video games reach newheights, we have the products, the processes, and the people to take maximumadvantage of the opportunities in our market. With that, let me turn the call over to Ben.

I’d like to comment briefly on our Q4 results and thecurrent holiday season and then I’ll elaborate on our accomplishments in a fewareas that Strauss just touched upon. We’re thrilled that our Q4 bottom line performance wasbetter than expected. This is the second quarter in a row that we beat ourguidance. On a non-GAAP basis, this is the first quarter in some time in whichTake-Two was profitable without a new Grand Theft Auto release. We beat our guidance primarily on the strength ofbetter-than-anticipated sales on internally developed titles, particularlyBioshock and Carnival Games. Product mix of Jack of All Games was also morefavorable as we worked hard to expand margins in that business. As you cantell, the revitalization of Take-Two is well underway. Looking to Q1, we have a very light new release schedule,with the majority of our business coming from catalog titles, so I view Q1 as atime to prepare for the next nine months of the year, which we expect to seesignificant growth. Overall, I’d say the sales trends for holiday 2007 appear toreinforce the overall strength of our industry as video games continue to beamong the must-have gifts this season. This bodes well for the long-termprospects of our industry in general and Take-Two in particular. I’d characterize our performance this season assatisfactory, especially in light of the fact that our holiday sales areprimarily driven by catalog titles. But our ambitions are to do much, muchbetter. Now let me turn to some of our recent product developments.We released new downloadable content for Bioshock, which will make the new gameplay experience even more compelling than it already is. This new internallyowned and developed franchise has shipped over 2 million units and has wonmultiple awards. Both the Associated Press and the British Academy of Filmand Television named Bioshock Game of the Year for 2007, and at last week’sSpike TV video game awards, Bioshock took home more awards than any othertitle, winning Game of the Year, Best Xbox 360 game, and Best Original Score.This is a great new franchise for Take-Two, upon which we plan to build. Rockstar just released Grand Theft Auto: Vice City Storieson PS2 and PSP in Japan and the title achieved greatest hits status on PSP lastmonth. From 2K Play, we’re thrilled with the enthusiastic consumer reception toCarnival Games, a great family title. It was the number one third party Wiititle in September, the number two third party Wii title in October, andremained a top 10 title in November. We’ve already shipped over half a million units worldwideand are seeing sustained demand for the title, and we expect the title tocontinue to perform well after the holidays. We plan to extend the success ofCarnival Games by bringing it to the DS platform this summer. Moving to sports, the performance at NBA 2K8 was very, verysolid. The Xbox 360 title outrated the competition and outsold it by almostthree to one in its first three months on the market, according to NPD. Looking at the balance of fiscal 2008, we’re extremelyoptimistic. We are eagerly anticipating the release of Grand Theft Auto IV inour second quarter. By now, I hope most of you have seen the third trailer thatRockstar unveiled several weeks ago along with the box art. The game looksterrific and we’re confident that it will be every bit as groundbreaking as theprevious titles. Our strong pipeline for 2008 also includes other titles --Midnight Club Los Angeles, episodic content for Grand Theft Auto IV, Bully:Scholarship Edition, Sid Meier’s Civilization Revolution, Borderlands, TopThree, and our complete sports lineup. Many of the products in our fiscal 2008pipeline are sequels to well-established franchises, the prior versions ofwhich sold over 15 million units in aggregate, not counting Grand Theft Auto. We are very excited about the potential for the 2008 lineup.We have significant revenue visibility with these proven brands. Among our other new releases, 2K Play recently released thefirst products from its partnership with Nickelodeon -- Go Diego Go: SafariRescue and Dora the Explorer: Dora Saves the Mermaids, both on the Nintendo DS.These titles will also be shipping on console early next year. 2K’s new title, Borderlands, was the exclusive cover storyin the September issue of Game Informer and is generating additional buzzfollowing the debut of the trailer on Spike TV’s 2007 Video Game Awards.Borderlands has been named one of the top games for 2008 by Electronic GamingMonthly, Game Pro, and Games for Windows magazine. Also for 2008, we are looking forward to Sid Meier’sCivilization: Revolution, the game that Sid says he’s always wanted to make.The game was built exclusively for console and handheld platforms and we arebringing it to Xbox 360, PS3, and DS. The title is already getting positivefeedback from both consumers and the press after our play test at the E For AllConsumer Game Show this past October. In sports, we’ll be expanding our lineup with Don KingPresents Prizefighter, a new boxing title that we announced last week for Xbox360, Wii, and DS. We are also looking forward to Major League Baseball 2K8 inthe spring, with Mets shortstop Jose Reyes as our cover athlete. Looking into fiscal 2009, the buzz is building already forMafia 2, the sequel to our 2 million unit bestseller. The title is alreadygenerating gamer and press interest after the debut of the cinematic Mafia 2teaser trailer at this year’s game convention in Leipzig, Germany. In fiscal 2009, we’ll also be offering additional episodiccontent for Grand Theft Auto IV in Xbox 360 and you can expect to see sequelsof some of our big franchises. You’ll recall that our goal is to balance outthe major releases throughout the year and we’ll have more to say about ourfiscal 2009 pipeline in the months ahead. We’ve said a lot about our focus on creating ownedintellectual property and we’ve recently established a new studio, 2K Marin, inNovato, California. This studio will develop original IP and also co-developproducts with other 2K studios around the world. This move reflects ourcommitment to create and leverage triple A franchises. To strengthen our focus on a number of critical operatingareas, we recently named Gary Dale to a corporate role as Executive VicePresident to Take-Two. In his new position, Gary will head up our efforts tocapture opportunities in emerging areas, such as online gaming and casualgames, as well as in critical regions of the world, Asia-Pacific and LatinAmerica. His experience and relationships in Europe will also be valuable incontinuing to grow our business in that critical market. Gary will also overseeour sales organizations. We’re thrilled with our Q4 performance and our progress todate. We believe that fiscal 2008 will demonstrate the value of our efforts torevitalize the business, make our organization more efficient, and focus onwhat Take-Two does best -- creating powerful game franchises. We look forwardto reporting on our progress throughout the coming year. Lainie.

Thanks, Ben and good afternoon, everyone. I’ll be coveringseveral topics today. First, a review of fourth quarter results; second, ouroutlook for fiscal 2008; and third, our guidance for the first quarter. Let’s look at our Q4 results. Net revenue was $293 million,compared with $267 million a year ago. We’re pleased that we were profitable inthe quarter on a non-GAAP basis and that we exceeded our guidance for a secondquarter in a row. This is the first quarter in quite some time that Take-Twowas profitable without a new Grand Theft Auto release. Non-GAAP net income was $3.4 million compared to a non-GAAPnet loss of $1.8 million last year, with earnings per share of $0.05 comparedto a loss per share of $0.03 last year. Our GAAP results for the fourth quarter were a net loss ofapproximately $7 million, or $0.10 per share, compared with a loss of $14million or $0.20 per share in the fourth quarter of fiscal 2006. Our GAAP results included $4.8 million in stock-basedcompensation expenses and a total of $3 million in business reorganization andexpenses related to unusual legal matters. Additionally, we realized a $3.1million loss on the sale of Joytech and a $1.4 million loss on thede-consolidation of Blue Castle Games, a developer of some of our sportstitles. Let me explain that a little bit further. We had previouslyaccounted for Blue Castle as a wholly-owned subsidiary in accordance withFIN-46. While Blue Castle continues to develop some of our sports titles, weare no longer their primary source of funding, which has resulted in having tode-consolidate their assets. Our increase in revenue year over year was primarily due tostrong sales of our newly released titles, led by Bioshock, NBA 2K8, andCarnival Games. Grand Theft Auto catalog sales were also a significant factorin the quarter’s results. Our sports business was once again a strongcontributor to revenue. Sports represented about 20% of our publishing revenuein the quarter, and Jack of All Games business also grew, led by strongnext-gen hardware and software sales. Looking at the breakdown of our total revenue, the mix was75% publishing, 25% distribution, about the same as Q4 of last year. Andlooking at our consolidated results, our total gross profit margin for thequarter was 30.6%, which was also comparable to last year. Our split between North America and international revenuewas 74% to 26% in Q4. It’s important to point out that our sports anddistribution businesses skewed these numbers relative to our peers. Thesebusinesses are primarily North American based. If you back out sports and distribution,our North America/international revenue split was about 60% to 40% in Q4 and57% to 43% for fiscal 2007. Our operating expenses in the fourth quarter wereapproximately $87 million, down significantly from last year’s fourth quarter.Operating expenses decreased in all areas except business reorganization, asthe restructuring began in the second quarter this year. Sales and marketing expenses accounted for the largestreduction year over year, due to our lighter release schedule. Relative to taxes, we are not showing any tax benefit on ourlosses. As we’ve said on previous calls, due to our domestic cumulative lossesfor the past three years, we are required to record a valuation allowance toreduce our deferred tax asset. In fact, we had a provision for taxes in thefourth quarter only because we are a taxpayer in some of our internationalterritories. Our full year results are detailed in the press release butI’d like to just highlight a few areas of our performance. We successfully initiated a $25 million cost reductionprogram. We’ll see the full impact of these reductions by the end of fiscal2008. We also established two important new franchises withBioshock and Carnival Games. Our sports business grew 20% year over year forthree reasons -- first, the additional titles we released in fiscal 2007compared to 2006; second, the improved performance of our Major League Baseballtitle; and third, the higher average software pricing relating to the largerinstalled base of next-gen hardware. While sports was not profitable in 2007, we significantlyimproved the bottom line performance of the business this year. Lastly, we showed revenue diversification in 2007 as our top10 titles were 27% of total company revenue, down from 38% in fiscal 2006 and48% in fiscal 2005. These accomplishments demonstrate the progress we’re makingon our strategic objectives. Moving on to our balance sheet, as we announced last month,we expanded our credit line to $140 million in November. The expanded lineprovides additional flexibility to help continue to fund our working capitalneeds during the busy holiday season and beyond. At the end of Q4, we had approximately $78 million in cashand $18 million of borrowings on our credit line. Based on our forecast of capsneeds, we expect to draw down on the line further in our Q1 but we anticipateno near-term need for additional capital beyond the credit line. Our accounts receivable reserve was about $63 million at theend of the quarter. This represented approximately 38% of gross receivables.Inventories at the end of the quarter were approximately $99 million, which isrelatively comparable to Q4 of last year. The increase in our software development costs and licensesis primarily related to the key titles planned for release over the next 12 to18 months. This includes Grand Theft Auto IV, Midnight Club Los Angeles, andBorderlands. We currently have approximately 30 titles in various stages ofdevelopment. Now for our outlook for fiscal 2008. First, before we getinto the guidance details, I would like to emphasize that we are providingguidance on a non-GAAP basis, which we believe best represents our operatingperformance. It is also consistent with the way analyst estimates many of ourmajor competitors are afforded on First Call, excluding stock comp expenses andany unusual charges. In contrast, the First Call estimates for Take-Twohistorically have been GAAP estimates, making it difficult to apply aconsistent valuation to companies industry-wide. Going forward, we wouldencourage all of the analysts to provide First Call and other reportingservices with non-GAAP estimates for Take-Two, just as you do for our industrypeers. For fiscal 2008, we are reiterating the guidance wepreviously provided in September of $1.1 billion to $1.4 billion in revenue,and $1.30 to $1.50 per share on a non-GAAP basis. The assumptions underlyingthat guidance were provided in our Q3 conference call on September 10th andthose assumptions are still valid today. Lastly, we are issuing guidance today for the first quarter.We expect a non-GAAP loss per share in the range of $0.50 to $0.60 on $175million to $225 million in revenue. This excludes stock-based compensationexpense of $0.07 per share and reorganization costs and expenses related tounusual legal matters of $0.02 per share. Our Q1 guidance reflects tax expenseattributable to the company’s international operations only. Let me describe some additional data points on our Q1outlook. We expect our revenue mix to be split equally between publishing anddistribution, due to the seasonal ramp-up in Jack’s business and the increaseddemand they are seeing for next-gen hardware and software. We also expect Jacksales to increase from Q4 to Q1, although we anticipate a decrease comparedwith the first quarter last year. For publishing, most of our business is coming from ourcatalog titles rather than new releases, so we are also expecting ourpublishing business to be down year over year in Q1. This will result inreduced gross profit margins compared to Q1 of last year. In fact, we expect Q1gross margins to be closer to what we experienced in fiscal 2007, about 25%. We expect margins to trend back up in Q2 with the release ofGrand Theft Auto IV and then for the full year, we continue to expect grossmargins of approximately 35%. We expect overall operating expenses to trend up a bit in Q1as compared to Q4, primarily driven by higher marketing spend as we prepare forour big 2008 releases. We also expect to see R&D expenses increase in Q1 ascompared to Q4, due to lower software capitalization rate during the holidayseason and some incremental IT spending. G&A should also trend down modestly from Q4 anddepreciation and amortization should remain about flat. As for taxes, we expect to show a provision for taxes in Q1for our international business only. While it’s early to talk about fiscal 2009, we can tell youthat we are building another robust release schedule. We are planning sequelsto some of Rockstar’s and 2K’s triple A brands and we’ll also deliveradditional episodic content for Grand Theft Auto IV on Xbox 360. Rounding outour lineup will be our current sports business and titles based on several newbrands. 2009 will also reflect the first full year of our cost savingsinitiative. We are optimistic about our future and the opportunities to furtherbuild shareholder value. At this point, I’ll turn the call back to Strauss.

Thanks, Lainie. Let me conclude by saying that we arepleased with our progress during what was both a challenging and rewarding yearfor the company. Building and managing Take-Two is a team effort and I want tothank all of our colleagues here for their hard work and their dedication. Weare all very excited about the year ahead. We believe we are extremelywell-positioned across the board for growth and improved financial performancein fiscal 2008 and beyond. We will now take your questions. Operator.

(Operator Instructions) Our first question comes from theline of Heath Terry with Credit Suisse. Heath Terry - CreditSuisse: Great. Could you give us a little more detail on thecomponents of getting the sports business to profitability? How much of it isadditional titles and the mix versus lower development costs or even lowerroyalty costs, in some cases?

Well, our profitability expectations are primarily based onexpanding our number of non-licensed sports titles, including Top Spin forTennis and Don King Presents Prizefighter, and we’re also assuming higheraverage price points and a larger installed base of hardware. Heath Terry - CreditSuisse: Can you give us an idea of the number of sports SKUs thatyou’ll have this year versus last year when you talk about that expanded titlelineup?

We haven’t shared that information yet, Heath. Heath Terry - CreditSuisse: Okay, great. And then, to the extent that there is any kindof non-traditional revenues in the guidance for next year, whether it’s in-gameadvertising, downloadable content, obviously you’ve got the relationship or thedeal with Microsoft on the downloadable content for GTA. Can you give us anidea of what component you expect that to be next year?

We’re really not breaking that out but I think this is stilla time -- for most of what you just described, I think we’ve said repeatedlywe’re really interested in expanding that area of revenue, diversifying ourrevenue base, and we’re pretty interested in building businesses like themicropayments business but it’s very early days for that business. Heath Terry - CreditSuisse: Okay, great. Thanks.

Our next question comes from the line of Eric Handler withLehman Brothers. Whitney Goldstein -Lehman Brothers: Thanks for taking my question. This is Whitney Goldstein.I’m just actually on the road right now. My question is regarding the hiring ofGary Dale. How do you expect your marketing efforts to change? Is he going tobe working on -- I know he’s working with sales to focus on a specific genrelike the sports titles or it is overall strategy or is there anything we’ll seedifferent in terms of your marketing efforts of that new hire? Thank you.

It’s overall oversight on the sales organization but inaddition to that in terms of new revenue, we’re highly focused on emergingmarkets, highly focused on Asia and certain markets in Latin America,specifically Brazil and Mexico. And he’s going to be leading our efforts on thebusiness development front around the world. Whitney Goldstein -Lehman Brothers: Okay, great. Okay, thank you very much.

Our next question comes from the line of Daniel Ernst withHudson Square Research. Daniel Ernst - HudsonSquare Research: Thanks for taking the call. Two questions, if I might; one,just looking at the pipeline for fiscal ’08, you commented about what you mighthave on the Wii front, given the success there. It looks like your Wii space isa little light relative to other titles you’ve announced so far. And then secondly on advertising, as you are approaching thelaunch of your big game for the year, can you talk about how your advertisingspend will ramp, your marketing spend, and how that might be different thistime around versus last, where you have a lot more opportunity for onlineadvertising -- that is not, you know, your advertising online and doingadvertising and demos and trailers on the consoles themselves that wasn’treally available in the last gen. Thanks.

Thanks, Daniel. With respect to your first question on thepipeline, we have seven titles on Wii. We’re pretty proud of that, actually.We’ve turned this company from a non-Nintendo shop into a shop that’s focusedas much on Nintendo as it is on every other platform. Just to name a few, Bullyis coming out on Wii, Prizefighter will be coming out on Wii. And actually, wethink prizefighter as a boxing game is actually a pretty compelling game on theWii. And it’s not just the Wii. We are also focused on the DS. Aswe said, Carnival Games will be coming out on DS and so we are pretty excitedabout that and as I said, we have a pretty good track record on the Wii and wetend to exploit that. So I wouldn’t characterize it as light. I would characterizeit as perfectly appropriate. With respect to launch and the advertising budgets, youknow, it’s really kind of case by case. Some titles will be more appropriatefor traditional marketing and some for traditional advertising channels andother products are more appropriate for online and alternative advertisingchannels. It’s really kind of case by case. I will tell you that both Strauss and I review the marketingplans of each and every title with a great deal of detail. And by the way, wedon’t always -- I wouldn’t say we don’t always agree but there is a healthydebate on where the advertising dollars should be spent and there is a prettyrobust conversation that goes on internally about that. Daniel Ernst - HudsonSquare Research: Sure, but if you look at GTA in particular, which obviouslyhas some notoriety around it and it maybe doesn’t need a whole lot ofadvertising. Maybe talk strictly about the plans -- not specifically but ingeneral terms about how advertising and marketing for that launch will bedifferent than this time last time.

If you are asking whether we should reduce our marketingexpense for Grand Theft Auto, I don’t believe that’s the best thing for thefranchise. I don’t think anybody internally believes that’s the best thing forthe franchise. In fact, we’ll be spending a healthy marketing budget to promotethat and promote it on a worldwide basis. And by the way, I think the trend is heading there too. Youjust need to look at Halo 3’s budget, for example, and that tells you the wholestory. So I don’t think this is a game where we are just going to try to getout and take advantage of the existing brand recognition and just try to launcha game on the cheat. We’re going to launch a game in the way that’s appropriatefor the franchise. Daniel Ernst - HudsonSquare Research: Thank you.

Our next question comes from the line of Mike Hickey withJanco Partners. Mike Hickey - JancoPartners: Thank you. Congrats on the quarter, guys. Curious on GTA IV;do you have any sense of how the sales of that game are going to spread acrossyour three quarters of your fiscal ’08 period? I’m guessing most will beup-front but any color on that would be great. And then for your GTA, your last GTA IV trailer, do you haveany data points in terms of the amount of hits the trailer got in the firstweek or so that you could share with us? And then the last question, taking a look at your sportsbusiness, I think Blue Castle did code for your biggest game. Do you plan toextend that license across other games like you did in fiscal ’07, like TheBigs or MLB Power Pros?

I’m not sure -- well, let’s take the first couple. In termsof the spread of sales, that’s not really something we discuss and if historyis any guide, and obviously we have very high expectations for Grand Theft AutoIV, we certainly expect this title to keep selling for some time but I don’tthink it’s appropriate to talk about how we spread out the expectations exceptthat they are meaningful.

I would say that we’ve said in the past, I think it’s stilltrue that when it was scheduled for release in October, that was probably ashorter window to spread over the sales because you hit the Christmas season,so our view remains unchanged from that, which is to say that you would expectto sell the same number of units but over a longer period of time than we wouldhave seen had it shipped in October. Mike Hickey - JancoPartners: Okay, and then on the trailer that you just put out, do youhave any data points for us in terms of --

Our sense is that it’s been very popularly received but wedon’t specifically share exact data points. But if you haven’t seen it, it’sworth -- I’ll give you the plug; it’s really fantastic. It’s certainly worthwatching. Mike Hickey - JancoPartners: No, I’ve seen it about 10 times.

Good. Then you know. That would be about 20 minutes of yourtime. Mike Hickey - JancoPartners: And then I think Blue Castle --

I didn’t follow the question on Blue Castle. Mike Hickey - JancoPartners: You’ve extended the MLB brand across different titles, themain one, of course, then Bigs and Power Pros. And looking at the rest of yourtitles through your fiscal ’08 period, I don’t see The Bigs or MLB Power Pros.I’m just curious if your philosophy has changed there or are those -- are theygoing to be there?

We have a commitment in our baseball genre. We are kind ofcommitted to send it over a number of SKUs. You could expect to see that onsome of our other sports titles as well. I think generally the philosophy ofTake-Two is to extend our brands over a number of different platforms asopposed to being narrow in our platform focus. But certainly in baseball, weare highly committed to extending the brands to multiple platforms. Mike Hickey - JancoPartners: Okay, and then the last one, on Midnight Club, is this agame that you guys can come out with annually? I mean, you’ve kind of skippedit but it seems like if you look at some of your competitors raising games,they have the ability to come out every year. And clearly this is a verypopular game and I think it would do well if you could do it annually. Issomething in the works or --

You know, I think our view is a little bit different. Firstof all, we are driven first and foremost by making the best games in thebusiness and you can’t do that on a clockwork type schedule. I think the second thing is even if we had the ability to doa triple A title annually, the question is how do you optimize the consumers’desire for a franchise title, the needed development time, and the concern thatif you come out too frequently, you run the risk of burning the franchise out.And I think Rockstar particularly has done a terrific job of managing that. Inother words, optimizing the required development time against optimizingconsumers’ expectations, hopes, and interest. And what’s -- I suppose you could argue that we leavesomething on the table by not putting stuff out, like stamping out cookies butthat’s just not how we operate around here. Every product is seen as somethingthat’s terribly important to us, it’s key to the company and frankly we lookat, and this creates a lot of pressure on our very talented people, we look ateach game as a standalone new product that has to be better than the last, andthat takes time. And if we can deliver that to the consumers, it’s somethingworth waiting for and I actually think it enhances the value of the franchiseover time and extends its life. Of course, what that means is and we said this is part ofour strategy, is we want to build up further our already leading portfolio ofowned intellectual property so that while you can’t count on a release everyquarter, and again we’re driven by the quality of products, not our quarterlyfinancial desires, what we’d really like to do is have a release schedule thatgets more and more robust and more and more predictable every year. But the wayto do that isn’t burning out a franchise that consumers love. The way to dothat is develop more great franchises. And frankly, we’ve shown -- not to overstate the case, but Ithink Bioshock puts a fine point on that. That looks to be another strongrepeatable franchise. We certainly feel that way about it.

There isn’t a piece of us, I mean, your question, Mike andthe earlier question I think from Daniel, there isn’t a piece of us that wantsto harvest any of these franchises and sort of say okay, let’s turn off themarketing and let’s just harvest what we can in terms of cash. It’s not what weare about. It’s not what the company’s about. We’re building up IP and we’rebuilding up franchises.

And doing it based on quality and meeting consumers’desires. We’re trying to delight our consumers. Mike Hickey - JancoPartners: Thank you very much, guys.

Our next question comes from the line of Brent Thill withCitigroup. Brent Thill -Citigroup: Thanks. Can you give us a sense of what percent of therevenue today is owned IP and where you would like to see that over the nextyear?

I think the answer is about two-thirds internal and aboutone-third external and that roughly tracks, but not entirely tracks, ownedintellectual property. But it’s certainly our strategy to own our brands. Brent Thill -Citigroup: Okay. And just a follow-up on Grand Theft Auto, can you justgive us your conviction level for the Q2 ship and have you thought aboutputting GTA on the Wii?

We wouldn’t say it if we weren’t convicted.

We have a high conviction level and right now I think, nodisrespect meant for the platform, but I think there are other titles that arebetter suited to the Wii than Grand Theft Auto IV. Brent Thill -Citigroup: Thanks.

Our next question comes from the line of Ben Schachter withUBS. Benjamin Schachter -UBS: A few follow-ups on the marketing; anecdotally, it seemsthat there’s more TV coming out for Bioshock recently. I was wondering if therewas anything you learned from that that will relate to GTA marketing? And then also, do you expect to get any significant or howsignificant marketing support from the hardware companies for GTA? And then finally on GTA, do you expect to have a higherpriced collection edition of GTA? And if so, what percentage of sales couldthat represent? Thanks.

I think each product stands alone and you try to optimizethe marketing, as Ben said. This is an interest that’s near and dear to ourhearts so we could wax eloquent, but in a nutshell we went back on televisionwith Bioshock because we thought there was a terrific opportunity for theholiday season and we have reason to believe that will be successful. I’m not going to tip our hands on the GTA IV marketing plan.As Ben said, it’s a very robust plan. We are taking nothing for granted. Thefact that you have awareness, you still have to do it in a way that isconsistent with what consumers expect and the image of the brand and I believewe will come out with a very, very creative plan. But it doesn’t -- it won’ttrack the Bioshock plan. Each one stands alone. In terms of hardware support, we have a close relationshipwith the hardware licensors, very close relationship. We know they areobviously interested in building up their platform’s success level but we don’ttalk specifically about our confidential discussions and agreements with them.

Two more points -- you’ve got to bear in mind that Bioshockwas released in a window that was just prior to Halo 3, and so it’s not likewe’ve increased our marketing. That was always the plan to have the one-twopunch, give Halo 3 the air that it needed and oxygen that it needed and thenhave a second punch. That was always the plan. The other thing that you’ve gotto consider is that Grand Theft Auto is a title that is in a category on itsown. When it ships and is supported by television, it’s going to have a prettywide berth. The industry will give it a pretty wide berth. Bioshock was new IPthat needed to start with a core audience and then we extended beyond the coreaudience. So they are very, very different titles as Strauss said. Ofcourse we are always learning. I think one of the things we’ve subscribed to dosince we arrived at the company is to increase learning at the company to makesure that what we do in one title, we take best practices and apply it to othertitles and we continue to do that. But these actually are two different animals. Benjamin Schachter -UBS: And will there be any type of higher priced collector’sedition that could make up a meaningful percentage of sales?

We don’t have a percentage of sales. In any event, it wouldjust be a budget number, not an actual number by definition, but there will bea special edition. Benjamin Schachter -UBS: And the last question, given Carnival’s success, does thatchange your Wii development strategy?

We are -- it doesn’t change the Wii development strategybecause we’ve always been committed to the Wii. Since it arrived, we werecommitted to the Wii and to the DS. Does it change our view of what a familyoriented title can be, of that genre and that production value? Absolutely.

In a very positive way. Benjamin Schachter -UBS: Great. Thanks a lot.

Our next question comes from the line of Doug Creutz withCowen & Company. Mr. Creutz, your line is open. Our next question comesfrom the line of John Taylor with Arcadia Investment Corporation. John Taylor - ArcadiaInvestment Corporation: I gather you would have given us a date if you wanted towhen GTA is going to ship. I wonder, have you picked a firm date or are youbeing vague with everybody on that?

We’re really not being vague. We’re just confirming secondfiscal quarter. I understand that’s a three-month time span but we’ll announcethe date when we’re ready to announce the date and tailor our marketing plansaccordingly. We’re really not intending to be vague. We’ll announce thedate when we have the date. John Taylor - ArcadiaInvestment Corporation: Okay, so does that imply you don’t have a specific date eveninternally at this point?

Yeah, I’ve probably pretty much said everything I’m going tosay on it. John Taylor - ArcadiaInvestment Corporation: All right. And then on the -- I wonder if you could talk alittle bit about Jack of All Games. What are you guys seeing in terms of dealsor potential deals that might become available from publisher over-builds,whatever, going into the first quarter? Can you characterize that opportunityfor us?

It’s a great question. I think we all are eagerly awaitingto see what happens post-Christmas. There is I think probably some over-buildin certain areas, certain genres, certain platforms. I think it’s a terrificopportunity for Jack and we’ll be pursuing that at the right time. It’s alittle too early to tell but that’s actually something that Jack excels at andwe’ll be looking at that very, very carefully. It’s a great question. John Taylor - ArcadiaInvestment Corporation: Okay. All right and then Lainie, do you happen to know whatthe inventory distribution is between Jack and the publishing side?

Sure. It’s about 70% distribution and publishing is 30%.That’s the mix. John Taylor - ArcadiaInvestment Corporation: Okay, good. And the last question, if you add together youramortization of development costs in the P&L in fiscal ’07 and add to thatR&D and then the increase in capital development costs, you come up withwhatever it is, a couple hundred million dollars. I wonder, can you give us --can you characterize kind of what you expect the total cash spend on productdevelopment to look like if you use all those accounts by the end of the year,by the end of the next fiscal?

I don’t have that in front of me and we really have nevershared that before, so I can’t give you that information right now. John Taylor - ArcadiaInvestment Corporation: Directionally -- flat, up, down?

I don’t have it. Sorry. John Taylor - ArcadiaInvestment Corporation: Okay. Thank you.

Our next question comes from the line of Doug Creutz withCowen & Company. Doug Creutz - Cowen& Company: Hi. Sorry about that. We had a little phone glitch. It lookslike GTA IV has been given a rating in Australia. I guess first, could youconfirm that? Second, what went into that process? What did you have to showthem and has it been approved for both the 360 and the PS3 platforms? Thanks.

I can confirm that we received an M15-plus rating inAustralia. It’s the same rating, by the way, that we received on Grand TheftAuto: San Andreas. Typically we will submit the rating to Australia earlierthan other territories and the rating -- there’s a rating package that goes,that typically is submitted to the ratings board in every individual countryand it includes a bunch of documentation, a reel of the game, all the stuffyou’d expect in the ratings. There’s nothing special required on that basis.And the rating is fully what we had expected and we are very pleased to see it. Doug Creutz - Cowen& Company: I guess my question, did they have to see a final build ofthe game to give it a rating or was it just a selection of stuff from the game?

They have to see a substantially complete game. That’s notto say that we can’t alter it once we receive the rating. We can continue topolish the game. Doug Creutz - Cowen& Company: Okay. Is an ESRB rating a gaiting item for you guys todetermine a final ship date?

An ESRB rating is a gaiting item for every game to get thefinal ship date. Doug Creutz - Cowen& Company: Well, I guess to announce the final ship date. Let meclarify that.

I don’t think -- no, I don’t think we would wait for theESRB to announce a final ship date, no. Doug Creutz - Cowen& Company: Okay. Thank you.

Our next question comes from the line of Tony Gikas withPiper Jaffray. Anthony Gikas - PiperJaffray: Good afternoon. A few questions; could you let us knowwhat’s in your plan for next year in terms of stock-based comp and one-time items,just to reconcile the GAAP and non-GAAP? And second question, any update onpotential realignment of comp plans at Rockstar studios? And the thirdquestion, can you help us with a tax rate on ’08 and ’09?

Well, we have for the full year for 2008, we have $0.45 ofstock compensation and $0.07 of unusual business reorganization charges andlegal matter expenses. That’s the first part of your question, Tony. What’s thesecond part? Anthony Gikas - PiperJaffray: The second part is any update on the potential realignmentof comp plans at Rockstar and then tax rate for ’08 and ’09.

We don’t have any updates about our internal comp plans andas you know, anything material, we take great pains to announce as soon as wehave news.

And for the tax rate, we announced on our call, the Q3 call,I think a dollar amount specific to fiscal year 2008 for taxes and that numberhas not changed, and it’s for our international business, where we are ataxpayer. But in the U.S., we’ll continue to not be a taxpayer and we will alsoin 2009 anticipate not being a taxpayer in that year as well. Anthony Gikas - PiperJaffray: Okay. Thank you.

Our next question comes from the line of Edward Williamswith BMO Capital Markets. Edward Williams - BMOCapital Markets: Just a couple of quick questions for you; first of all, withregard to your R&D headcount, can you give us an idea as to where you endedthe fiscal year and how you expect that headcount to change throughout 2008?

We have currently 1,200 as of the end of 2007. I don’t havea 2008 number in front of me. We can get that number and we can get back to youon that.

I think you can safely assume it’s going to grow. We aregrowing our business. Edward Williams - BMOCapital Markets: Okay, and along those lines, how significant do you think 2KMarin should be?

I think we have great hopes for it. It remains to be seen.It’s obviously a key part of the strategy. It’s going to work on its ownintellectual property and work with other studios around the world. We thinkit’s a very positive step, particularly because we’ve moved senior managementout to Novato. Edward Williams - BMOCapital Markets: And then looking at your ’08 release schedule, can you giveus any granularity as to which quarters you expect some of these titles toship?

Not yet. It’s coming. Edward Williams - BMOCapital Markets: Okay, and this may be another one that’s coming but can yougive us an idea as to when it may be coming -- the business model around theepisodic content for GTA IV, is that something that we could get some color onas soon as when GTA IV ships or as far away as when the episodic content isavailable?

I think we -- you know, we’re pleased that we beat guidancetwo quarters in a row and we take great pains not to particularly because ofhow this is all developed. We now take enormous pains to make sure that wedon’t disclose forward-looking concepts before we’re highly confident that weunderstand where things are going. So we are not trying to be coy but if we are not going totell you something then we are also not going to tell you when we are going totell you. When we have the news, we’ll share it with you. Edward Williams - BMOCapital Markets: Okay, so that’s a TBD at this point. And then looking atyour international publishing in 2008, can you give us an idea as to whatpercentage of your publishing revenue you think will come from internationalmarkets?

We don’t disclose this in the 10-K generally but I would saywhen you look at international, it’s important to break out the sports businessversus everything else, because sports is primarily a domestic business. I don’t have exact numbers here for you but I’ll tell you,rule of thumb for non-sports business is about 50-50. Edward Williams - BMOCapital Markets: Okay, and then, looking at Jack’s and the inventory that youhave there, what’s your thought? Are you comfortable with the inventory levelsat this point or is that still a focus point in terms of reducing yourinventory?

Well, at this point it’s peak season, so it’s appropriatefor where it is but I’d like it to be lower because it’s a big number. But itis appropriate for where we are in the season and we are -- we scrub inventoryon a quarterly basis. I’m comfortable with what the number is and just as anoperational matter, we strive to get working capital down to as low a number aspossible. Edward Williams - BMOCapital Markets: All right, great. Thank you.

Our next question comes from the line of Edward Urban withBear Stearns. Edward Urban - BearStearns: Good afternoon. Thanks for taking my questions. First, I waswondering, your fiscal ’08 EPS or gross margin guidance, rather, is slightlyhigher than we saw following the prior GTA release. What specifically gives youthe confidence in being able to achieve that margin? And then secondly, recently you mentioned some Nintendoproduction issues related to Carnival Games. Can you elaborate a bit on theexact issue you are facing there and do you have any visibility at this time intowhen supply will improve there?

I think our margin is simply a broader mix of internallydeveloped titles. We own the intellectual property and that extends beyond GTAIV. And in terms of availability of product for the Wii, look, you know, thisis a high-class problem. When you have a hit title, sometimes it’s hard to keepit in stock and Nintendo is a great partner and we are working together to tryto get that product to consumers. The good news is consumers remain very, veryinterested and we see it’s really an evergreen product.

By the way, we’ve already begun to see supply ease up. Edward Urban - BearStearns: Okay, and in terms of the gross margin, you mentionedinternally developed product and it seems like Rockstar as a percentage ofsales will be comparable for this release in the fiscal year compared with theprior release, of the other divisions, were you expecting significantcontribution or what releases are you pointing to outside of Rockstar thatwould drive that margin?

Our distribution business margin is up as well as the 2KGames, the sports business as well has a pretty strong margin and in the lastrelease, our sports business wasn’t as strong at that time. Edward Urban - BearStearns: Okay. Thanks.

Our next question comes from the line of Evan Wilson withPacific Crest. Evan Wilson - PacificCrest Securities: A couple of questions for you; first, I’d like to follow-upagain on Carnival Games. Give us, if possible, could you give us a feeling of a-- you know, a basis of that 500,000 units that you said had sold so far, whatyou think the potential for the game would have been if there were no supplyconstraints? And also, what the sales cycle looks for that game now that it’sbeen out for a while and there’s some other stuff out there? Do you think thatyou have still a big opportunity to continue to sell it through the Januaryquarter? And then on the GTA release, if you could be a little bitmore specific around the PS3 and 360 platform. We’ve seen several otherpublishers decide to do a split release. I know that’s not ideal. Is itsomething you’d consider, even if it would keep both releases inside the fiscalQ2?

First question on Carnival Games, it’s almost an impossiblequestion to answer because you don’t know -- if a consumer wants a game, it’snot available, you just have no idea whether that game is -- you know, whetherthey would have purchased that game or not. It’s an impossible question toanswer. Do we think it has legs after January? Absolutely. It’sprecisely that title and that kind of title. We think it’s an evergreen titleand we’re encouraged by the fact that Wiis will continue to ship throughChristmas and beyond. We’re encouraged by the rain check program that they justannounced with Gamestop. We think as the installed base grows, it’s only goingto be good news for Carnival Games and we think it’s a must have title, so weare pretty excited about it and we think it’s going to extend well beyond thisChristmas. And as I said, we’ll be extending that to other platforms.Yes, it’s a growing franchise with growing characters and we plan to exploitthose as well. With respect to Grand Theft Auto, we’re committed tosimultaneously ship PS3 and 360. Evan Wilson - PacificCrest Securities: Thanks.

Our next question comes from the line of Adam [Knowle] withCowen & Company. Adam Knowle - Cowen& Company: Thanks, guys. All my questions have already been answered.

Our next question comes from the line of Mike Hickey withJanco Partners. Mike Hickey - JancoPartners: Follow-ups, I was curious if you could update us on yourcost cutting. I think you were looking for $25 million run-rate by the end ofyour ’08 period, with a potential for upside. Can you give us some clarity onthat?

That’s exactly still accurate. We expect to realize the $25million largely in its entirety by the end of ’08 and we think there’s furthercost reduction to be done, although to be clear, it will not be headcountdriven. It will be driven from non-headcount related costs, so really drivenfrom getting the core business more efficient but we don’t expect to do thisthrough headcount reductions. We are really happy with the team and thestructure and we are in growth mode.

Just a little bit of detail, I think we -- we think we’vegot about $10 million in 2007, the rest coming in 2008. It doesn’t includesavings from legal costs and we expect those legal costs to go downdramatically as we continue to settle out some of the outstanding litigation.So I would say $25 million is a floor. Mike Hickey - JancoPartners: Okay, and the legal costs, that was -- was that an extrathree to four per quarter, or --

In 2007, we spent $17 million in outstanding litigation and weexpect that number to be reduced dramatically. Mike Hickey - JancoPartners: Okay, great and then the margin on Borderlands, and this anexternally developed property, right? So it’s going to be a little bit lower?

Correct. Mike Hickey - JancoPartners: Okay. And I’m sure, Strauss, you would have pushed a pressrelease on this but SEC and DA investigation, any updates there or any [inaudible]you can give us?

We don’t have anything more to announce. We are doing thebest we can to get those issues wrapped up as expeditiously as possible. As youknow, we can put our best forward and we still have to address the internalconcerns of those agencies. Mike Hickey - JancoPartners: Okay. Thanks, guys.

Seeing as there are no further questions in the queue, Iwould like to turn the call back to management for any concluding remarks.

Really appreciate you joining us, we feel good about thequarter, we feel good about the way things are going and we feel especiallyoptimistic about the fiscal year that’s ahead of us. Thanks for joining ustoday.

Ladies and gentlemen, this concludes today’s teleconference.Thank you all for your participation.