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Grand Theft Auto IV, the latest iteration of the hit video game franchise, racked up first-week sales of $500 million, Take-Two Interactive, the game’s publisher, plans to announce on Wednesday. The report exceeded the sales expectations of analysts.

The company is expected to report it sold six million copies of the graphically violent game, 3.6 million of them on the first day.

The sales exceed projections of industry analysts who were estimating that some five million consumers would purchase the game in the first two weeks.

The significance of the sales extends beyond buoying Take-Two, a company that has had its share of legal, financial and management struggles in the last few years. The company is the subject of a $2 billion hostile takeover effort by Electronic Arts, which is offering Take Two shareholders $25.74 a share for control of the company. If Take-Two can exceed sales expectations on Grand Theft Auto IV, it has the potential to drive up the share price and force Electronic Arts to raise its offer.

On Tuesday, Take Two’s shares closed at $26.35, up 29 cents.

Electronic Arts’ takeover bid turned hostile after Take-Two management said that it would not negotiate an acquisition agreement with Electronic Arts — or any suitor — until after the release of Grand Theft Auto IV. Now that the game is out, Take-Two may well have entered discussions with Electronic Arts and possibly other suitors who covet the Grand Theft Auto franchise, but Take-Two has declined to comment on whether such discussions are taking place.

If Take-Two and Electronic Arts wind up doing a deal, there is pressure on Electronic Arts and also on some Take-Two shareholders to get one done quickly. Electronic Arts has said that it needs to get a deal in time to subsume Take-Two’s assets before the holiday selling season.

Take-Two’s management has said that the success of Grand Theft Auto IV is awakening shareholders to the long-term value of the company’s stock and that if investors can be patient it can command a higher price in the long term.

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Electronic Arts is playing it cool in the pursuit of Grand Theft Auto developer Take Two Interactive. The would-be target is cringing under EA’s steely gaze and still complaining about “unfair value” as loudly as ever.

Take Two’s shareholders reelected the entire slate of sitting directors without opposition from its would-be acquirer, and then passed a resolution to give 1.5 million new shares of stock to Zelnick Media. That’s the private investment company that replaced most of the Take Two board last year and is owned by chairman Strauss Zelnick.

In response, EA calmly lowered its bid from $26 per share to $25.74, like the company said it might if this stock grant was voted through. That way, the extra cost of the new shares is negated, and the purchase price remains steady at $2 billion cash. The release of GTA: IV in less than two weeks doesn’t seem to faze the gaming giant, and no competing offers from other large game publishers like Activision have turned up.

This is technically a hostile takeover, since Take Two rejected the original offer, and EA then took the matter straight to shareholders. But as hostile takeovers go, this one’s actually pretty peaceful. The simple fact that EA never submitted an opposing slate of directors is a sign of the company’s smug confidence in its ultimate success. 6.4 million shares have already been signed up for the offer, with about a month to go before the newly-extended deal deadline.

The FTC is looking into antitrust problems around the proposed buyout, but given how quickly the Activision-Vivendi deal passed muster, I don’t see how tacking the relatively small Take Two onto a hulking EA would change any competitive landscapes, despite the negative effect an acquisition would have on the sports gaming scene. The industry is certainly consolidating quickly down to a mere handful of very large players, but that’s not very different from what happened in telecommunications in the last decade, or how the airline industry is boiling down to just a few large survivors.

EA will have its way with fair Lucrece, er, Take Two. I think the target is fighting the proposal simply because Zelnick and Friends are hoping to enrich themselves a bit more at the expense of other shareholders. That’s exactly what the new stock grant accomplished. It’ll be a bit sad to see Take Two lose its unique identity and get subsumed into EA’s (lack of) culture, but this is not personal. It’s just business.

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Take-Two Interactive Software told shareholders Wednesday to reject a $2 billion hostile bid from a rival video game publisher, Electronic Arts, as too low, but said it had begun to explore a sale or other options.

Take-Two said it was still open to a combination with Electronic Arts or another company, but not before the April 29 release of its Grand Theft Auto IV, widely expected to be the best-selling video game this year.

Electronic Arts responded by saying its offer was “full and fair” and reflected the value of Take-Two’s game franchises, employees and improving operations.

“By advising its stockholders to reject the offer, Take-Two’s board is exposing them to further delays which may reduce the value and the certainty of a potential transaction,” Electronic Arts said.

Take-Two said its board had begun considering strategic alternatives and preparing materials that any potential buyer would need to conduct due diligence. It said it had indications of interest from other companies since Electronic Arts made its $26-a-share offer, but had not held any substantive talks.

Take-Two also adopted a 180-day shareholders’ rights plan, or poison pill, to guard against Electronic Arts’ hostile bid and delayed its annual meeting in New York to April 17 from April 10. The Electronic Arts offer expires on April 11, although the company can extend it.

Electronic Arts, the world’s largest video game publisher, took its all-cash bid directly to stockholders this month. It faces stepped-up competition from a rival, Activision, which is merging with the video games unit of the French conglomerate Vivendi.

Many analysts expect that the bid by Electronic Arts will ultimately succeed, but that the company may have to raise its offer.

“This thing is very much in play, and we’re seeing public bargaining,” said Todd Mitchell, an analyst with Kaufman Brothers.

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April Fools Day isn’t until next week, but Sony has already fallen prey to one nasty trick. The electronics giant updated the consumer alerts section of its official PlayStation Web site to say that “there has been a possibility of unauthorized access to personal information on the PlayStation Store through PCs…”

From the description given, it appears users’ passwords were at risk. Given access to such passwords, unauthorized users could sign on to an account, obtain the real user’s personal information, change their password, and rack up charges on the PlayStation Store. While the store saves credit card numbers, it does not display the full number to the user, so thieves would be unable to swipe credit card information for use elsewhere.

Sony said it has already fixed the issue and that the network’s security has been restored. The company has contacted users that it believes may have been victims of the security breach, and suggests that concerned gamers can ensure their accounts are safe simply by logging in with their pre-set password.

If users are unable to log in, Sony is asking them to reset their passwords, check to see what unauthorized activity has taken place, and e-mail the company at PSN_account_support@playstation.sony.com for assistance.

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Electronic Arts Inc said on Monday that Chief Financial Officer Warren Jenson will leave the video game publisher, which is pursuing a hostile takeover of rival Take-Two Interactive Software Inc.

Electronic Arts did not give details on the reasons for his departure, but said Jenson will stay on board to help the company close its fiscal year and financial reporting. A replacement will be named shortly, it said.

Jenson has served as CFO since 2002 and helped shepherd the company through a U.S. regulatory probe of the company’s stock option grant accounting. The U.S. Securities and Exchange Commission ended its inquiry into the company’s options practices in November, with no enforcement action taken.

Jenson said in a statement that it was “time for me to write the next chapter in my career.”

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Yesterday, Ubisoft announced it would leverage its just-purchased Tom Clancy license to become a player in the film-production business. One day later, its partial owner, Electronic Arts, announced that it too is getting into the film business. The second-biggest third-party publisher in the world announced that it is partnering with Starz Media to adapt the internally developed sci-fi survival horror shooter Dead Space into an animated feature film.

The Dead Space film will occupy the intervening period between the end of the recently announced comic-book series and the beginning of the game, and follows an Alien-esque plot about an exploratory mining spaceship stumbling across a dormant alien beacon in a remote area of outer space. The find sets off a chain of events that see a slumbering species reawakened, and the spaceship’s crew struggling to escape the ancient ruins of the dig site with their lives.

Starz’s internal studio Film Roman will be producing Dead Space. The production house is best known for its work on popular animated television series such as Fox’s The Simpsons and King of the Hill. The film is expected to air on broadcast TV day and date with the game’s launch on October 31, and a DVD release is slated to follow sometime thereafter. According to today’s announcement, EA and Starz will be teaming up to adapt two other franchises into animated films.

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In February, HD DVD creator Toshiba officially called an armistice in the high-definition video playback wars, saying it would cease production of its format standard and let it fade into obscurity alongside Sony’s Betamax. While Toshiba’s pullout defaulted the victory in the HD disc war to the Sony spearheaded Blu-ray Disc Association, skirmishes surrounding the format linger on.

The US International Trade Commission said this week that it will be launching a patent infringement investigation of “certain short-wavelength light emitting diodes, laser diodes, and products containing same.” Parties named in the investigation include Blu-ray creator Sony, along with 30 other top electronics manufactures, including Nokia, Samsung, Sharp, Toshiba, Pioneer, and Hitachi.

The investigation stems from a complaint filed by Gertrude Neumark Rothschild on February 20. Rothschild claims diodes currently imported for use in “hand-held mobile devices, instrument panels, billboards, traffic lights, HD DVD players (e.g., Blu-ray Disc players), and data storage devices” infringe upon one of her patents, and thus are in violation of section 337 of the Tariff Act of 1930. As such, Rothschild is requesting that the US trade body issue exclusion and cease and desist orders to all companies named in the investigation.

Sony had not responded to requests for comment on the investigation as of press time.

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