By Yi-Wyn Yen

Watching the latest saga between video game publishers Electronic Arts and Take-Two is like witnessing two rival tennis pros throw flowers at one another.

On Friday, EA (ERTS) and Take-Two (TTWO) engaged in a press release battle that did not bring them any closer to reaching a deal.

EA extended its $2 billion tender offer to purchase the maker of the highly-anticipated Grand Theft Auto IV by 30 days. Though the all-cash bid remains the same, EA lowered its per-share price to $25.74 from $26 to reflect a dilution of additional shares that will go to Take-Two’s management. Take-Two closed at $25.98 on Friday.

EA’s deadline for Take-Two shareholders to accept the offer was originally set to expire at midnight Friday, but so far the gaming giant has won just 8% of the total shares it needs. In a statement, EA said it “continues to believe that the offer price is full and fair.”

Shortly after, Take-Two retaliated by firing off its own release. The company’s chairman, Strauss Zelnick, called the 6.4 million shares that were tendered “minuscule.” On Thursday evening at the annual shareholder meeting, Take-Two shareholders backed a proposal to give ZelnickMedia, the consulting firm that manages Take-Two, 1.5 million shares in restricted stock. Zelnick said that was “indisputable evidence” that its stockholders think its share value is “superior to the EA offer.”

EA has argued that the vote to back Take-Two’s management does not reflect the majority of Take-Two’s shareholders because they weren’t eligible to vote. Only those who held the stock prior to Feb. 19 were allowed to attend the meeting. Analysts estimate that between 50% to 70% of Take-Two’s stock has been sold since EA went public with its takeover bid on Feb. 24. An EA spokesman likened rewarding ZelnickMedia, which is expected to get a windfall if the company gets sold, to “having your last employer give you a million dollar bonus that your new boss is forced to pay.”

Take-Two refuses to talk with EA until after April 30, the day after GTA IV launches. Analysts expect the company will sell roughly 15 million to 20 million copies through 2009. Take-Two’s board unanimously rejected EA’s offer because it was “highly opportunistic and poorly timed” to get the most out of GTA, Strauss said at the shareholder meeting.

The alternative for EA is to simply walk away from the deal. But analysts say that is an unlikely scenario. They still anticipate the deal to go through, though at a slightly higher share price between $26 to 28. Take-Two shareholders have until May 16 to consider the tender offer.

By Scott Moritz, writer

Google’s (GOOG) blockbuster quarter squashed slowdown fears and help lead the entire market higher Friday.

Fans enjoyed the biggest one-day Google stock rise — up $89.72, or 20%, to $539.26 — in the past two years as the Net search giant blew past earnings targets by sidestepping a big drop in U.S. paid click traffic during the three months ended March 31.

Wall Street had been a little pessimistic going into the earnings report Thursday, after ComScore (SCOR) surveys showed a third straight month of miniscule advertising traffic growth related to domestic searches. The reports helped confirm suspicions that the drag of decreased consumer spending was starting to spread beyond retail and housing to the tech sector.

But the fears of a revenue slump at Google were overestimated as the company saw strong international paid click sales, and the effects of higher prices. ComScore felt a little investor scorn, perhaps undeservedly, for its role in the Google earnings anxiety.

Google reported 20% growth in overall paid click revenue over year-ago levels, which was down from the 30% pace in the prior quarter, but well above the 1.8% U.S. rate ComScore reported for March. ComScore’s snapshot flagged the U.S. slowdown but did not capture the bigger picture, namely Google’s expansion overseas, which accounted for 51% of total sales, up from 47% a year ago.

Analysts who had braced for a slowdown going into the earnings report quickly turned bullish after Google’s earnings were released.

Jefferies analyst Youssef Squali upgraded Google to Buy from Hold because the company demonstrated it was capable of “defying economic headwinds.” Squali however, kept his stock price target at $600.

Sandeep Aggarwal, an analyst with Collins Stewart, started coverage on Google Tuesday with a neutral rating with concerns about a slowing economy and declining ad budgets. On Friday Aggarwal upgraded Google to a buy for the company’s ability to penetrate international markets and make more profitable product improvments.

Aggarwal’s price target for Google is $615.

One notable downward adjustment came from Morgan Stanley analyst Mary Meeker. Meeker, who rates Google a buy, cut her 2008 sales estimate by about 3% to $22.4 billion from $22.9 billion. Meeker said the move was a “precaution to potentially continuing paid click volatility.”

Meeker does not set price targets.

One element of Google’s big performance may reflect well on rival Yahoo (YHOO). Though Google gained market share in the first quarter at Yahoo’s expense, the health of the sector seems to be intact. This should give Yahoo some added sway in its standoff with Microsoft (MSFT) over the $42 billion proposed merger.

Slumping consumer spending leads to more belt-tightening in techland as AT&T (T) says it will cut about 4,650 employees as part of a “streamlining” effort.

The San Antonio, Texas-based phone giant says the cuts will amount to about 1.5% of its 310,000 staff and largely involve regional managers. The move comes amid a steep decline in local phone lines as customers cancel service. The shrinking trend in Ma Bell’s core business also comes during an economic slowdown and signs that consumers are becoming more tight-fisted.

Competition has also intensified in the past year as cable companies like Comcast (CMCSA) and Time Warner Cable (TWC) sell more phone services as part of a video and Internet bundle. AT&T has been slow and somewhat stymied in its efforts to roll out a competing video service to more markets.

AT&T says it will take a $374 million charge in the first quarter. The company is on deck to report its first-quarter results Tuesday.