UPDATE 3-Take-Two posts smaller-than-expected loss

* Q3 rev $138.6 mln vs Street view $125.3 mln

* Sees Q4 EPS ex-items 30-35 cts, rev $350-$375 mln

* Shares down slightly

(adds analyst comment, additional context)

By Gabriel Madway

SAN FRANCISCO, Sept 1 Take-Two Interactive Software Inc reported a slightly smaller-than-expected quarterly loss and topped revenue forecasts, but tempered its outlook for the current quarter, and the video game publisher's shares dipped slightly in extended trading.

The "Grand Theft Auto" publisher cautioned on Tuesday that consumer spending remained weak and retailers were treading carefully. Despite recent price cuts on consoles, Take-Two (TTWO.O) said it is cautious with its outlook for the remainder of its fiscal year.

Microsoft Corp (MSFT.O) and Sony Corp (6758.T), the No. 2 and No. 3 console makers in the United States, both slashed prices last month, a move game publishers have been clamoring for to help spur software sales.

"The retail environment is still challenging, we're still seeing retailers being careful about their initial buy-ins and very careful about inventory management, so we're trying to take a prudent approach to our guidance," Take-Two Chairman Strauss Zelnick told Reuters in an interview.

The company does not expect to release "BioShock 2," "Mafia 2," "Max Payne 3" or "Red Dead Redemption" for this year's holiday season.

Janco Partners analyst Mike Hickey expects those four titles to generate $400 million in sales for the company next fiscal year.

"I think its less about near term, it's more about the medium and longer term. Over the next two years, I think they have a fairly credible earnings stream."

Separately, Take-Two said it has agreed to pay $20.1 million to settle a consolidated securities class action related to allegations of sexually explicit images in "Grand Theft Auto" and the backdating of employee stock options.

The company roughly three-fourths of that paid by Take-Two's insurance carrier. The company said it has fully accrued for its portion of the settlement costs.

Take-Two said it continued to cut costs and sold its catalog titles aggressively in what was its lightest release quarter.

The company said it swung to a net loss of $55.5 million, or 72 cents a share, in the fiscal third quarter ended July 31, from a year-ago profit of $51.8 million, or 67 cents a share.

Excluding items, it posted a loss of 66 cents a share, better than the average analyst estimate for a loss of 69 cents a share, according to Reuters Estimates.

Revenue tumbled 68 percent to $138.6 million, compared with Wall Street's estimate of $125.3 million. The release of "Grand Theft Auto IV" last year makes sales comparisons for the company somewhat stark.

The company lowered the top end of its forecast range for earnings and revenue in the current quarter ending Oct. 31. It now expects earnings excluding items of 30 cents to 35 cents a share, on revenue of $350 million to $375 million.

Wall Street was expecting earnings of 35 cents a share on revenue of $369.4 million.

New York-based Take-Two's shares closed at $10.16 on the Nasdaq and fell to $10.06 in extended trading. (Reporting by Gabriel Madway; editing by Tim Dobbyn, Phil Berlowitz and Andre Grenon)