Innovation & Design

Atari Posts Sharp Loss


Atari's fiscal results for the fiscal 2006 first quarter (ended June 30) paint a less than healthy picture of the company's finances. Net revenue for the quarter was $24.2 million, compared to $108.1 million in the same period the year prior- a drop of 77%. The company attributed the significant revenue drop to the June 2004 release of DRIV3R, which was one of the quarter's top SKUs, and the company's decision to release less titles in the 2006 fiscal year in order to focus on quality.

Missed Expectations

Net loss for the quarter was $32.8 million, or $0.27 cents per share, compared to a net income of $12.1 million, or $0.10 per share the year prior. Analysts were expecting a net loss of $0.11 a share on revenue of $55.6 million, or an almost 120% greater return than was reported.

Atari noted that $2.2 million was spent on restructuring charges, as the company continued efforts to restructure US operations, including closing studios in Santa Monica, California and Beverly, Massachusetts. Without these charges the company noted that Q1 loss would have been $0.23 per share- still well off of analyst's prediction of $0.11 lost per share.

Positive Outlook

The company remains outwardly confident that a focus on fewer, but higher quality SKUs will prevent dismal quarterly results like those just reported from happening again.

"With many exciting advances happening within our industry and at Atari, we will continue to execute on our strategic initiatives in order to better position Atari for future growth," stated Bruno Bonnell, Chairman, CEO and Chief Creative Officer of Atari. "Fiscal 2006 is a year of focus at Atari as we are committed to improving the Company's financial position, growing our market share on a global basis, capitalizing on technological innovations and releasing unique new products which appeal to both hardcore gamers and the mass-audience."

The company has a variety of high-profile titles slated for release during the remainder of FY 2006, including Indigo Prophecy, Marc Ecko's Getting Up: Contents Under Pressure, and The Matrix: Path of Neo.

The company opted to not release guidance for its current quarter or for the rest of the fiscal year however, which betrays some of its outward confidence.

A Helping Hand

The company failed to meet the financial result required by its chief financier HSBC Global, but will continue operations thanks to additional support from parent company Infogrames, as it attempts to return to profitability.

"As a result of the support of IESA, we believe Atari will have the financial flexibility necessary to meet the current demands of our marketplace, be better positioned for future growth and the worldwide exploitation of owned and licensed IPs, engage leading development studios and secure new relationships with the best creative talent in the entertainment industry. There is substantial opportunity to expand our business going forward by focusing on product. Our path for the future of Atari is clear and, as evident from our actions, we believe we are positioning Atari to maximize the benefits of the continued growth and evolution of the interactive entertainment industry," Bonnell said.


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