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Author Topic: "Substantial" doubt over Atari's future as profits plunge  (Read 3647 times)
Arthur_Parker
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on: February 10, 2006, 10:24:52 AM

Source

Quote
Publisher continues cost-saving moves as HSBC refuses to extend further credit

Atari Inc, the US division of French publisher Infogrames, has confirmed that the company's ability to continue as a going concern is now in question after its third quarter results slid into the red.

The firm's results for the quarter ended December 31st revealed sales down to $100.8 million from a figure of $156.4 million a year previously, while profits collapsed into a net loss of $4.8 million, from a profit of $19.6 million in the previous year.

The figures are a slight improvement over the rest of the financial year to date; over the past nine months, Atari's sales have fallen more than 50 per cent year on year to just $163.4 million (down from $332.5 million), and the firm is trailing a nine-month loss of $62.8 million compared with a nine-month profit of $14.8 million in the last three quarters of calendar 2004.

Even more troubling for the company than its losses, however, is its precarious financial situation - with the company currently in default on a variety of covenants related to its credit facility with HSBC, which is currently refusing to extend further credit to the struggling publisher.

Atari is now exploring the various measures available to it to stay in business, including moving to a new credit facility, the sale of various intellectual property rights and the sale or even closure of some of its development studios.

The company has also revealed that it's looking into making layoffs and suspending various projects in development in a desperate attempt to control its costs and lower its working capital requirements.

In the midst of the crisis, another blow to Atari has come with the departure of the company's Chief Financial Officer, Diane Baker, who has resigned to "pursue a new opportunity" - with no replacement yet being announced.

Despite the uncertain future the company faces, chief executive and chairman Bruno Bonnell announced a number of new products along with the firm's Q3 results - namely a new game in the Stuntman franchise for the Xbox 360, a new Alone in the Dark title for the PC, and a return to the classic Battlezone franchise on the PSP.

Unsurprisingly, shares in the publisher sank on the news, and were trading down nearly 14 per cent at $0.78 in New York at the time of writing - having dropped almost 30 per cent of their value overnight to open at $0.63, but rallying slightly as the day went on. Atari's stock hasn't traded at over the $1.00 mark since mid-January.

No comment from Turbine as yet how or if this is going to affect DDO.
shiznitz
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Reply #1 on: February 10, 2006, 10:27:15 AM

What would you expect Turbine to say, exactly? Issue a press release titled "Oh Fuck!"  cool


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Arthur_Parker
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Reply #2 on: February 10, 2006, 10:31:22 AM

Quote
The company has also revealed that it's looking into making layoffs and suspending various projects in development in a desperate attempt to control its costs and lower its working capital requirements.

DDO isn't gold yet I don't think, printing the CD's, boxes etc is an upfront cost.  I dunno, Turbine will at least say DDO is shipping as normal I expect.  They will comment, they have to.

Edit to add more.

http://biz.gamedaily.com/industry/feature/?id=11825

Quote
Atari Posts Net Loss; CFO Resigns

The losses keep piling up for Atari. There's only so much of that a company can withstand before it's game over. Worse yet, the company announced that its credit line has been cut off. Shares in the company have plummeted in after-hours trading. More within...

   
The trend of poor holiday performances for Western publishers continues, as Atari, Inc., the subsidiary of France-based Infogrames Entertainment SA, today reported weak fiscal results for the quarter ended December 31, 2005.

Sales down, losses up
Net revenue amounted to $100.8 million, as compared with $156.4 million in the same period during the year prior, while publishing net revenue was $82.4 million, down from $137.9 million. Net loss for the third quarter of Atari's fiscal 2006 was $4.8 million, or $0.04 per share, compared to net income of $19.6 million, or $0.16 per share, in the year earlier period. This follows a second quarter in which the company saw its net loss almost double at $25.2 million.

Atari said that it is continuing to take steps to streamline its U.S. operations. As a result, the company recorded Q3 restructuring charges of $1.1 million; excluding these charges and losses from discontinued operations, Atari's loss for the holiday quarter would have been $3.4 million, or $0.02 per share.


[   "The Company cannot guarantee... [we] will generate sufficient resources to fully address the uncertainties of our financial position."   ]   


Along with its financial results today Atari also announced that Diane Baker has resigned her position as Atari's Executive Vice President and CFO, to be effective shortly. The company's continuing woes were not cited as a reason for her leaving; she did not jump ship, but instead left "to pursue a new opportunity," the company said.

Sales for Atari during the holiday were driven by Dragon Ball Z: Budokai Tenkaichi (PS2), Dragon Ball Z: Super Sonic Warriors 2 (NDS), The Matrix: Path of Neo (PS2, Xbox and PC), and Atari Flashback 2 (Plug-and-Play). The company noted, however, that revenues were expected to be down because fewer titles were released during the quarter as compared with Q3 from the previous year. That said, "a weak holiday season for the industry" and "product launch delays" contributed to Q3 results that were "substantially below the Company's expectations."

Atari's nine-month results were equally gloomy. Net loss was $62.8 million, or $0.50 per share, compared to net income of $14.8 million, or $0.12 per share, in the year-earlier period.

In need of extra credits
And the bad news doesn't stop there; it gets worse. Atari said it was "advised by HSBC Business Credit (USA) Inc. that it is in default on certain covenants under its revolving credit facility and that HSBC will not currently extend further credit. As of February 9, the Company had no balance outstanding under the credit facility. HSBC also stated that it may agree to review revised business plans or projections and make or not make future advances under the facility. The uncertainties caused by these conditions raise substantial doubt about the Company's ability to continue as a going concern."

Atari then promised investors that it is not giving up hope and is currently looking into ways to rectify its miserable financial situation. "The Company is taking definitive steps to address its current financial position and restore shareholder value, and continues to believe in Atari's ability to compete in the interactive entertainment industry," Atari said in a statement. "The Company is currently exploring the replacement of its credit facility, potential licensing or sale of selected intellectual property rights and the sale or closure of development studios. Additionally, the Company will continue to control costs and reduce working capital requirements in order to conserve capital through potential personnel reductions and the suspension of certain development projects. However, the Company cannot guarantee the completion of these actions or that such actions will generate sufficient resources to fully address the uncertainties of our financial position."

Atari provided no guidance for the remainder of its 2006 fiscal year or for the 2007 fiscal year. The publisher's Q4 line-up includes Desperados 2: Cooper's Revenge (PC), Dragon Ball Z: Shin Budokai (PSP), Driver: Parallel Lines (PS2 and Xbox), Dungeons & Dragons Online (PC), Kao the Kangaroo Round 2 (PS2, Xbox, GC and PC), Kao Challengers (PSP), Marc Ecko's Getting Up: Contents Under Pressure (PS2, Xbox and PC) and Tycoon City: New York (PC), among others.

And its initial fiscal 2007 portfolio is perhaps even more promising: Alone in the Dark: Near Death Investigation (Xbox 360 and PC), Battlezone (PSP), Neverwinter Nights 2 (PC), Stuntman 2 (Xbox 360), Test Drive Unlimited (Xbox 360, PC), TimeShift (Xbox 360 and PC), and more titles from the Dragon Ball Z franchise.

"With the new console cycle now underway, new technologies bring with it new challenges," commented Bruno Bonnell, Chairman, CEO and Chief Creative Officer of Atari. "As we anticipated, during the holiday season the industry felt a depressed demand for current generation titles at retail and, as a result, publishers will need to strategically address the marketplace, balancing titles across multiple consoles, as well as portable devices. Atari remains committed to providing gamers with titles across all platforms focusing on its largest franchises, including Dragon Ball Z, Driver, Test Drive and Dungeons & Dragons, to name a few. Additionally, we will look to increase our marketshare on portable devices such as Nintendo DS and Sony's PSP as the demand for quality titles for these formats continues to grow."

Atari may try to reassure investors, but many seem unconvinced. Upon hearing the news many ridded themselves of the stock in after-hours exchanges and as a result shares of Atari (ATAR) were off by 32 cents (36 percent) to 56 cents. During regular trading Atari closed at 88 cents a share on Thursday.
« Last Edit: February 10, 2006, 10:40:18 AM by Arthur_Parker »
HaemishM
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Reply #3 on: February 10, 2006, 11:27:16 AM

Diane Baker resigns to "purusue new opportunities" one of which is probably buying groceries without going to the unemployment office, I'd imagine.

Phred
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Reply #4 on: February 11, 2006, 01:49:52 AM

So can we conclude that the brand name Atari that Infogrames US bought can be labled the Kiss of Death yet?

So far it's clobbered Warner Bros, the Trameil clan and now Infogrames.

Strazos
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Reply #5 on: February 11, 2006, 07:15:50 AM

Things are not looking good for Atari....their lineup looks like shit to me.

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