Atari To Close Studios, Shows Poor Q3 Earnings

Author: by Nich Maragos, Simon Carless

Atari Inc. has announced its financial results for the October-December 2004 financial quarter, showing a very disappointing 15 percent reduction in profit (from $23 million USD last year to $19.6 million USD this year) compared to the Christmas 2003 period, and went on to "outline the first phases of its strategic plan since the installation of its new President and Chief Executive Officer, Jim Caparro, at the end of November 2004." In relation to this, the company simultaneously announced that it would close its publishing studios located in Santa Monica, CA (originally set up as part of Infogrames' 'Hollywood convergence' attempts) and Beverly, MA (the former offices of Microprose/Hasbro Interactive), and will relocate the functions handled by those studios to Atari’s corporate headquarters in New York, which did not previously hold major publishing operations. Existing internally-owned development studios, including California's Shiny and Texas' Paradigm, were apparently not affected by this shift. Revealing that net revenue decreased from $190 million to $161.8 million, Atari cited the console shortage and a highly competitive holiday season as factors in the downturn. Better-selling titles for the quarter included Atari Anthology (PS2 and Xbox), Dragon Ball Z: Budokai 3 (PS2), Pirates! (PC), RollerCoaster Tycoon 3 (PC) and the Company’s stand-alone, plug-and-play Atari Flashback Classic Game Console. The company also announced to financial regulators that it would be in breach of its covenants to its senior credit facility, GECC, which is managing some of the longer-term debt that the company has, but that the facility "are extremely comfortable with where we [financially] are." "We are extremely optimistic about Atari's future, while also being realistic about the challenges that lay ahead," said Atari President and CEO Jim Caparro. "We've begun to evaluate and execute several strategic initiatives that mark the first steps towards simplifying Atari's global operations." The company's expectations for the final quarter of the 2005 fiscal year are $70 million to $80 million in net revenue, with a net loss of as much as $10 million USD. The company is also rescheduling some of its upcoming titles, such as Dragonshard and Boiling Point, so that they fall into the upcoming 2006 fiscal year.