Wedbush: Atari To Fall Short Of Expectations

Market analyst firm Wedbush Morgan Securities has predicted that struggling game publisher Atari will fail to meet market expectations with its fiscal first quarter 2007 earnings, which will be released after close of business on Wednesday, August 9. However, the firm noted that Atari's earnings could benefit from the recent sale of many of its intellectual properties. In July, the company announced it sold its Driver franchise and most of the assets of the Newcastle, UK-based Reflections development studio to Ubisoft for $24 million. In addition, Atari announced in May the sale of the TimeShift and Stuntman franchises, as well as the Games.com casual game site, and Texas-based studio Paradigm Entertainment. Wedbush expressed some concern that while Atari's liquidity has improved from these divestitures, it may not be able to generate “substantial” revenue in the future with so many of its core franchises now sold to other companies. The firm commented that according to NPD U.S. retail video game software sales data, Atari's game sales for the period are down a quarter from the previous year, and that it believes that the company's latest release, Dragon Ball Advanced Adventure, sold ”fewer units than we expected.” The analyst added that while it continues to expect that Atari will eventually return to profitability, it will do so with “substantially” lower revenues than previously expected, due mainly to the loss of so many intellectual properties. Wedbush has maintained its target price of $0.68 for shares of Atari, along with its label of "hold," though it notes that uncertainty, such as that associated with game release timing, declining average software prices, the effects of competition, and slower than expected demand for console hardware, remains a risk. The stock opened its trading today at $0.70. When reporting its results for the fiscal 2006 fourth quarter and 2006 year end, Atari emphasized a need to cut costs by providing providing games that have "mass market appeal", a concept that it believes can be realized through lower prices, as well as through digital distribution. The company as also expressed an interest in the growing casual game market as a possible area of investment.