There is an increasing concern that the Atari brand is finally on the verge of disappearing, as it concluded a quarter where its losses are bigger than its revenues, which have crashed to just $10.4 million.
Three years ago Atari amassed sales of $343 million, which fell to $206 million last year and $122 million for the year just gone. Its belated quarterly figures to June 30 have now just been filed, at a revenue level closer to a $40 million run rate for the coming year, and underinvestment in new games means that there is little left of the once great native US gaming operation which is now controlled by French gamer Infogrames.
Last month the new Infogrames CEO Patrick Leleu slashed the board of Atari and dragged in new high powered replacements, which looked like they have the job of finding a buyer for the existing game titles. Over the past two years the company has sold off most of its game development facilities.
As we said revenue for the quarter was $10.4 million, compared to $19.5 million last year, which contributed to a net loss of $11.9 million, compared to net loss of $7.3 million last time.
By filing its Form 10-Q it may avoid being delisted by Nasdaq for non-filing, but as the company begins to run out of money there may be other reasons for Nasdaq to be concerned, which is why the company last month changed its debt position from a $3 million line of credit with Guggenheim Corporate Funding (it had been a $15 million line, but it hauled it in) to a $10 million revolving credit line backed by BlueBay Asset Management which holds shares in the parent company Infogrames Entertainment.
But if the new management is preparing the company for a sale, and these funds are just to keep Atari afloat, then they will have to be quick about finding a buyer. The company used operational cash of around $3.8 to support the bigger loss of $11.9 million, whereas it used $12.4 million the previous year when the loss was only $7.3 million.
Atari says that most of its new games releases, the few it has left, are focused on the holiday season, which is pretty much its last chance, as it will need to spend virtually every cent it can lay its hands on finishing and promoting those games during the second and third quarters of its fiscal year.
In Atari’s quarterly filing it made it clear that the management continues to seek additional financing, gave no guarantee that it would manage the trick, setting the scene for a messy closure, perhaps a Chapter XI filing, sometime in the run up to Christmas, if things don’t work out..
The company cut to the bone in May losing 20% of its staff and at present is reliant for 60% of its revenues on the big US retailers Wal-Mart, GameStop, and Best Buy, but given the amount of competition for shelf space in these giants, Atari cannot take these sales for granted either, especially as new games from other suppliers emerge for Xbox 360, the Nintendo Wii and Sony PlayStation 3.
The ‘Atari’ brand has lost almost all of the cachet that was associated with it in the past although the company is now considering licensing the ‘Atari’ name for use in products other than video games. Given that the name itself is now licensed, that may not be possible.