Atari on Its Last Life?

[82-T/A]

 

 

Atari (Nasdaq: ATAR) didn't disappoint. It once again reported operating and net losses; the fourth-quarter release is full of all the gory details.

 

The company just can't seem to get a break, but that's not surprising; the video game industry is in the midst of a transition to new console systems by Sony (NYSE: SNE), Microsoft (Nasdaq: MSFT), and Nintendo. But you can't blame it all on that macro fact, since Atari has been doing poorly for a long while now.

 

Let's go right to the data. Net revenues for the fourth quarter declined 15%, to $54.7 million. The operating loss improved to $4.3 million, versus $9.8 million a year ago. The net loss also improved, coming in at $4.3 million ($0.03 per diluted share), compared to a net loss of $9.1 million ($0.07 per diluted share). Excluding restructuring charges, the loss would have been $0.01 per share.

 

For the year, revenues declined 46.4% to $218.7 million. An operating loss of $66.7 million compares very unfavorably to the operating income of $6.3 million observed in the previous fiscal year. The net loss calculated out to $67.1 million ($0.52 per diluted share), a sore change from the net profit of $5.7 million ($0.05 per diluted share) that the company achieved in its previous fiscal year. Again, restructuring events influenced the loss; without them, it would have been $0.45 per share.

 

So what happened to make revenues plummet? Atari is doing its best to move inventory from shelves to homes by instigating a value-pricing scheme called the GamersFIRST program; the company stated that this affected reserves in the fourth quarter. That's all fine and dandy, but it shouldn't deter investors from inferring something that the company actually stated for everyone to know: Atari has become riskier than ever. Management isn't even sure if the company can continue on if things don't improve quickly.

 

Total costs and expenses declined nicely in both the quarter and full fiscal year-- this is a good thing. But as Rich Smith pointed out in his Foolish Forecast, the revenue declines have essentially been wreaking havoc on the bottom line. And as for the margins at the end of the fiscal year -- the less said the better. The year-over-year declines in this area continue the overall woeful thesis.

 

What can Atari do to survive? I tend to be a big believer in the power of brands, but with one as tarnished as much as Atari's, I'm quite pessimistic about the options available. As CEO Bruno Bonnell states, "We must recapture what made Atari an iconic brand." I agree with his sentiment on the casual-gaming market -- Atari's portfolio probably would be a good fit for that area of video gaming. (I mean, who doesn't like a quick round of Asteroids every now and then?)

 

But is it going to make a difference to the long-term prospects of the company? Will it ever again be a force to be reckoned with in an industry that it at one time ruled? I really don't see that happening. The company obviously doesn't have the cash flow to compete effectively with the big guns of Activision (Nasdaq: ATVI), Electronic Arts (Nasdaq: ERTS), or THQ (Nasdaq: THQI).

 

I'm usually the one saying such-and-such video game company will benefit from the upcoming new console cycle. But not this time. And there's no need to talk of valuation here either. Atari is one stock to stay far, far away from. I still have an Atari 2600 -- I'll never get rid of it. But to those who've been speculating on this stock, I'd say it's finally time to cut your losses and run.

[jaybird3rd]

What can Atari do to survive? I tend to be a big believer in the power of brands, but with one as tarnished as much as Atari's, I'm quite pessimistic about the options available. As CEO Bruno Bonnell states, "We must recapture what made Atari an iconic brand." I agree with his sentiment on the casual-gaming market -- Atari's portfolio probably would be a good fit for that area of video gaming. (I mean, who doesn't like a quick round of Asteroids every now and then?)

 

But is it going to make a difference to the long-term prospects of the company? Will it ever again be a force to be reckoned with in an industry that it at one time ruled? I really don't see that happening. The company obviously doesn't have the cash flow to compete effectively with the big guns of Activision (Nasdaq: ATVI), Electronic Arts (Nasdaq: ERTS), or THQ (Nasdaq: THQI).

Well, there you have it. Atari can't compete in the multi-million-dollar mainstream game market, so why continue to throw money down that hole? They should focus instead on casual gaming (especially their successful Flashback series), more and better emulation compilations for modern consoles and handhelds, and the strong nostalgic appeal that the classic Atari properties continue to have.

[NovaXpress]

The stock is rapidly appraoching the magic 50-cents-per-share mark of doom. Atari is about to be taken off the NASDAQ listings. D&D Online, their supposed savior, is a complete disaster.

 

But let's here what Atari CEO and total assclown Bruno B has to say:

"The Atari brand has stood for innovation and pioneering spirit for more than 30 years. As Atari executes on its strategic objectives, we must recapture what made Atari an iconic brand. During fiscal 2007, we will focus our efforts on established franchises, new major motion picture licensed IP with significant marketing campaigns, online products and titles for portable devices."

 

Hmmm. "The Atari brand has stood for innovation and pioneering spirit for more than 30 years. . .we will focus our efforts on established franchises, new major motion picture licensed IP with significant marketing campaigns." That's some serious idiocy there. Atari finally has a king who's even dumber than Tramiel.

[jaybird3rd]

Hmmm. "The Atari brand has stood for innovation and pioneering spirit for more than 30 years. . .we will focus our efforts on established franchises, new major motion picture licensed IP with significant marketing campaigns." That's some serious idiocy there. Atari finally has a king who's even dumber than Tramiel.

Heh ... it seems to me that "major motion picture licensed IP" and "established franchises" are what got them where they are now ("Matrix: Path of Neo"? "Marc Ecko's Getting Up: Contents Under Pressure"? WTF were they thinking?!) Their online efforts have been underwhelming, too, and it's just stupid to try to bet the whole company on more of the same.

[NovaXpress]

How about "Mark Echo in Dungeons & Dragons Online To The Extreme?" They could combine two catastrophic failures into one company-killing flop!

[+FujiSkunk]

I have a better idea: Marc Ecko XXX. IT CAN'T FAIL!!

 

[Gregory DG]

I don't know why anyone ever cares. This is not the Atari we knew and loved. Shoot, even the Tramiel Atari wasn't.

 

If InfoAtari wants to survive, they've got to hold true to Atari's motto: Easy to learn, difficult to master. In other words: Addictive as he//. Unfortunatley, they've tried to compete in a "me-too" manner rather than lead it. How about some innovative ideas, Atari? Jeez...

[NovaXpress]

I want them to fail. Then Bruno would be forced to sell the Atari IPs to a company that might be smart enought to know how to use them.

[82-T/A]

Well, it's kind of unfair to say that the Atari of today is not the Atari of yesterday. Nothing is ever the same as it was 25+ years ago. Show me one thing, that's remained completely the same in the past 25 years. Even the 60s Volkswagen Bus that they still make in Brazil is different, even though it isn't.

 

I'm not living in a cloud, or under a rock. Atari IS doing extremely poorly, but companies have been turned around. A perfect example is Pontiac. Back in the late 50s, the Pontiac brand was facing extinction. John Z. Delorean came in, completely turned the company around and saved Pontiac. Three times since then, Pontiac has carried the entire company in sales.

 

Atari DOES stand the chance at a reprise... but it requires superior management, and major cost cutting. The branding of Atari is FAR too strong of a brand for people to simply forget. Even if Infogrames completely bombs... there will be someone else waiting in line to buy the name Atari.

 

 

Although, at this point, it looks pretty poor for the current owner.

[jaybird3rd]

Well, it's kind of unfair to say that the Atari of today is not the Atari of yesterday. Nothing is ever the same as it was 25+ years ago. Show me one thing, that's remained completely the same in the past 25 years.

One example I can think of is Intellivision Productions and the Blue Sky Rangers. Their dedication to the Intellivision is the same today as it was in the 1980s. They've stuck with the Intellivision since the beginning, and after the console itself stopped selling, they've continued to market the games through their handhelds and through emulation compilations on consoles, computers, and cell phones. In my view, that's the model and the kind of spirit that Atari should have in handling and marketing their (much larger) library of classic properties.

 

Atari DOES stand the chance at a reprise... but it requires superior management, and major cost cutting. The branding of Atari is FAR too strong of a brand for people to simply forget. Even if Infogrames completely bombs... there will be someone else waiting in line to buy the name Atari.

 

Although, at this point, it looks pretty poor for the current owner.

I agree with NovaXpress: Infogrames should fail because they've done nothing to grow the Atari legend. Curt Vendel and his team deserve the credit for the Flashbacks, while Infogrames deserves the blame for anything that was wrong with them. Before long, Infogrames will crash and burn while the classic Atari properties will live on in someone else's hands. I just hope that, when the time comes, Infogrames has enough sense to turn those properties over to somebody who actually cares about them. Edited June 15, 2006 by jaybird3rd

[christianscott27]

But is it going to make a difference to the long-term prospects of the company? Will it ever again be a force to be reckoned with in an industry that it at one time ruled? I really don't see that happening. The company obviously doesn't have the cash flow to compete effectively with the big guns of Activision

 

Ahh the irony, Atari flops about like a leaky beachball while ACTIVISION rides high and mighty still.

[Gamemaster_ca_2003]

Atari Needs to Stop Makeing games about.

 

Taking down the system

Becoming the One

Become the Greateest Street Racer

Or any other Plot Line Imaginable

 

All Atari Games Should Be about Playing For a High Score.

[Tickled_Pink]

Atari Needs to Stop Makeing games about.

 

Taking down the system

Becoming the One

Become the Greateest Street Racer

Or any other Plot Line Imaginable

 

All Atari Games Should Be about Playing For a High Score.

Ah ... I like it ... starting their own NICHE market.

 

In all honesty that's what they would be doing. Those games have pretty much gone. But it's like I said before, they should stick to the handheld market for the time being - lower costs. Interesting, the bit about casual gaming. Ideal for ... um ... handhelds?

[liveinabin]

I want them to continue to devalue the Atari name until it's cheap enough for this site to buy. Lets face it, AtariAge is pretty much the only company that has any real right to use that name now.

[Albert]

I want them to continue to devalue the Atari name until it's cheap enough for this site to buy. Lets face it, AtariAge is pretty much the only company that has any real right to use that name now.

One can dream, but even if Infogrammes completely tanks, the Atari name will be a valuable asset that will be sold off to the highest bidder. Which will be well beyond my pocketbook. If the name and assets do get sold yet again, hopefully it'll be to a smaller company that will use it in the spirit of Atari's earlier history, rather than just slapped onto products in a mad marketing frenzy.

 

..Al

[Clint Thompson]

Bruno is an idiot. No CEO deserves to live like he does for the company he has let down. I may not have a BS... but who needs a BS to make retarded decisions (and statements) like they have for the past few years. (Aside from the Flashback line... that's the only real positive thing to come from them) I was surprised to read about Midway obtaining the Unreal series of games... only to turn around and release some anthology crap soon. I'm also not sure wtf they were thinking about with MarC Ecko (echo echo).... pssh... and Matrix? Joke... Magic: The Gathering... didn't they already sell that crap off to.

 

So Atari needs to quit thinking so damn big. All the money they threw away could have landed Mr. Big Time CEO a better car and some more food for his expenses. (Oh but he really doesn't make that much money for a CEO...) Your right, GOOD CEOs make GOOD money. Bah.... maybe I'm just disgusted about the whole thing....

 

What they SHOULD do, imo.... (could they even get it right?):

 

•Make new, fresh games (from scratch) for Xbox Live!, Sony Online. Focus strictly on that.... prove to make some good games, start from the ground up.

•Release a few old-school games. No Retro DS crap, no no.... under close-supervision to someone who knows what a good game is and not just utter crap.

•Make Magic: The Gathering an Xbox live *CARD* game with new cards available to purchase with points (aka. profit) and utilize both voice/video communications on live. *Do they even still own the rights to that? Probably not*

 

and... That's that. Leave it to that.... at least until they can prove to turn some profits. Screw all the crappy games they are making.... oh wait... (sad face) they were actually going to release some games I wanted to play:

 

Test Drive Unlimited Online (they finally seemed to have gotten something right?) *can they afford to publish it?*

TimeShift (neat.... I wanted to play this game... it's been sold!)

UT 2007 (ha.... yea right... SOLD!)

 

Argh... anger.

 

Actually... I have a phone call to make tomorrow..

[NovaXpress]

Bruno Bonnell holds SIX fucking positions:

Infogrames Chairman

Infogrames CEO

Atari Chairman

Atari CEO

Atari Chiff Creative Officer

and just a week ago he was named Atari's Chief Financial Officer!

 

This guy has fucked up everything he touches and he's taking on more responsibility? The Atari name would be better off if he sold it back to the Tramiels.

 

Bruno is the Satan in the Atari pantheon.

Edited June 16, 2006 by NovaXpress

[Albert]

Bruno Bonnell holds SIX fucking positions:

Infogrames Chairman

Infogrames CEO

Atari Chairman

Atari CEO

Atari Chiff Creative Officer

and just a week ago he was named Atari's Chief Financial Officer!

 

This guy has fucked up everything he touches and he's taking on more responsibility? The Atari name would be better off if he sold it back to the Tramiels.

 

Bruno is the Satan in the Atari pantheon.

Are the Infogrames and Atari titles (Chairman, CEO) different jobs? I thought Atari and Infogrames were one and the same? Or does Infogrames still exist as a separate entity from Atari? It is very interesting that he holds so many titles, though. That is a bit ridiculous for a company of this size.

 

..Al

[NovaXpress]

Yes, Infogrames is a separate company. They are the primary shareholders and therefore control Atari.

 

From the Motley Fool's scathing evaluation:

Other recent developments at Atari, though less headline-grabbing, are perhaps even more disturbing. Notably, the fact that parent company Infogrames' Chairman and CEO, and Atari Chairman, CEO, and Chief Creative Officer Bruno Bonnell, has donned a sixth size-C hat, and is now also Atari's Acting Chief Financial Officer. Reports that Bonnell is petitioning the Senate of Rome for the title of "dictator-for-life" could not be confirmed by press time.

The Motley Fool Tears Bruno A New One

[Clint Thompson]

Bruno Bonnell holds SIX fucking positions:

Infogrames Chairman

Infogrames CEO

Atari Chairman

Atari CEO

Atari Chiff Creative Officer

and just a week ago he was named Atari's Chief Financial Officer!

 

This guy has fucked up everything he touches and he's taking on more responsibility? The Atari name would be better off if he sold it back to the Tramiels.

 

Bruno is the Satan in the Atari pantheon.

Are the Infogrames and Atari titles (Chairman, CEO) different jobs? I thought Atari and Infogrames were one and the same? Or does Infogrames still exist as a separate entity from Atari? It is very interesting that he holds so many titles, though. That is a bit ridiculous for a company of this size.

 

..Al

•I will be happy to fill one of the many burdening tasks he is unable to fulfill permitting I get a chance to kick his ass • but no really... everyone is jumping ship because they can see the forecast of a train wreck. James jumped ship too and wasn't even there a year. Someone there (Brunno?) is too damn tight headed to change their mindset.... maybe egos play a role or wtf ever....

 

If the building is burning it only makes sense to get the water.... maybe he's aquaphobic.

Edited June 16, 2006 by Clint Thompson

[NovaXpress]

An ugly day is ahead for Atari and their parent. Infogrames lost around $190M in fiscal 2005. Both companies are getting closer to the edge of the cliff. At least they have responsible leadership:

"We are not changing our course," said Chief Executive Bruno Bonnell.

 

Atari's fall line-up. These titles are the only hope for the company. So let's see some of that good old Atari spirit of "innovation and pioneering spirit."

 

Alone in the Dark Sequel

Arthur and the Minimoys (movie license)

BattleZone

Dragon Ball Z: Budokai Tenkaichi 2

DUNGEONS & DRAGONS: Tactics

Earthworm Jim

HOT PXL (Warioware clone)

Neverwinter Nights 2

Super DBZ

Test Drive Unlimited

[NovaXpress]

And while we're summing up the data, here's the current results of Atari's fire sale:

Timeshift franchise sold to Vivendi

"games.com" address sold to AOL

Stuntman franchise and Paradigm studio sold to THQ.

[Albert]

Atari's fall line-up. These titles are the only hope for the company. So let's see some of that good old Atari spirit of "innovation and pioneering spirit."

 

Alone in the Dark Sequel

Arthur and the Minimoys (movie license)

BattleZone

Dragon Ball Z: Budokai Tenkaichi 2

DUNGEONS & DRAGONS: Tactics

Earthworm Jim

HOT PXL (Warioware clone)

Neverwinter Nights 2

Super DBZ

Test Drive Unlimited

Lots of original titles there. What is Battlezone? Wasn't that already done several years ago? Neverwinter Nights 2 will probably do well, same with Test Drive Unlimited. But, yes, it's quite sad how many games these days are simply based on existing franchises.

 

..Al

[Clint Thompson]

I still think it's kinda shitty they had to let Time Shift go.....

[NovaXpress]

Cuurent price of Atari stock: 48 cents

 

My original plan was to buy when it dropped below 50 cents, in anticipation of a payoff when EA or Activision bought the Atari properties. But now I can see that Bruno is insane. He's going to ride it out until the company is taken from his cold, dead, idiot hands.