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Atari’s Losses Down - Can It 'Save Its Way To Prosperity'?

Officials from troubled publisher Atari have revealed 3Q results which show losses lessening for the company, following better sales of Test Drive Unlimited, Neverwinter Nights 2 and Dragon Ball Z: Budokai Tenkaichi 2. [UPDATE:
Officials from U.S. based publisher Atari have revealed the company’s third quarter and nine month financial results, for the period ended December 31st, 2006, both of which show a defined move towards profit. Parent company Infrogrames revealed its revenue results at the beginning of the month (according to standard French financial practices, revenues and income are reported separately), with Atari’s own results mirroring a similar lessening of losses. Net revenue for the third quarter was put at $47.3 million, though, considerably down from $100.0 million at the same time in 2005. However, the company’s net loss for the quarter lessened from $4.8 million to $0.7 million. Net revenue for the full nine months were put at $95.3 million, a decrease from $162.2 million the previous year. The net loss for the company for the nine months was just $7.5 million, significantly lessened from a loss of $62.8 million at the same time in 2005. "Atari continues to focus on improving product quality and is committed to growing shareholder value. Specifically, Neverwinter Nights 2, Dragon Ball Z: Budokai Tenkaichi 2 and Test Drive Unlimited achieved our targets of quality and market place acceptance on a global basis,” stated David Pierce, president and CEO of Atari. [UPDATE: Wedbush Morgan's Michael Pachter has weighed in on the "much better than expected" results, noting: "Although Atari’s Q3 releases, Neverwinter Nights 2 and Dragon Ball Z: Budokai Tenkaichi 2, sold well, its catalog sales and distribution business were weak. However, the company’s pro forma Q3 results were much better than our expectations due to a significantly improved cost structure." However, he warned on the future: "We continue to believe that Atari is attempting to save its way to prosperity. Though we believe that it is important for the company to align its cost structure with its sharply reduced revenue profile, we believe that alignment only makes sense in the context of future growth. In order to achieve that growth, we believe that the company must invest in R&D, and we are concerned that lack of investment in R&D and marketing could limit Atari’s ability to effectively compete as the next generation consoles begin to ramp." Pachter's conclusion: "Atari's and Infogrames' liquidity has improved recently due to asset sales, an equity raise, and a debt recapitalization. However, we remain concerned that Atari will continue to face a liquidity crunch, given its low cash balance and history of losses. Additionally, it appears that Atari will face difficulty generating future revenues with so many of its successful games having been sold off."

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