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Wedbush: Atari Facing Continued 'Liquidity Crunch'

Prior to Atari's third quarter earnings announcement, Wedbush Morgan's Michael Pachter has predicted weak financial results for the firm, adding to concerns over the company's future after the sale of key properties such as Driver, Stuntman, and
Ahead of next Thursday's official earnings report from Atari, Wedbush Morgan's Michael Pachter has predicted weak financial results following continued restructuring efforts by the publisher, and has voiced growing concerns over the company's future earnings potential following the recent sale of numerous franchises. The company is still undergoing a major restructuring effort that has seen the divestiture of its external studios, most recently Shiny to Foundation 9 and Melbourne House to Krome, as well several of its video game properties. “Atari’s and Infogrames’ liquidity has improved recently due to asset sales, an equity raise, and a debt swap,” wrote Pachter in a research note to investors. “However, we remain concerned that Atari will continue to face a liquidity crunch, given its low cash balance and continuing losses.” He added: “Additionally, it appears that Atari will face difficulty generating future revenues with so many of its successful games having been sold off, including such brands as Timeshift, Stuntman, and Driver.” The company had earlier sold the Civilization franchise to 2K Games. Earlier today, officials from Atari's parent, French publisher Infogrames, reported a substantial decline in revenue, and blamed much of the company's third quarter downturn on the company’s U.S. subsidiaries, namely Atari, Inc. and Atari Interactive, Inc., as they completed restructuring plans. In total, third quarter U.S. revenue reported by Infogrames equated to $45 million, a figure that Wedbush believes makes up the majority of Atari’s third quarter earnings. Wedbush has lowered its estimates for Atari from $76 million to $47 million to reflect the publisher's lower than expected revenue. In addition, for fiscal 2007, the analyst has also dropped its estimates from from $160 million to $125 million, as well as maintained its stock rating of 'hold'. Wrote Pachter, “We continue to believe that Atari is taking the right steps to return to sustained profitability, although continuing liquidity constraints dramatically increase the execution risk involved.”

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