Cost-cutting puts Atari in black--barely

After years of losses, publisher posts a quarterly profit--of $311,000; revenue slides 26 percent.

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This February, then-Atari CEO Bruno Bonnell announced that he wanted his company to "refocus our creativity efforts on external studios, rather than internal development." Thus began a veritable fire sale of the ailing publisher's numerous in-house developers. First on the auction block was Stuntman developer Paradigm Entertainment, which was sold to THQ in May. In July, Ubisoft scooped up Reflections Interactive and its once-coveted Driver license for $21.6 million. Then, in late September, Enter the Matrix studio Shiny Entertainment was sold off to Foundation 9, a fast-growing consortium of development studios, for a paltry $1.6 million.

According to Bonnell, the idea behind the sell-off was twofold: to raise revenue and cut costs. Today, the tactic bore fruit. Atari announced a profit for the July-September 2006 quarter, its first in years. While notable, the size of the profit was less than impressive--just $311,000 during the quarter, which is the second of Atari's 2007 financial year. Still, that was better than the $25.2 million the company lost between July and September 2005.

While profit was up, overall revenue was down--way down. Atari took in $28.6 million for the quarter, a decrease from $38.4 million during the same period in 2005. The publisher's biggest release during the quarter was Test Drive Unlimited, an open-ended driving game for the Xbox 360. (It is due on the PC, PlayStation 2, and PlayStation Portable next year.) The game sold 96,804 copies between September 5 and 30, generating just under $3.9 million in revenue.

For the six months ending September 30, Atari lost $6.8 million, a major improvement over the $58.0 million shortfall it suffered during the same six months in 2005. Losses from continuing operations alone during the period were $14.1 million, down from $52.5 million the year before. To help pay for current operations, Atari today secured a three-year, $15 million loan from finance firm Guggenheim Corporate Funding, LLC.

"With the sale of the Shiny development studio, we have completed the divesture of our internal development studios streamlining our development operations," said David Pierce, Atari's newly appointed president and chief executive officer. "Finally, we are realizing the results of our previously announced cost reduction plans as general and administrative expenses are down 31 percent."

Atari's highest-profile fall release, the well-reviewed Neverwinter Nights 2 for PC, was released on October 31 during the company's third fiscal quarter. Notable releases for the rest of Atari's financial year, which ends on March 31, 2007, includes: Bullet Witch (Xbox 360 - Q1 2007), Dungeons and Dragons: Tactics (PSP - February 2007), and HOT PXL (PSP - February 2007). The company is supporting the Nintendo Wii launch with Dragon Ball Z: Budokai Tenkaichi 2, due out November 21. Atari is also releasing a tie-in with the Luc Besson-produced computer-animated kids' movie Arthur and the Invisibles for the PC, PS2, and Game Boy Advance in January. A previously planned PSP version of the game was not mentioned in Atari's earnings report.

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