"Substantial" doubt over Atari's future as profits plunge

Atari Inc, the US division of French publisher Infogrames, has confirmed that the company's ability to continue as a going concern is now in question after its third quarter results slid into the red.

The firm's results for the quarter ended December 31st revealed sales down to $100.8 million from a figure of $156.4 million a year previously, while profits collapsed into a net loss of $4.8 million, from a profit of $19.6 million in the previous year.

The figures are a slight improvement over the rest of the financial year to date; over the past nine months, Atari's sales have fallen more than 50 per cent year on year to just $163.4 million (down from $332.5 million), and the firm is trailing a nine-month loss of $62.8 million compared with a nine-month profit of $14.8 million in the last three quarters of calendar 2004.

Even more troubling for the company than its losses, however, is its precarious financial situation - with the company currently in default on a variety of covenants related to its credit facility with HSBC, which is currently refusing to extend further credit to the struggling publisher.

Atari is now exploring the various measures available to it to stay in business, including moving to a new credit facility, the sale of various intellectual property rights and the sale or even closure of some of its development studios.

The company has also revealed that it's looking into making layoffs and suspending various projects in development in a desperate attempt to control its costs and lower its working capital requirements.

In the midst of the crisis, another blow to Atari has come with the departure of the company's Chief Financial Officer, Diane Baker, who has resigned to "pursue a new opportunity" - with no replacement yet being announced.

Despite the uncertain future the company faces, chief executive and chairman Bruno Bonnell announced a number of new products along with the firm's Q3 results - namely a new game in the Stuntman franchise for the Xbox 360, a new Alone in the Dark title for the PC, and a return to the classic Battlezone franchise on the PSP.

Unsurprisingly, shares in the publisher sank on the news, and were trading down nearly 14 per cent at $0.78 in New York at the time of writing - having dropped almost 30 per cent of their value overnight to open at $0.63, but rallying slightly as the day went on. Atari's stock hasn't traded at over the $1.00 mark since mid-January.