Atari USA Operations, Have Filed for Bankruptcy In Order To Separate From its French Parent, A New Start For The Gaming Legend?

Atari USA Operations, Have Filed for Bankruptcy In Order To Separate From its French Parent, A New Start For The Gaming Legend?

The game console legend Atari Inc. and three of its affiliates filed petitions for Chapter 11 reorganization in U.S. Bankruptcy Court in New York late Jan. 20^th, 2013.

DOING WHAT?

So, first question is what was Atari still doing in business in the first place? Didn’t they make game consoles in the 1980’s? Since the early 2000s it has been closely tied to French company Infogrames, which changed its name to Atari S.A. in 2003 and in 2008 acquired all the gaming pioneer's American assets. The 31-year-old brand is still known worldwide for its pioneering role with video games such as "Pong" and "Asteroids," but Atari has been mired in financial problems for decades.

The latest CEO, Jim Wilson has been with the company since 2008, and has been CEO of the French parent company since 2010 which he has run out of New York. He has attempted to rebuild the company, which has just 40 employees in the U.S., by developing games for smartphones and the Web based on well-known properties.

Among these properties is the successful "greatest hits" compilation of arcade titles and an updated version of "Pong." He has also licensed the Atari logo for consumer products, a business that provides about 17% of the company's revenue.

WHAT’S REALLY GOING ON?

The U.S. operations business has been improving over the year and make up the bulk of Atari S.A.'s business.

Atari S.A. has been profitable for the last two fiscal years, save for the effect of a money-losing French subsidiary, Eden Games, that has been up for sale. Before Jim Wilson came on board and took over as CEO, neither Atari S.A. nor Infogames had been profitable for about a decade.

These profits have been small ($11 million and $4 million, respectively, for the last two fiscal years) and revenue plummeted 34% in fiscal 2012 and 43% in fiscal 2011, but still that is a long way from bankruptcy – so what gives?

Well, Mr. Wilson and crew are hoping to break the American business free from French parent Atari S.A. and in the next few months find a buyer to take the company private. They hope to grow a modest business focused on digital and mobile platforms.

This is because the parent company has a bad financial situation by its near total reliance on the London financial company called BlueBay Asset Management. A $28-million credit facility with BlueBay lapsed Dec. 31, leaving Atari without the resources to release games currently in the works, including a real-money gambling title titled "Atari Casino."

Time to dump the French frogs, and take the USA business to new heights with a new owner, at least that is the plan.

It's not yet clear who might step up to buy Atari Inc., although Mr. Wilson will probably seek backers to help him keep control. It's also possible the company could be sold to another buyer, whole or in pieces.

Time will tell is Pong keeps rockin’!