The headline makes this seem much worse than it actually is. Early yesterday evening, the US arm of Atari has filed for chapter 11 bankruptcy in hopes of separating itself from its French parent body and its associated debt. Atari SA has apparently been strapped for cash since December and hasn’t turned a profit since 1999 when it literally went for broke and sold numerous assets and restructured. In the end, the French company set a gloomy forecast for the upcoming year and intended to take on investors.
Which leads us to the chapter 11 bankruptcy. In the announcement, the move is called “the most strategic option for Atari’s U.S. operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari SA” and that “during this period, the company expects to conduct its normal business operations.”
In all, the bankruptcy will include 90 to 120 days of attempting to sell most or all of the company’s assets including Pong, Asteroids, Tempest, Centipede, Missile Command, and even its logo, which apparently accounted for 17 percent of their annual revenue. And pending approval, Atari US will have $5.25 million in debtor-in-possession investment from financial firm Tenor Capital Management. The company hopes to come out of the separation with little to no linger debt from their parent organization.
Atari SA has been operating under a bleak outlook for quite some time. Its market value has dropped to $33.8 million, 50 percent from the previous year, and its revenue down 34 percent (a slight improvement from the 43 percent in 2011, but that’s like saying at least you only stepped in one pile of dog poop instead of two). Atari SA’s shares are currently trading at less than one Euro, though they have finally turned a profit in the past two years after a decade of, well, not.
Problems have been exacerbated by two factors: 1) Atari’s over reliance on London financial company BlueBay Asset Management, a move that resulted in dire straits when it (and its $28 million) lapsed on December 31, and 2) Atari’s increasingly confusing and unfortunate corporate structure as an American business with a French stock listing. Joystiq has a pretty good recap of the madness of how the two companies came to be, but it basically boils down to Infogrames Entertainment acquired Hasbro Interactive in 2001 who had acquired Atari Corporation in 1998 and then changed its name to Atari SA in 2009.
Atari US has been aiming to be a mobile studio for quite some time and has been looking to release the free-to-play Atari Casino before, presumably, the BlueBay Asset credit lapse. It’s nothing that particularly interests me, but, when run lean, that has the potential to be a successful business model.
Source: LA Times