Analysts differ over Atari as revenues miss targets

Market analysts in the United States have issued markedly different responses to Atari's announcement of second quarter results, which revealed that the firm's revenue missed predictions but also showed a smaller than expected loss figure.

For the three months ended September 31st, the company - which is a subsidiary of French firm Infogrames - reported revenues of $71.4 million, an 18 per cent increase on last year's figure but still somewhat short of the firm's own projection of $75 million.

However, the company's bottom line beat both analyst estimates and the company's own guidance, coming in at 14 cents per share (around $16.9 million) as opposed to the expected 16 cents per share ($19.3 million).

The company reduced its future projections once more in this report, and now expects to see revenues of $450 to $470 million rather than its previous projection of $470 million - while some analysts have pegged their projections even lower, at around the $440 million mark.

The company's earnings per share projection remains at $0.20 to $0.25, but again, some analysts believe this to be over-optimistic, and are expecting EPS as low as $0.10 for the 2005 financial year.

Indeed, the firm's prospects have split analysts down the middle - with some, such as Wedbush Morgan's Michael Pachter, restating a Buy rating on Atari, while others including TerraNova Institutional's Boris Markovich, have downgraded the company to a Sell rating.

"We believe that there are a number of factors which will keep the valuation of ATAR down in the near term," Markovich wrote in a research note. "We are estimating sales below the company's guidance and we expect negative growth looking out at FY06. We do not see much upside to the holiday (Q3) quarter."

Markovich went on to point out that Atari does not have any obvious three million unit plus sellers in its line-up for 2006, as it did for 2005 (Driv3r) and 2004 (Enter the Matrix).

However, Pachter's assessment of the company was significantly more upbeat, stating that "we are increasingly confident that the company's Dragon Ball Z games will perform well, and believe that Atari stock will rebound over the next few quarters as the company continues to execute as expected."

The Dragon Ball Z franchise, which is a Bandai property published outside Japan by Atari, has been an increasingly important part of the firm's line up in recent years, along with a number of other Japanese anime related franchises such as Yu Yu Hakasho, a PS2 version of which was a key sales driver in the September quarter.

Speaking in the conference call which accompanied the announcement of the results, Atari chairman and CEO Bruno Bonnell downplayed suggestions that parent company Infogrames SA might choose to sell Atari in order to service its considerable debts.

"There is a long list of options that Infogrames can activate before deciding to sell its main asset," he told questioners on the call who grilled him about the financial status of the parent, which is being increasingly drawn into question as over 100 million Euro worth of bonds edge towards maturity in 2005.