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It's an open question whether Atari (ATAR) is better known for being one of the video-game industry's pioneers -- or one of its persistent failures.

The company has gone through numerous incarnations since jump-starting the video-game era with its original console and hit arcade games back in the early 1980s.

Like that earlier incarnation, the current version of the company, now majority owned by French video-game maker


, is struggling.

The company's sales and bottom line have plunged. Its executive suite has been a revolving door since the departure of Atari CEO Jim Caparro a year ago; and some of its key games, such as

Driver 3

, have been busts.

But the company has bounced back before, and the new CEO, Bruno Bonnell, who also heads Infogrames, is hoping to lead the company's latest resurrection. Last week, in the wake of the

E3 conference in May, I talked with Bonnell about his efforts to revive Atari. What is Atari's strategy as the industry goes through the remainder of this console transition?

Bruno Bonnell

: Atari is definitely not in the tanker category like

Electronic Arts


, for instance. We're more into a very flexible, opportunistic attitude.

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So, away from the $25 million budget that I'm

considering now as

the urban myth of our industry, we'd rather focus on what are people really willing to play.

If the $25 million budget is a "myth," what are you expecting to spend on developing next-generation titles?

It all depends.

Aside from

Test Drive


Alone in the Dark

, which are in the range of $15 million, our focus is probably more on

Xbox 360 where you can make great games for $50,000. It's like the movie business: You have movies that cost $200 million plus, and you have movies which cost less than a million euros.

You can make great games for $50,000?


For Xbox Live Arcade.

In the movie business, people accept the idea that you can spread the budget from, I would say, $5 million to $200 million. You know, in the games business, every game should be 25

million dollars, otherwise it's a bad game. That's why I call it an urban myth. You have games

that have cost us much less and made a tremendous profit.

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In terms of game costs, there seems to be conflicting opinions in the industry. Some in the industry see things like

Live Arcade

or Nintendo's Wii console as a hopeful sign that there's a market for fun, inexpensive games. Other folks, such as Midway's (MWY) David Zucker, say that unless companies produce ambitious, expensive titles -- which is what his company is focusing on -- they're going to founder.

This is a strategy. I respect it. It's the riskiest strategy. You have to have a very strong backer to do that.

I'm not saying we don't want to do any of these games. I'm saying I'd like to come to a much more mature analysis of the market, where we accept the fact that there's the possibility to express creation into different types of investments.

If you look at the recent history ... you've seen games with significant investment behind

them which have not

been performing on the market. You know, we cannot say that we are very thrilled about



If you start to hear about the $25 million games, plus the marketing, you will be going into an investment which is quite close to a significant movie. And you better be sure of what you are doing. And I don't have this bravery yet. I'm a little more cautious.

There have been questions that have been raised -- that you guys have raised yourselves -- about your ability to continue as a going concern. Where do things stand now?

Well, you have different aspects here. You have the public information that we owe to our shareholders and the analysis from outside auditors about the status of the company. And there is the reality of the business from an everyday basis.

I would say on the first front, our financials are two weeks away. We posted a fairly serious nine months. I don't think people are expecting anything from the last quarter of the year; and if they were, it would be, probably, a mistake.

In terms of our capacity to move forward, we explicitly told the market that we would sell, if need be -- there is no taboo -- some assets. That's what we've been doing.

What do you see as the core assets of Atari? What would you not sell?

I told you there is no taboo, so there

are no core assets. It's a question of opportunity.

Surprisingly, what is considered today a jewel of the crown within Atari might be the disappointment tomorrow and vice versa.

Right. But at some point, you've got to say, "This is what we're going to stick with."


Test Drive Unlimited

is not for sale, right?

Alone in the Dark

is another one. We just acquired the rights for

Earthworm Jim

, which is something we've moved on by spending money. And our

Dragon Ball Z

contract is rock-solid for the next five years.

Those products are already in the process of being shipped. Now, anything else, which is not in the rolling budget, is probably open for discussion.

In addition to selling off game franchises, Atari's been selling or closing development studios. Those moves may be necessary in the short term, but don't they hurt you in the long term, especially since your rivals are generally beefing up their own internal development efforts?

Well, you know, my grandfather used to say, "You never buy the long term without securing the short term."

We bought tons of studios in the past. It didn't work out for us. So instead of stubbornly losing money in this strategy, I rather propose an alternative that so far has really proven successful for us.

Are you exploring at all the possibility of selling the entire company, rather than piecemeal sales of assets?


Atari has been talking for a long time about simplifying its relationship with Infogrames. I talked with former CEO Jim Caparro about it last year. Why is it taking so long to push that through?

At this time last year, we were building, with an American CEO, a strategy that today should have been completely in place. But this guy left. And I have to go back to the wheel and still drive a situation where he ... clearly created a significant panic on board.

Not only

had Jim left, but he had hired a completely new set of managers, among which, by the way, none are here today, zero.

This year for us is clearly a year where we tried to put the company in the best possible shape. Of course, the operations have suffered

from this mess. And clearly this mess doubled by the situation of the PlayStation 2 market.

But now we can seriously consider taking action.

What's the status on replacing your management team?

We're still interviewing a lot of people. Same story, same answer.

I'll have a

different answer for you within weeks.

You guys have warned that you are in danger of having your stock delisted. What's the status on resolving that?

We have between nine months and a year to resolve this issue. There is a very easy way to do it, which is to optically change the trading price by reverse-split. If you do this in market conditions which are not good, you have the risk that people are actually downplaying your stock, so you degrade the value. I would say that's the last resort, that's the last way to get off the hook of the delisting.

I'm expecting that with different announcements and different results we'll have over the next six months, we'll have a situation where we don't need to have concern about delisting anymore.