Michael Pachter prediction: Atari may be demoted to distributor

Atari‘s recent Q2 2007 reports indicate that the company has been soaking up considerable losses lately. Considerable enough, it seems, that analyst Pachter predicts the company runs the risk of losing its publisher status, and downgrading to a dedicated distributor. You can catch up on Pachter’s detailed explanation of this scenario by reading on his statements in the full article.

As you guys will recall, Atari‘s Q2 2007 financial reports indicate the the company’s taken a literal pounding, losing US$ 7.7 million in the period ending September of 2007.

In light of this, Wedbush Morgan analyst Michael Pachter made his predictions, which include the possibility of Atari dropping its publishing business, and reducing itself to game distribution.
 
As Pachter explained, the company predicts that it would be expecting fewer game releases for the fiscal year of 2008. This move is expected to reduce revenues, with Pachter further commenting that Atari was having problems cutting costs accordingly. As for Pachter’s statement regarding Atari’s possible drop to a distributor:

We are concerned that lack of investment in R&D and marketing (along with the divestiture of many of its brands) could limit AtariÂ’s ability to effectively compete as the next generation consoles begin to ramp. It is likely, that the company will cease its publishing operations altogether and become a pure distribution business. However, in order to profitably do so, we believe that it must cut its staffing levels by over 50%.

On a more positive note, Pachter stated that  “if the company is able to get through FY:08 without compromising its overall financial well-being, it may be able to return to profitability in FY:09.” Pachter further warned that this possibility was a “highly speculative scenario.”

Via Gamasutra