The trend of poor holiday performances for Western publishers continues, as Atari, Inc., the subsidiary of France-based Infogrames Entertainment SA, today reported weak fiscal results for the quarter ended December 31, 2005.

Net revenue amounted to $100.8 million, as compared with $156.4 million in the same period during the year prior, while publishing net revenue was $82.4 million, down from $137.9 million. Net loss for the third quarter of Atari's fiscal 2006 was $4.8 million, or $0.04 per share, compared to net income of $19.6 million, or $0.16 per share, in the year earlier period. This follows a second quarter in which the company saw its net loss almost double at $25.2 million.

Atari said that it is continuing to take steps to streamline its U.S. operations. As a result, the company recorded Q3 restructuring charges of $1.1 million; excluding these charges and losses from discontinued operations, Atari's loss for the holiday quarter would have been $3.4 million, or $0.02 per share.

Along with its financial results today Atari also announced that Diane Baker has resigned her position as Atari's Executive Vice President and CFO, to be effective shortly. The company's continuing woes were not cited as a reason for her leaving; she did not jump ship, but instead left "to pursue a new opportunity," the company said.

Sales for Atari during the holiday were driven by Dragon Ball Z: Budokai Tenkaichi (PS2), Dragon Ball Z: Super Sonic Warriors 2 (NDS), The Matrix: Path of Neo (PS2, Xbox and PC), and Atari Flashback 2 (Plug-and-Play). The company noted, however, that revenues were expected to be down because fewer titles were released during the quarter as compared with Q3 from the previous year. That said, "a weak holiday season for the industry" and "product launch delays" contributed to Q3 results that were "substantially below the Company's expectations."

Atari's nine-month results were equally gloomy. Net loss was $62.8 million, or $0.50 per share, compared to net income of $14.8 million, or $0.12 per share, in the year-earlier period.

And the bad news doesn't stop there; it gets worse. Atari said it was "advised by HSBC Business Credit (USA) Inc. that it is in default on certain covenants under its revolving credit facility and that HSBC will not currently extend further credit. As of February 9, the Company had no balance outstanding under the credit facility. HSBC also stated that it may agree to review revised business plans or projections and make or not make future advances under the facility. The uncertainties caused by these conditions raise substantial doubt about the Company's ability to continue as a going concern."

Atari then promised investors that it is not giving up hope and is currently looking into ways to rectify its miserable financial situation. "The Company is taking definitive steps to address its current financial position and restore shareholder value, and continues to believe in Atari's ability to compete in the interactive entertainment industry," Atari said in a statement. "The Company is currently exploring the replacement of its credit facility, potential licensing or sale of selected intellectual property rights and the sale or closure of development studios. Additionally, the Company will continue to control costs and reduce working capital requirements in order to conserve capital through potential personnel reductions and the suspension of certain development projects. However, the Company cannot guarantee the completion of these actions or that such actions will generate sufficient resources to fully address the uncertainties of our financial position."

Atari provided no guidance for the remainder of its 2006 fiscal year or for the 2007 fiscal year. The publisher's Q4 line-up includes Desperados 2: Cooper's Revenge (PC), Dragon Ball Z: Shin Budokai (PSP), Driver: Parallel Lines (PS2 and Xbox), Dungeons & Dragons Online (PC), Kao the Kangaroo Round 2 (PS2, Xbox, GC and PC), Kao Challengers (PSP), Marc Ecko's Getting Up: Contents Under Pressure (PS2, Xbox and PC) and Tycoon City: New York (PC), among others.

And its initial fiscal 2007 portfolio is perhaps even more promising: Alone in the Dark: Near Death Investigation (Xbox 360 and PC), Battlezone (PSP), Neverwinter Nights 2 (PC), Stuntman 2 (Xbox 360), Test Drive Unlimited (Xbox 360, PC), TimeShift (Xbox 360 and PC), and more titles from the Dragon Ball Z franchise.

"With the new console cycle now underway, new technologies bring with it new challenges," commented Bruno Bonnell, Chairman, CEO and Chief Creative Officer of Atari. "As we anticipated, during the holiday season the industry felt a depressed demand for current generation titles at retail and, as a result, publishers will need to strategically address the marketplace, balancing titles across multiple consoles, as well as portable devices. Atari remains committed to providing gamers with titles across all platforms focusing on its largest franchises, including Dragon Ball Z, Driver, Test Drive and Dungeons & Dragons, to name a few. Additionally, we will look to increase our marketshare on portable devices such as Nintendo DS and Sony's PSP as the demand for quality titles for these formats continues to grow."

Atari may try to reassure investors, but many seem unconvinced. Upon hearing the news many ridded themselves of the stock in after-hours exchanges and as a result shares of Atari (ATAR) were off by 32 cents (36 percent) to 56 cents. During regular trading Atari closed at 88 cents a share on Thursday.