U.S. division of Atari files for bankruptcy

The arcade game maker Atari hopes to move

The arcade game maker Atari hopes to move forward with a private sale and a return to profitability. (Jan. 21, 2013) Photo Credit: Getty

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The U.S. operations of video game maker Atari have filed for bankruptcy to break free from their debt-laden French parent.

Atari Inc. and three affiliates filed Chapter 11 petitions in U.S. Bankruptcy Court in New York Sunday. In Chapter 11, a company seeks relief from creditors to reorganize with the hope of emerging from bankruptcy in stronger condition.

Atari's leaders hope to break the American business free from French parent Atari S.A. and then find a buyer to take the company private.

They hope to grow a modest business focused on digital and mobile platforms, according to a knowledgeable person not authorized to discuss the matter.

Although the 31-year-old brand is still known for its pioneering role with video games such as "Pong" and "Asteroids," Atari has been mired in financial problems for decades. Since the early 2000s it has been closely tied to French company Infogrames, which changed its name to Atari S.A. in 2003 and in 2008 acquired all the gaming pioneer's American assets.

Chief executive Jim Wilson has been with Atari Inc. since 2008, and in 2010 became CEO of the French parent. Wilson has tried to rebuild Atari, which has just 40 employees in the United States, by developing games for smartphones and the Web based on well-known properties -- among them a successful compilation of arcade titles and an updated "Pong." He has also licensed the Atari logo for consumer products, a business that provides about 17 percent of the company's revenue.

There is evidence that the U.S. operation, which after the sale of other assets now makes up the bulk of Atari S.A.'s business, has been improving. The corporate parent has been profitable for the past two fiscal years, save for the effect of a money-losing French subsidiary, Eden Games, that has been up for sale. Before that, neither Atari S.A. nor Infogrames had been profitable for about a decade.

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Still, its profits have been small ($11 million and $4 million, respectively, for the past two fiscal years) and revenue plummeted 34 percent in fiscal 2012 and 43 percent in fiscal 2011.

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