Fiscal 2005 Half-Year Financial Results in Line with Forecasts; Reaffirms Fiscal 2005 Operational Profitability; Redemption Plan for OCEANE 2005 Bonds Announced

Business Wire, Nov 24, 2004

PARIS -- Infogrames Entertainment S.A. ("IESA"), the majority shareholder of Atari, Inc. (Nasdaq: ATAR), today announced fiscal 2005 half-year financial results and a proposed redemption plan for its OCEANE 2005 bonds as part of its ongoing planned financial restructuring.

"We are announcing today a solution to balance the Group's finances by means of a redemption plan for the OCEANE 2005 bonds, designed with the best interests of both our shareholders and the company's creditors in mind, while ensuring that we are in a financial position to repay our remaining debt.

First-half financial results were in line with our guidance and we remain on track to meet our goal of an operating profit in the range of 20 to 30 million euros for fiscal 2005.

With a healthy financial position and an upgraded production system, Infogrames is better prepared for the onset of a new technology cycle," comments Infogrames Chairman Bruno Bonnell.

I. HALF-YEAR FINANCIAL RESULTS IN LINE WITH FORECASTS

Consolidated revenue for the first half of fiscal 2005 was EUR 277 million on a current exchange-rate basis, down from EUR 314.9 million last year; on a constant exchange-rate basis, revenue amounted to EUR 285.5 million.

Business was sustained in all of the Group's markets during the second quarter, including in Europe and Asia, where sales were up 30% to EUR 48.4 million. Revenue rose by 18% at Atari, Inc., which reported revenues of US$71.4 million.

Gross profit amounted to EUR 143 million, reflecting a one-point increase in gross margin from the previous year (to 51.6% from 50.4%) primarily as a result of the increased internalization and concentration of our software publishing portfolio.

Spending for research and development totaled EUR 42.5 million. Annual expenditures, including for third parties, have been averaging about US$150 million dollars.

Marketing and distribution expenses amounted to EUR 69.0 million for the six-month period, unchanged in absolute terms but up 3% relative to sales (to 25% from 22%). The increase was accounted for by additional spending on the Group's franchises (DRIV3R, Transformers).

Overhead and administrative expenses continued to decline.

There was a small consolidated operating loss at the end of the first half of fiscal 2005 (EUR 3.5 million), consistent with the volume of sales for the period and in line with earlier Group estimates.

Net interest and investment expenses for the period totaled EUR 12.2 million, compared with EUR 14.3 million last year, reflecting the decline in the debt over the period.

An extraordinary loss of EUR 16.7 million was recorded for the period, consisting mainly of a one-time dilutive impact of EUR 13.1 million resulting from the termination of the Nexgen financing arrangement in October 2004. A year ago, the Group had recognized an extraordinary dilution gain from the recapitalization of Atari, Inc.

The consolidated entities reported a loss of EUR 32.8 million for the six-month period, before amortization of goodwill and minority interests.

The Group posted a consolidated loss after minority interests of EUR 42.2 million for the first half of the current fiscal year.

In the absence of non-recurring items, the consolidated loss would have been EUR 27.3 million.

The financial results are consistent with the Company's business objectives.

II. OUTLOOK FOR THE YEAR CONFIRMED

After the close of the first half on September 30, 2004, the Group sold the rights to its Civilization franchise for US$ 22.3 million, generating a one-time gain of EUR 15.5 million.

The Group also released RollerCoaster Tycoon 3, which reached the top of the charts in the United States on PC, and, in the US, it sold more than 500,000 units of its Atari Flashback (a replica of the historic Atari 7800 console featuring 20 classic Atari games).

Products scheduled to be released during the third quarter include Dragon Ball Z: Budokai 3 for PS2; and a series of other games, such as Titeuf Mega Compet (GBA), Godzilla: Save The Earth (PS2 and Xbox), Axis & Allies (PC), Duel Masters (PS2), Duel Masters: Kaijudo Showdown (GBA), YuYu Hakusho: Tournament Tactics (GBA), Sid Meier's Pirates! for PC, and Atari Anthology (PS2 and Xbox).

Among the highlights of the fourth quarter will be the release of an exceptional game, Act of War for PC, which updates modern warfare simulation, along with games from the Backyard Sports, Dragon Ball Z and Dungeons & Dragons franchises.

Atari, Inc., the Group's US subsidiary, confirmed its earlier forecast of sales in the range of US $450 million to US $470 million for the year and expects to earn net income of US $25 to US $30 million (US GAAP).

The volume of business anticipated by the consolidated companies for the second half would confirm the Group's announced expectations of moderate growth for the year as a whole, at constant exchange rates.

The combination of these factors is expected to generate operating income in the range of 20 to 30 million euros for all of fiscal 2005.

III. OCEANE 2005 REDEMPTION PLAN