Atari (NASDAQ:ATAR) reported results for its fiscal first quarter yesterday, and although the company didn't see a loss like it did in its fourth quarter, the situation is still less than heartening. The company achieved net income of $12.1 million ($0.10 per diluted share) versus net income of $23.8 million ($0.32 per diluted share) in 2003 for the same period. The revenue scenario isn't much better: $110.3 million versus $151.4 million last year.
Decreases such as these just aren't good. Exposure to the fast-growing video-game sector is desirable for many an investor's well-diversified portfolio, but I wouldn't look at Atari as a proper vehicle for gaining such exposure. I have to admit that I don't own any stocks in this industry so far, but I still retain this belief and will hopefully initiate some positions in the future. As time goes on, quality game developers/publishers will be able to capture a lot of disposable income, especially as console cycles repeat themselves; see the lowdown on upcoming systems, such as the successor to Sony's (NYSE:SNE) PlayStation 2 unit and Nintendo'srevolutionary offering.
Video games are, in my opinion, great combatants against the problem of age compression, which is the issue of young kids becoming more precocious at earlier stages in their development and thus becoming bored with action figures put out by Hasbro (NYSE:HAS) and Barbie dolls developed by Mattel (NYSE:MAT). On a pure anecdotal basis (which most likely could be backed up by research, I'd guess) I've noticed that video games are still regarded as "massively cool" by kids and teens, and I would imagine that the future will remain bright for these products for quite a long time.
Atari just isn't in the league of either Activision (NASDAQ:ATVI) or Electronic Arts (NASDAQ:ERTS). It needs a solid slate and a deep affinity for its brand to get its stock price above the current quagmire it finds itself stuck in. The valuable equity inherent in Electronic Arts' brand -- especially from the perspective of its sports line -- helped drive that company's latest sizzling report. And the lucrative license that Activision has in the Spider-Man character certainly didn't hurt that company's profit heroism.
Perhaps one of the better ways to become part of the video game investing bandwagon is Microsoft (NASDAQ:MSFT). Not only does an investor get access to the Xbox arena, but there's that nice dividend potential (neither Electronic Arts nor Activision provide a yield right now). Any of these alternatives would be a saner bet than Atari at this juncture. The game could change, of course, but for now, Atari is a gamble.
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Fool contributor Steven Mallas owns none of the above companies.
