Atari (NASDAQ:ATAR) is still in the game, although it certainly isn't one of the better publishers out there. While the company may have narrowed its loss from continuing operations this past quarter, it still has a long way to go to inspire investor confidence.

Revenues declined in the second quarter by roughly 25%, coming in at $28.6 million. The operating loss narrowed to $9.6 million, down from $22.1 million year over year. Net loss from continuing operations was $9.5 million ($0.07 per diluted share) versus last year's loss from continuing operations of $22.3 million ($0.18 per diluted share). For the completeists out there, Atari did score an insubstantial net profit after the addition of income from discontinued operations.

Not that it makes any difference. While a reduction in costs and a narrowing of losses are always welcome items, Atari is merely surviving right now. It needs to get back on track and thrive. The publisher hasn't figured out a way to do it, however, and the longer the red ink is spilled, the more I wonder how Atari will effectively compete. It has secured a three-year, $15 million credit facility, but I'm not doing backflips over that news.

I'd be happier to see a strong slate of games. What do you think of when you think Electronic Arts (NASDAQ:ERTS)? Madden, right? How about THQ (NASDAQ:THQI)? Nickelodeon games, as well as Destroy All Humans!, perhaps. Activision (NASDAQ:ATVI) brings to mind Call of Duty and Tony Hawk titles, while Take-Two Interactive (NASDAQ:TTWO) recalls a certain franchise involving carjacking and sexual hijinks. What about Atari? Sure, you might think Dragon Ball Z games, the Test Drive franchise -- you might even remember the hoopla surrounding a game based on The Matrix, which sent the company's stock into overdrive a few years ago. These latter brands just don't hold the same fascination for me as do the intellectual properties controlled by the other, stronger publishers. And when I say "fascination," I mean I don't believe they can be leveraged to confer as substantial an amount of shareholder value as other slates might.

For Atari to make a name for itself in the brave new world of the three big consoles -- the Sony (NYSE:SNE) PlayStation 3, the Microsoft (NASDAQ:MSFT) Xbox 360, and the Nintendo Wii -- it will have to make some great games. To do that, it will need one of two things: a lot of money, or a lot of innovative prowess. I'd go for the latter. Budgets for games are skyrocketing, so much so that the industry is exploring opportunities with advertising to alleviate development pressures. Atari should just sit its collective self down and come up with concepts that no one else has thought of. Think of what Nintendo is doing -- it's trying to wow gamers with its nifty new Wii controller, hoping to once again become a force to be reckoned with in the mindshare of console consumers. Problem is, I wonder if it's simply too late.

This one isn't too difficult -- I can't see Atari's stock as a useful instrument of appreciation for your hard-earned investment dollars. The losses have narrowed, but the speculative nature of this company remains. It needs to figure out a new franchise for itself, one that isn't expensive to develop, and that's a tall order. I have utterly no confidence in the company's long-term future. But I'll say this -- Atari, prove me wrong! I grew up playing games under this brand. I want to eventually eat my words on this subject. For now, though, don't fool around with the stock -- let the traders mess around with this penny equity, you've get better places for your money.

Video games are a hot investment thesis, so check out some more Foolish articles:

Electronic Arts and Activision are Motley Fool Stock Advisor recommendations. To see why, take a free 30-day trial today.

Microsoft is an Inside Value pick.

Fool contributor Steven Mallas owns shares of Activision. As of this writing, he was ranked 1,520 out of 12,508 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.