Warner Communications Co., the giant entertainment conglomerate, expects to suffer even larger losses in the second quarter than in the first, Chairman Steven J. Ross told shareholders at the company's annual meeting in New York yesterday. However, he said that he "can reaffirm" that earnings for the second half of 1983 will exceed those of the second half of 1982.
The bulk of Warners' losses can be attributed to problems at Atari, a wholly owned video game and home computer subsidiary.
The Sunnyvale-Calif.-based company lost more than $45.6 million in the first quarter of this year versus a profit exceeding $100 million in the first quarter of 1982. Atari gross revenue last year topped $2.05 billion. But damaged severely by increased competition and inventories of games that did not sell nearly as well as hoped, Atari saw its revenue plummet late last year. Its continued losses are expected to be responsible for the second-quarter deficit as well, Warner officials say.
Because of this, "Atari is reorganizing its corporate structure," Ross said. Atari's home computer division will be folded into its consumer electronics division, which makes the company's video games, with hopes of streamlining operations and reducing overhead. Ross did not say when the consolidation was to occur or what specific savings the move would produce. However, he said the move "will substantially reduce operating costs and enable Atari to be a more effective competitor in all aspects of its business."
Atari also has made peace with its founder, Nolan Bushnell, who was dumped unceremoniously in 1978 after Warner took over the company. Warner announced Thursday that it has dropped a lawsuit charging Bushnell with violating an agreement not to compete with Atari in the video games market for seven years.
The suit was triggered when Bushnell's Pizza Time Theatre chain of video game parlor-restaurants acquired Videa, an arcade-game-design company heavily populated by Atari alumni. Bushnell renamed the company Sente, after the move that beats the "Atari" move in the Japanese board game Go.
Now, Pizza Time will license consumer rights to the home versions of video arcade games it develops.