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Article #219 (376 is last):
>Newsgroups: freenet.sci.comp.atari.news
From: aa399@cleveland.Freenet.Edu (Len Stys)
Subject: FIRM'S FORTUNES HAVE SWUNG UP AND DOWN
Date: Thu May 10 18:36:16 1990

FIRM'S FORTUNES HAVE SWUNG UP AND DOWN

(Reprinted from the CLEVELAND PLAIN DEALER, May 8, 1990)

LOS ANGELES TIMES


     SUNNYVALE, Calif. - Atari's fortunes weren't always so modest.

     Founded in 1972 by Nolan Bushnell, the creater of the Pong arcade video
game, Atari Inc. was sold to Warner Communications in 1976 and became a
leader in the booming video game business, achieving $2 billion in
annual sales.

     But in 1982, the industry header into a steep decline as Americans began
defecting to videocassette recorders and other entertainment gear. 
high-flying Atari suddenly was mired in red ink.

     In 1985, Jack Tramiel saw an opportunity.  Years before, he had
parlayed a one-time typewriter repair shop into Commodore International,
which became one of the hottest computer companies around.

     While at Commodore, Tramiel slashed prices and squeezed competitors
such as Coleco and Timex out of the home computer market.  Computer dealers
complained that Tramiel's price-cutting and penchant for marketing through mass
merchants such as K mart and Toys R Us made it impossible for them to make a
profit.

      When Atari went on the block, Tramiel had just emerged the loser from
a power struggle with a prominent Commodore shareholder.

     He and a group of investors paid $240 million in notes for Atari's home
video game and personal computer division, with Tramiel staking an
estimated $45 million of his personal fortune on Atari.

     (When Warner sold Atari, it was spit into two independent companies. 
The other entity is privately held Atari Games, which produces arcade
games and develops software for among other equipment, Nintendo Entertainment
Systems.)

     A though executive who is fond of saying that "business is war." Tramiel
slashed the Atari work force to fewer than 200 from 2,000.

     Tramiel's hard-driving strategies seemed to pay off.  Profits climbed,
and defying skeptical industry analysts, Atari went public in November
1986.  The Tramiel family holds about 52% of the stock and Time Warner owns
22%, according to Sam Tramiel.

     Yet Tramiel's treatment of computer dealers apparently haunted
him.  Atari had well-regarded computers but few places to sell them.

     The situation prompted a mistake.  In August 1987, seeking a quick way to
expand distribution, Atari paid $67.3 million for the struggling Federated
Group consumer electronics chain of 67 stores.

     Troubles soon escalated.  A year after purchase, Atari sued several
former Federated officers and investment advisers, alleging that they
had overstated the company's assets, causing Atari to overpay for the chain.
 The suit is still pending.

     Since then, Atari has sold the Southern California Federated stores
and has begun treating Federated Group as a discontinued operation, even
though a handful of stores remain open in Texas, Atari took a $100 million hit
against 1988 earnings for write-offs of merchandise, stores and reserves for
future losses from the chain.

     As a result, Atari showed a loss of nearly $85 million, contrasted with
a profit of $57 million in 1987.

     For 1989, Atari reported a profit of $4 million on sales of $424 million.


 

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