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Article #440 (635 is last):
From: aa700@cleveland.Freenet.Edu (Michael Current)
Subject: Atari/JTS Merger, wire report
Reply-To: aa700@cleveland.Freenet.Edu (Michael Current)
Posted-By: xx004 (Atari SIG)
Date: Sat Apr 20 16:37:44 1996

By Mike Langberg, San Jose Mercury News, Calif.

Knight-Ridder/Tribune Business News

Feb. 14--Atari Corp.'s long, strange story took another odd twist
Tuesday as the Sunnyvale video company announced plans to merge with JTS
Corp., a start-up manufacturer of computer hard-disk drives in San Jose.

Once the deal is completed in May or June, the combined company will
take the JTS Corp. name -- although Atari Corp. will continue in business as
a subsidiary manufacturing the Jaguar video-game system and developing
personal computer games.

Atari shareholders will own 60 percent of the merged company. Atari
Chairman Jack Tramiel and his family now hold 42 percent of Atari stock, so
they'll get 25 percent of the new entity.

But Tramiel, who took control of Atari in 1984, won't be the boss. He'll
take a seat on the board of directors, while JTS will continue to be managed
by two disk-drive industry veterans: Chairman Jugi Tandon and President Tom

Tramiel and his son Sam, now Atari's president, will continue to run the
video-game business for at least the immediate future.

Atari has been nearly swamped by years of heavy losses, and the Jaguar
has never become a credible force in the $6-billion-a-year video-game
industry. Only 150,000 Jaguar units have been sold since the system's launch
two years ago; Sony Corp., in comparison, has sold more than 500,000 of its
Playstation units since their introduction in September.

Despite its red ink, which includes a loss of $22 million on sales of
just $12 million in the first nine months of 1995, Atari has always held onto
considerable cash reserves and now has about $50 million in the bank.

"We had a surplus of cash and I felt we needed to invest this cash in
areas other than the game business," Tramiel said Tuesday.

Atari may be trading one big risk -- the video game business -- for
another. The disk-drive industry is huge, but constant pressure to make
higher-capacity drives at lower costs has forced numerous companies into

Up front, Atari is providing an immediate bridge loan of $25 million to
JTS; if the merger falls through, the loan will be converted into JTS stock
that will be retained by Atari.

Tramiel also denied persistent reports in recent weeks that Atari
intends to sell its few remaining assets. The company has laid off almost its
entire staff, and now functions with a skeletal crew of 30 people in
Sunnyvale and 10 workers at an office in the United Kingdom.

Atari was founded in 1972 by Nolan Bushnell, who invented the first
video game -- "Pong." The company grew to become one of the biggest in
Silicon Valley and was sold to the company that is now Time Warner Inc.

before nearly collapsing in the early 1980s when consumers suddenly grew
bored with video games.

JTS, in contrast, is growing rapidly.

The company was formed in February 1994 by Tandon, when he bought the
assets of a defunct disk-drive company called Kalok Corp. Tandon had
previously founded Tandon Corp. of Los Angeles, which made disk drives in the
1970s and early 1980s, then switched to making PCs. Tandon Corp. fell victim
to the first big PC price war in 1992 and entered bankruptcy proceedings in
early 1993.

Tandon first met Tramiel in the 1970s, when Tandon Corp. supplied disk
drives to Commodore, a computer company then owned by Tramiel.

Mitchell, JTS's president, worked for Tramiel as Commodore's general
manager in 1978 and 1979. He then left to help launch Seagate Technology Inc.

of Scotts Valley, now the world's largest disk-drive producer. Mitchell left
Seagate in 1991 to become president of Conner Peripherals in San Jose, then
moved to JTS last year before Conner was acquired by Seagate.

JTS, which has 160 employees in San Jose and 1,300 workers at a
disk-drive production plant in Madras, India, is trying to convince laptop PC
manufacturers to switch to a new type of hard disk. Laptop computers today
use 2.5-inch diameter hard drives, which are more expensive to manufacture
than the larger 3.5-inch drives that are common in desktop PCs. JTS is
offering a compromise: a thin 3-inch drive that shares the low-cost
manufacturing methods of 3.5-inch drives, while taking up no more space than
thick 2.5-inch drives.

The company has gotten an order from Compaq Computer Corp. of Houston,
which is expected to ship laptops with the JTS drives by June. Compaq has
also helped fund development work at JTS and has convinced another disk-drive
manufacturer, Western Digital Corp. of Irvine, to start making a small number
of 3-inch drives.

But JTS still faces a considerable struggle in convincing laptop makers
to switch to 3-inch drives.

"It's my understanding Compaq's interest is still somewhat limited,"

said Robert Katzive, vice president of the research firm Disk/Trend Inc. of
Mountain View. "Maybe there's room (for 3-inch drives), we'll just have to



     Visit Mercury Center on America Online (keyword: MERCURY) or Mercury
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15:28 02-14-96


LOS ANGELES--(BUSINESS WIRE)--Feb. 14, 1996--Analyst Lee Isgur  of Jefferies
& Co. Inc. raised his rating on Atari Corp. (ATC) to  ACCUMULATE from Hold
due to Atari's announced merger with JTS Corp.  and the likelihood that
Atari's growth in 1996 will accelerate  dramatically.  


Jefferies & Co. Inc. 

Lee Isgur, 415/263-1417 


Michael Current, 8-Bit Atari FAQ & Vendor/Developer Lists maintainer
   User groups: CAIN, SPACE, NWPAC /

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